Tax Incentives for IT Companies: Kyrgyzstan's Experience

Chubak Temirov, director of the High Tech Park in Kyrgyzstan, told Global CIO how the first tech park in Central Asia was created and what opportunities are open to its residents.

The High Technology Park of the Kyrgyz Republic (HTP) has been operating for more than ten years. Law on creation of HTP and special tax regime for companies-residents of the Technopark was passed in 2011 at the initiative of Kyrgyz Association of Software and Services Developers (CARPOU) in order to help IT-companies to legalize business. The first three companies became residents of the technology park in 2013. Today there are more than three hundred organizations in the park, they employ more than two thousand people. Since 2019 the total turnover of the companies placed in the Park doubled annually and in 2022 amounted to 4.2 billion soms.

Tax preferences for Technopark residents

Residency in the park exempts companies from three main types of taxes: income tax, VAT and sales tax. In addition, residents receive significant relief on two other taxes: income tax on employees is cut in half, from 10% to 5%, social contributions - 12% of the average salary in the country. That is, these deductions do not depend on employees' salaries. The main value of residency in the park is precisely the preferential taxation. 

Such conditions are favorable not only for local companies but also increase the attractiveness of Kyrgyzstan for large international companies wishing to have a back office, development team, and support team in Central Asia, Chubak Temirov believes. He emphasizes that life in Kyrgyzstan is cheaper than in many other countries: inexpensive internet, electricity and housing. The technopark's slogan: “Live in Kyrgyzstan and work with the whole world.”

What companies can join the technology park 

To become a resident of the park, a company must be engaged in one of three types of activity: software development, creation of services, including call centers, and export of information technology. 90% of the turnover must be the result of IT-related activities. 

The second requirement - at least 80% of the company's income must be earned through the export of IT services. When a company is accepted as a resident, this condition may not be strictly observed, then the potential of the company is considered and it is given 18 months to reach the desired level. 

In addition, companies must pay 1% of the turnover to the park's directorate. The park is owned by the state, but it is financed by the residents.

How are residency decisions made? 

The park has a Supervisory Board, which consists of representatives from Parliament, the government, and CARPOU, the software developers' association. There is an Expert Council of five experts who directly evaluate applications for entry. And there is the Directorate, which is engaged in operational management. This structure of three governing bodies allows the most transparent consideration of applications. 

The Directorate helps companies to prepare documents, the Expert Council evaluates and makes a decision on accepting the company as a resident. After six months of work, if the company meets all the necessary requirements, it is recommended for permanent, indefinite registration in the park. The Supervisory Board makes the final decision.

Living in Kyrgyzstan and working with the world

From the outset, the park was primarily focused on supporting outsourcing and outstaffing companies. The conditions for residency, which required achieving immediate financial results, were not conducive to startups. However, recently the priorities have changed, and now startups are welcomed guests at the park. A special funding is being created for them, and plans are underway to attract investors and accelerators through various events. By nurturing its "unicorns", the technopark aims to enhance the investment appeal of the entire region.

To maintain the relevance of the competencies of local specialists, the Park conducts educational activities, helping to obtain additional skills in narrow areas, including data analysis and the use of machine learning. Enhancing Kyrgyzstan's visibility in the global IT arena is a key objective of the Park. One recent initiative in this regard was a competition for residents, with the winners receiving an opportunity to visit Silicon Valley. Going forward, the technopark intends to further engage in international IT projects and foster collaboration with foreign companies.