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6.5. Deduction of Cross-Border Payments and Non-Deductible Expenses

Expenses incurred for the purpose of business are deductible unless they are specifically disallowed.

The following general expense types are not deductible or have limited deductibility for tax purposes in Kyrgyzstan:

  • Corporate tax is not deductible;
  • VAT not allowed for offset, sales tax, land and property tax, and sub-surface use taxes are deductible, subject to certain conditions;
  • Fines and penalties levied by state bodies are not deductible;
  • Capital expenditure and expenses connected with the purchase, production, and installation of equipment are not deductible;
  • Undocumented expenses are not deductible;
  • Expenses incurred in generating exempt income are not deductible;
  • Donation of assets to charitable organizations in excess of 10% of taxable income are not deductible;
  • Expenses incurred on behalf of a third person are not deductible, subject to certain conditions;
  • Entertainment expenses are not deductible;
  • Expenses incurred for acquisition, management, or maintenance of any property if income from such property is not taxable under the Act;
  • Expenses related to repairs in excess of 15% are not deductible and must be added to the value of the fixed asset;
  • Interest on loans taken for business purposes is deductible within the limitations provided in the tax laws, depending on methodology and nature of the debt (for e.g., interest on loans taken for the purpose of purchasing depreciable assets is not deductible and must be added to the value of the fixed asset); and
  • Expenses/ losses incurred on transactions with related parties/ employees are not deductible, subject to certain conditions.