Recently a contingent of 170 participants from AIFTP was on an
international tour to Tashkent from 29th May, 2016 to 3rd June,
2016. After inaugural of the conference in the evening of 31st May
by Charge-De-Affairs Shri. D. K. Sharma in Tashkent, technical
sessions as part of tax conference had began on 1st June and
continued up to 3rd June, 2016 at Tashkent Community Hall.
Since professionals in taxation or revenue laws in Uzbekistan
Republic were not involved in the Conference, as a matter of
interest and enthusiastic aptitude, a critical study has been
undertaken by us as to the source for survival for the Republic of
Uzbekistan, the erstwhile constituent of the Union of Soviet
As a consequence of such exercise, some of the salient features
touching upon taxation and its administration are being given for
the benefit of the learned members of AIFTP family.
According to the available sources, it appears that there is a
very good scope for ample opportunities for Foreign Direct
Investment (FDI) to ensure sustainable economic growth and
modernisation through the influx of foreign capital, technology and
There is very much stability of legislation as the foreign
investment law, inter alia provides protection against adverse
changes in investment, tax and customs law for the first 10 years
Uzbekistan adopts the continental legal system under parliament (Oliy
majlis) is the only sole authority to establish laws. Therefore is
no court precedent doctrine in Uzbekistan and therefore court
decisions are normally and merely considered to be of recommendatory
New Tax Code from 1st January, 2008 has been entered in an
attempt to develop a fairer tax system, to ease the tax burden on
business, simplification of tax procedures, encourage, savings and
investments as also to promote economic development in the country.
The new tax code inter alia allowed the main taxes to be applicable
on the investor activity such as corporate income tax, individual
income tax, VAT, excise duties, property tax obligatory contribution
to non-budget funds, land tax, tax recovered at source from the
payments of non- resident income and other duties and payments.
Who is a resident in Uzbekistan ?
An entity is considered as a resident in Uzbekistan if such
entity has completed state registration procedures. The resident
companies are subject to profit tax (Income tax) on their local and
worldwide trading income and other taxable income such as interest,
royalties and rental income.
Profit tax also is levied on the Uzbekistan – source income of
non-residents operating through a permanent establishment.
Non-commercial organisations are generally exempt from profit tax,
except on profit (income) derived from commercial activities.
The gross income of micro-firms and small businesses is subject
to simplified (unified) taxation regulations, replacing profit tax,
VAT (voluntary), property tax, land tax, social infrastructure
development tax, and national road, school development and pension
In Uzbekistan mining operations and related processing are
subject to mining tax and excess profits tax.
Taxable income inter alia comprises of business and investment
income and is calculated as the difference between aggregate income
and expenses, which in general incurred wholly and exclusively for
business purposes are deductible. For other income sources, expenses
shall be deducted provided they are specifically incurred in
generation of income.
Dividends paid to residents and non-residents with permanent
establishments in Uzbekistan from out of profit already subject to
Uzbekistan tax are exempt from profit tax. There is no profit tax on
income derived from State securities.
Capital gains are treated as ordinary income to be taxed at the
standard profit tax rate.
Losses based on financial year results will be allowed to be
carried forward for five years except for losses incurred while the
taxpayer was exempt from profit tax.
Rate of profit tax generally it is 7.5%, with a 15% rate
applicable to banks. In addition to general profit tax,
non-residents entertaining with permanent establishment was also
paid net profit tax @ 10% on their net income.
Unified tax rate is 6% subject to variance in the rate for a
number of industries to illustrate IT, construction, publishing
companies, and industrial enterprises will pay 5% tax while
entertainment companies and companies with lease income derived from
the rent of sales outlets will pay 30% tax.
There is no surtax (Surcharge). Similarly individual
entrepreneurs are subject to alternative minimum tax at lower rate.
Foreign profit tax paid by a Uzbekistan resident company will be
credited against Uzbekistan profit tax in terms of double tax
Legal entities engaged in specific activities will be allowed
temporary exemption from profit tax, property tax, certain social
infrastructure taxes, unified tax payments and obligatory road fund
payments. Companies expanding general production capacity,
reconstructing industrial structures, modernising production
facilities and equipment, etc., will be eligible for incentives to
reduce their taxable base by deducting expenses incurred for five
Interest paid to resident or non-resident shall be subject to 10%
withholding tax. Royalties and similar payments to non-resident are
subject to tax @ 20% subject to reduction under tax treaty. There is
no tax on technical service fee.
Branch and its head office are treated as independent entities,
so that any remittance from branch to the head office is subject to
10% net profit tax. There is no capital duties.
4% property tax is levied on legal entities, fixed assets.
