NEW TAX CODE of TAJIKISTAN – KEY CHANGES

On 23 December 2021, new Tax Code of the Republic of Tajikistan was adopted by the Tajikistan Parliament. The Tax Code is in force since 1 January this year. Key changes related to the tax rates tax base/incidents include the following.

Corporate Income Tax Rates

The general tax rate on corporate income is reduced to 18% from the previous 23% rate.

Corporate income of financial institutions and mobile operators is set at 20%.

For companies directly involved in the production of goods, the corporate income tax rate remains the same – 13%.

Minimum income tax applied at 1% of gross income is abolished.

Simplified Tax Regime

The taxation regime did not change in any significant way except that the eligible taxpayers may additionally opt to pay VAT while staying under simplified regime.

Road User Tax

This tax is now abolished.

Excise tax on mobile operators

The tax increased from 5% to 7%.

Social Tax

The tax rate is reduced from 25% to 20%. For employers that are governmental organisations the tax rate did not change (25% on the payroll).

For employees, the social tax rate increases from 1% to 2%.

Individual Income Tax

Value-added Tax

The VAT rate was reduced from 18% to 15%.

VAT eligibility threshold remained unchanged (if gross income for the preceding 12 months exceeds TJS 1 million (appr. USD 88 495), then a taxpayer becomes VAT payer and must switch to general taxation regime (where taxation typically is on a net basis, at a higher rates and with more scrutiny on the part of the tax authorities).

For supplies by local producers and processors of agricultural goods, education services and medical services at resorts and sanatoriums the VAT rate is now 5% (this is not creditable against output VAT). For hotel and catering services the VAT rate is now 7%.

For VAT purposes, foreign services, which are deemed provided in Tajikistan include services:

• when they are provided by a person present in Tajikistan at the time of such services are provided;
• when they are related to immovable property located in Tajikistan;
• the purchaser of the services carries on its activity in Tajikistan;
•  e-services where a purchaser satisfies at least two of the following criteria: billing address is in Tajikistan; IP address is in Tajikistan or otherwise the geolocation of the purchaser is in Tajikistan; bank account is in Tajikistan; a purchaser uses mobile international code for Tajikistan; any other information which identifies the location of the purchaser in Tajikistan.  

E-services are subject to VAT and include, among others:

• granting rights to use computer software and databases via the internet;
• providing advertising space via the internet;
• storage and processing of information online;
• provision of domain names, hosting and web-support services;
• search engine and statistics tracking services;
• administration of information systems, and others.

Online sale of goods, provided such goods are physically supplied, or the provision of consultancy services by e-mail are not e-services for these purposes.

Foreign companies providing e-services to individuals in Tajikistan will have to register with the tax office in Tajikistan through opening their tax account (e-room) and pay the tax directly via such facility. For e-services provided to local companies or individual entrepreneurs, if a foreign company does not have its permanent presence in Tajikistan, tax office may request to pay VAT directly or appoint a local agent for that purpose,   

Technological and innovative activity will be exempted from all taxes with the exception of social, individual income tax and withholding taxes (interest, dividends and other income). The government is yet to define what will be considered technological and innovative activity (this regime will remain in effect for the next five years).

Disclaimer: the foregoing is not a tax advice and is only intended to provide a very high-level update on certain changes introduced to the tax regime of Tajikistan.