Taxation of SME in Tajikistan

1. State Tax Committee of the Republic of Tajikistan Taxation of SME in Tajikistan Current situation and future developments P. Usupov, Deputy Chairman of State Tax Committee of Tajikistan Tbilisi, May of 2011

2. Table of contents: • Republic of Tajikistan: general overview • Current system of taxation in the Republic of Tajikistan • Taxation of SME • Future directions of development

3. Republic of Tajikistan: General overview • Total area– 143,1 thousand square kilometers • Population – 7, 5 . • Currency – Somoni (4,4 Somoni = 1,0 USD) • GDP– 24, 7 billion Somoni (~5,6 billion USD) • Share of tax proceeds in GDP – 18, 8 % • GDP per capita – 3,3 thousand Somoni (~750 USD)

4. Current taxation system in the Republic of Tajikistan (1) Tax legislation The Tax Code (entered into force in 2005) The Law on the State Budget International treaties and agreements Other legal acts Total – 21 taxes, including 17 state taxes and 4 municipal (local) taxes

5. Current taxation system in the Republic of Tajikistan(2) Individual entrepreneurs Companies Farmers Unified tax on agricultural businesses Simplified tax regimes Patent Flat fee Confirmation on the basis of tax on gross income (turnover) tax on gross income (turnover) tax on gross income (turnover) Profit tax Profit tax Confirmation on the basis of tax on gross income General system

6. Taxation of SME (1) Small and medium enterprises (Law №46 adopted on10.05.2002 ) Small enterprises –individual entrepreneurs and legal persons, where the share of state in the equity of the company does not exceed 25%; gross income is under 800 thousand Somoni; number of wage workers is under 30 persons (for agricultural producers – 50 persons) Medium enterprises - individual entrepreneurs and legal persons with gross income from 800 thousand to 15 million Somoni, with wage workers from 30 to 100 persons (for agricultural producers – from 50 to 200 persons).

7. Taxation of SME(2) Regimes, applied to small and medium enterprises Individual entrepreneurs Companies Farmers Unified tax on agricultural businesses Simplified tax regimes Patent Flat fee Confirmation on the basis of tax on gross income (turnover) tax on gross income tax on gross income Profit tax Profit tax Confirmation on the basis of tax on gross income (turnover) General system Regime applicable to medium enterprises

8. Taxation of SME(3) 3 regimes of taxation of individual entrepreneurs

9. Taxation of SME(4) Simplified tax regimes for agricultural producers (farmers) and individual entrepreneurs, who implement economic activities on the basis of patents From 2005 From2008 Agricultural producers (farmers) taxed with unified tax, are exempt from the following: - tax, paid by simplified system - Income tax - Tax on profit of legal entities - VAT; - Land tax - Minimal tax on income of enterprises - Road tax • “New patent”, introduced in 2008; patent holders pay unified flat tax, which includes: • income tax • Tax on retail sales • Social tax

10. Taxation of SME(5) “Old patent” – challenges “New patent” – solutions • Problems in calculations and payment of taxes, especially tax on retail sales and social tax; • - Large number of tax inspections, majority of which was related to calculation of taxes on retail sales In the event of unifying three taxes into single flat tax there is no requirement or need of maintaining accounting and reporting - Costs and inefficient use of resources of entrepreneurs and tax administration Reduces number of tax inspections , is not requiring detailed and meticulous examination of calculations - Restriction of growth – “old” patent was limiting activities of entrepreneurs to 49 types of economic activities Grouping of economic activities on the basis of their homogeneity and profitability levels into 28 groups

11. Taxation of SME(6) «Old» system of patenting «New» system of patenting Patent (income tax) Social tax Tax on retail sales «New» patent • Flat rate • Includes personal income tax, social tax and tax on retail sales • Promotes to fulfilling of tax liabilities • Reduces number of tax inspections and simplifies procedures • Simplifies tax procedures related to fulfilling of tax liabilities • Is not requiring accounting and reporting • Unified flat rate • Includes personal income tax • Differentiation according to types of activities • Is bases on calculation of proceeds and income • Need of maintaining of accounting (cash register, documentation confirming expenses) • Unofficial payments

12. Taxation of SME(7) «New» patent – this is not achievement, but a first step to promotion of economic growth • Certificate or company • Research of different sectors of economy • Revision of volumes and categories • Simplification of other regimes • Introduction of super patent • Reformation of legislative framework 1 stage 2 stage 3 stage

13. Directions of further development of taxation system Administration Legislation Achievements Simplified regime has been introduced for agricultural producers New patent was introduced The law on State Registration has been adopted (introducing single window principle) Program of development of tax administration for 2011 -2015 has been adopted Draft concept for development of tax system Registration offices started operation Department for VAT taxpayers has been organized Information technologies have been introduced Regulations for working with taxpayers have been introduced Tax procedures have been revised Further actions Introduce program of development of tax administration Elaborate and introduce system of risk assessment Simplify procedures of receiving of tax declarations and payments New Tax Code needs to be elaborated and adopted Improve taxation of SMEs

14. Thank you for your attention