Changes to tax legislation of the Republic of Uzbekistan
Alert on recent changes to tax legislation of the Republic of Uzbekistan (the “RUz”)

AMENDMENTS TO THE TAX CODE OF THE RUz ENACTED FROM 1 JANUARY 2024

In December 2023, the law was adopted that introduced a number of changes and clarifications to the Tax Code of the RUz (the “TC RUz”). The changes are effective starting from 1 January 2024 unless otherwise stated in this law.

In this alert, we have summarized, in our opinion, the most significant changes in the tax legislation. To obtain information about the full list of changes, we recommend reviewing the text of the relevant law and the amended TC RUz.

Tax records keeping period

The retention period for tax reporting and other documents required for taxes calculation and payment, has been reduced from five to three years.

Fulfillment of tax obligations and statute of limitations

• The statute of limitations for tax obligations has been reduced from five to three years.
• Applications for credit or refund of the amount of overpaid tax can be submitted within three (previously five) years from the date of tax payment, unless otherwise provided by tax legislation.

Tax control

Restrictions have been established for in-house tax audits (with the exception of in-house tax audits carried out for the purpose of reimbursement (refund) of the amount of value added tax – VAT), prohibiting the following tax control activities:

• entry to a taxpayer’s territory
• inspection of the territory and premises of a taxpayer
• requesting documents from a taxpayer and demanding the presence of a taxpayer
• seizure of documents and objects of the taxpayer

Transfer pricing control

• The period of examination of controlled transactions (TP audit) has been reduced from five to three calendar years preceding the year in which a decision to conduct the examination was made.
• A decision on conducting an examination (TP audit) may be made no later than three years (previously four) from the date of receipt of the notification or notice about controlled transactions.

VAT

• Clarifications have been introduced, stipulating that in addition to foreign legal entities, individuals registered as entrepreneurs in accordance with the legislation of a foreign state and conducting entrepreneurial activities, selling goods (services) within the territory of the RUz, if the place of sale of such goods (services) is recognized as the RUz, will be recognized as VAT payers.
• Starting from 1 April 2024, the VAT exemption on the following operations will be revoked:

- medical services (excluding cosmetic services)
- veterinary services
- sale of medicinal products, veterinary medicinal products, medical, and veterinary supplies

• Starting from 1 April 2024, the exemption from VAT on the import into the territory of the RUz of medicinal products, veterinary medicinal products, medical and veterinary supplies, as well as raw materials imported according to the list determined by legislation for the production of medicinal products, veterinary medicinal products, medical and veterinary supplies, will be revoked. This amendment will not apply to imported finished medicinal products, veterinary medicinal products, medical and veterinary supplies that are also produced in the RUz, according to the list approved by the Cabinet of Ministers of the RUz.
• The provisions on the offset of VAT paid on the import of goods into the territory of the RUz, when sale of these goods is made under a commission agreement (assignment) with a committee (principal) who is a foreign person, now apply not only to foreign legal entities, but to all foreign persons.

Excise tax

• Excise tax rates on petroleum products and manufactured alcoholic and tobacco products have been increased. For specific imported tobacco and alcoholic products, the tax rates have been reduced.
• Starting from 1 April 2024, excise tax will be imposed on carbonated beverages containing sugar or other sweeteners, or flavoring substances, and packaged in consumer packaging (including energy and tonic drinks).

Corporate income tax

Taxpayers whose total income, taking into account adjustments for the tax period preceding the current tax period, exceeds ten (previously five) billion soums, pay monthly advance payments (not later than the twenty-third day of each reporting month period).

Personal income tax (PIT)

Income of self-employed persons received as a result of labor activity or from the sale of goods (services) are taxed in the manner established for individual entrepreneurs, from the day the specified income exceeds one hundred million soums during the tax period. At the same time, self-employed persons pay social tax in the manner established by the TC RUz.