Equipment not installed in due time is subjected to double property
tax rate. Stamp duty is levied on court claims, notary acts, the
State registration of legal entities and licences. On transfer of
properties, there is no tax. 8% social infrastructure development
tax is levied on an entities net profit (after corporate property
Tax authorities may apply market rates to revenue generated from
related party transactions.
Calendar year is the tax year.
While, the above is source of revenue, I would like to state in
brief how the tax is administered.
The new tax code adopted from 1-1-2008 defines certain principles
behind taxation in Uzbekistan namely tax law in the country.
Tax law in Uzbekistan is based on principles of the integrity,
legality, obligation, determinacy and fairness of taxation and the
tax system. All ambiguities and contradictions in any tax law of the
country shall be interpreted in favour of the taxpayer; Tax laws
increasing rates or introducing new taxes or sanctions on taxpayers
shall be prospectively but not retrospectively. The assumption in
the country is that taxpayers act or fail to act within the law and
are basically innocent of any infringement and burden of proof is on
the tax authorities; The tax authorities shall maintain the
confidentiality of taxpayer-related information. Thus the new Tax
Code has greatly increased taxpayer rights and defined the rights
and obligations of the tax authorities, while strengthening tax
officials’ responsibility for tax law violations.
Tax Code allows the tax authorities to carry out two main types
of audits in relation to individual and corporate taxpayers, and the
two audits are known as Desk tax audits and Field tax audits. Desk
tax audits is carried out by the tax authorities in his offices on
the basis of tax returns, financial statements and other relevant
documentation filed by taxpayers, while Field tax audit only is
carried out at a taxpayer’s office or business premises and the
Field tax audit shall not exceed 10 calendar days.
The Tax Code introduces provisions limiting the powers of the tax
authorities in relation to tax audit. Field tax audit is limited to
3 years ending on the audit starting date. The statute of limitation
for tax violations is five years. One tax audit shall be within a 12
Tax Code also sanctions for tax violations namely interest @
0.033% for each day payment in arrears on late payment with cap that
interest so leviable shall not exceed total unpaid tax. Tax payers
operating without registering with the tax authorities are subject
to a fine of up to 50% of the revenue for the period.
Resident companies shall file quarterly corporate profit tax
returns by the 25th of the month following the accounting quarter,
and an annual return on or before 15th February of the year
following the reporting year. Non-residents with a permanent
establishments should file annual returns by 25th March of the year
following the accounting year.
Consolidated returns are not permitted; generally speaking each
company should file its own return banks are required to file
consolidated returns. However bank branches should submit separate
Resident individuals who are taxable on worldwide income whereas
non-residents are taxed on income received in Uzbekistan only.
Individuals are residing permanently in Uzbekistan or physically
present in the country for at least 183 days in any consecutive
12-month period are treated as Uzbekistan residents.
Joint filing is not permitted to mean spouses are taxed
separately. Individuals required to file an income tax return should
do so by 1st April of the year following the tax year, while the
total tax due based on a tax return should be paid by 1st June of
the following tax year.
VAT is levied @ 20% on the supply of goods, services and imports.
The standard VAT rate is 20%. However certain services such as
passenger transportation including taxi services, medical,
educational, tourist and excursion services, and financial and
insurance services are not subject to VAT. Reporting period for the
VAT is the calendar year.
Micro-firms and small businesses report and pay VAT, of course
voluntarily quarterly before 25th day of the following month,
whereas other legal entities report on monthly basis and pay VAT
monthly before the 25th day of the following month. Micro-firms and
small businesses are subjected to tax @ 6% and they do not generally
pay VAT although they can opt to register and pay VAT voluntarily
other legal entities shall register with the local tax authorities
within 10 days of State Registration.
For Tax code–presidential and cabinet of ministers decrees are
the main source of tax legislation.
Uzbekistan Nation had already entered into 50 tax treaties with
various countries involving FDI in Uzbekistan.
State Tax Committee, State Customs Committee and the Ministry of
Finance are the tax authorities.
The above in nutshell is in relation to administration of tax in
Republic of Uzbekistan.
The team of AIFTP have visited places of importance and have
enjoyed the nature and beauty of Tashkent city which is a very
planned and clean and green city. We have a privileged opportunity
to visit Sastrys Street, where Lalbahadur Sastry Ji the Former
Premier of India is seen in a statue. We have, of course paid a
respectful and dedicated floral tribute to the world’s greatest
martyr who scarified his life while serving the great nation. A man
of unquestionable and unimpeachable integrity, dedication, honesty
and simplicity and above a noble person without a own house and a
bank balance which the nation shall feel proud of.
JAI HIND ||