Kyrgyzstan: Economy Ministry proposes raising income tax in mining sector

The Ministry of Economy of Kyrgyzstan proposes to increase the tax rate on the income of mining and mining-processing enterprises by 3% in the case of sale of gold ore and concentrates and revise the tax royalty base in sale of metal ores and concentrates. Amendments to the Tax Code have already been submitted for public discussion.
This is done to ensure return of gold to the country and in order for the National Bank to have an opportunity to buy more gold on the foreign exchange market. The Ministry of Economy stresses that a total ban on the export of commodities containing precious metals will adversely affect the mining industry. After all, not all types of raw materials can be processed in Kyrgyzstan.
“Therefore, in order to ensure the return of the refined precious metal and preserve the investment climate in the industry, it is necessary to increase the tax rate on income of mining and mining-processing enterprises by 3% while singling out separate rates for the sale of alloys and refined precious metals, which remain unchanged,” background statement for the document says.
Such an amendment means that the tax rate will increase in the case of export and sale of gold ores and concentrates outside Kyrgyzstan. In export of gold-bearing ores and concentrates with the condition of the return delivery of processed refined metal, the increase in the rate of this tax does not affect a subsoil user, but remains the same. At the same time, when the refined metal is imported back into Kyrgyzstan, the Ministry of Finance and the National Bank can use the preferential right to purchase refined metals at primary auctions, which is stipulated by law.
The Ministry of Economy stresses that this approach is an alternative mechanism to replace the introduction of export duties.
In addition, the ministry proposes to change also the system of administration of tax royalties.
“To stabilize the amount of royalty tax deductions, as well as to exclude the facts of unfair tax concealment, a mechanism for administering royalties was worked out by establishing the tax base in the form of the cost of precious metals in ores and concentrates according to prices set on the London Metal Exchange. The bill will streamline administration of taxation of incomes of mining enterprises, ensure return of products of processing of ores and concentrates containing precious metals, provide an incentive to build processing facilities capable of processing all types of ores and concentrates,” the Ministry of Economy summed up. (24.kg/Ukrainian metal)