PIT exemptions of the following types of income have been established:

• funds of employees, not exceeding their monthly salaries and equivalent payments, used to acquire shares under the employee stock ownership plan in case of public offering of shares of an employer company
• part of the salary and other income of taxpayers-individuals sent to an individual investment account for the purchase of securities issued on the local stock market, under the certain conditions

Land tax

Basic land tax rates for non-agricultural land have been increased by 12% on average, compared to 2023 tax rates.

Water tax

The tax rates have been increased by 12% - 120%, compared to 2023 tax rates.

Subsoil use tax

• Tax rates effective in 2023 have been increased by 12% on average for the following:

- mineral salts (rock (table), potassium, sulfate salts), carbonate raw materials (limestones, dolomites), mineral fertilizers (glauconite, phosphorites and others) and other mining chemical raw materials
- blocks of natural facing stone, saw stones, rubble stone, marble, limestone-shell rock, limestone (except for limestone for the production of cement and lime), dolomites, crushed stone, basalt, granites, granodiorites, granosyenites, syenites, porphyrites, diabase-porphyrites , gabbro, shale rocks, carbonate raw materials, travertine
- brick and tile raw materials, loess and loess-like rocks, construction sand, sandstones, sand and gravel mixture

• The fixed tax rate on limestone for cement production is reduced from 22,500 soums per ton to 6,000 soums per ton.

Turnover tax

Tax rates for taxpayers paying tax in a fixed amount have been changed as follows:

• for taxpayers with total income not exceeding five hundred million soums, the tax rate has been increased from twenty to twenty-five million soums
• for taxpayers with total income of over five hundred million soums – the tax rate has been increased to thirty-four (previously thirty) million soums

Tax benefits

The benefits are extended until 31 December 2028 in relation to:

• exemption from PIT on income in the form of dividends on shares owned by individuals – residents and non-residents of the RUz
• application of a 5% corporate income tax rate on income in the form of dividends on shares owned by legal entities non-residents of the RUz
• exemption from PIT and income tax on the income of individuals and legal entities – residents and non-residents of the RUz in the form of interest on bonds of companies

The following temporary benefits have been introduced:

• From 1 January 2024 to 1 January 2026, interest income received by commercial banks participating in the "Comprehensive Program for Continuous Support of Small Business" from bank loans allocated to specific projects is considered deductible expenses for corporate income tax purposes.
• From 1 January 2024 to 1 January 2027, research and development centers pay property tax and land tax at a rate of 1% of the calculated amount of these taxes, as well as a social tax at a rate of 1%.
• From 1 January 2024 to 31 December 2025, provisions of Chapter XVIII-1 of TC RUz shall not apply to legal entities extracting precious, colored, and/or radioactive metals, rare and rare earth elements from technogenic mineral formations (hereinafter referred to as "metals"), and those extracting hydrocarbon raw materials. This provision applies to the mining area where extraction started within the period from 1 January 2024, to 31 December 2025, and extends to the entire period of metal extraction or hydrocarbon raw material production activities.
• From 16 November 2023 to 1 January 2028, the turnover on the sale and importation of goods (services) acquired in connection with projects fully or partially financed through the state's external debt, attracted from international financial institutions and foreign governmental financial organizations by budget organizations, state-owned enterprises, and legal entities where the state holds 50% or more in the charter capital, is exempt from VAT. This applies to projects financed fully or partially through the state's external debt, obtained from international financial institutions and foreign governmental financial organizations (excluding funds from international financial institutions and foreign governmental financial organizations refinanced or re-lent through commercial banks of the RUz) for infrastructure projects.

HOW CAN BEONE HELP?

We will be glad to provide our assistance in the following areas:

• Consulting services regarding the applicability of new regulatory provisions to your company.
• An assessment of the impact of these legislative changes on existing business structures, including taxation of both current and planned transactions.
• Revision and update of the company’s tax accounting policy, taking into account legislative changes.
• Preparation of relevant queries to the regulatory authorities on the application of new legislative provisions that may require clarifications.

We hope that you found this overview helpful. We will be glad to advise you on these changes in more detail and discuss them should you have any questions.