On 19 August 2026, the Government of the Kyrgyz Republic, acting on a recommendation from the State Tax Service, approved a decree extending the exemption from the unified (single) tax for individual entrepreneurs and small enterprises engaged in sewing, textile manufacturing, and related retail activities until 31 December 2026. Originally set to expire on 30 June 2026, the extension responds to industry appeals citing ongoing supply chain disruptions, rising input costs, and the need to preserve employment in the labor-intensive textile cluster. The measure applies to taxpayers operating under the patent-based simplified tax regime who derive at least 70% of their revenue from eligible activities.
Key Takeaways
- Sector-Specific Eligibility: The exemption covers NAICS codes 313, 314, 315 (textile mills, product mills, apparel manufacturing) and retail sellers (code 448) where domestic raw material content exceeds 50%. Service providers such as tailoring shops qualify only if they produce finished goods on-site.
- Compliance Safeguards: Beneficiaries must maintain separate accounting for exempt activities, submit quarterly production reports to the STS, and undergo annual verification of domestic content ratios. Non-compliance results in immediate revocation of the exemption and retroactive tax assessment with penalties.
- Transition to General Regime: The decree outlines a phased transition plan for 2027, introducing a reduced single tax rate of 2% (down from 4%) for the first two quarters, followed by the standard rate. Affected businesses are advised to begin ERP system adjustments now to accommodate the upcoming changes.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement