Tax incentives, Corporate Taxation and Foreign Workers Taxation.
Tax incentives, Corporate Taxation and Foreign Workers Taxation.
In general, businesses operating in Uzbekistan pay taxes either under the standard tax regime or special tax regime.
Standard tax regime envisages payment of range of taxes, including the following:
- Corporate income tax (CIT), including withholding tax;
- Value added tax (VAT), including VAT on imported goods/ services;
- Personal income tax (PIT);
- Social tax (ST);
- Property tax;
- Land tax;
- Water use tax;
- Excise tax;
- Subsurface use tax.
Relevant legislation may also establish certain duties and payments.
For details, refer to Table.
|
No. |
Tax |
Taxpayers |
Taxable Base |
Rate |
|
|
Corporate income tax |
Legal entities having taxable income, non-residents acting in Uzbekistan via a permanent establishment (PE) |
Taxable profit calculated as a difference between gross revenue and deductible expenses. The taxable base can be reduced by an amount of losses, accumulated in previous periods |
General rate - 15%; other rates may apply depending on type of activity, e.g. 20% for cement / polyethylene granules production, mobile communication services, banks, markets and shopping malls |
|
Withholding tax |
Foreign legal entities and individuals receiving income from Uzbekistan |
Uzbek-sourced income paid to non-resident* |
dividend, interest - 10%; insurance premiums - 10%; telecom, transportation - 6%; other (royalty, rent, etc.) - 20%. |
|
|
2. |
Value added tax |
Uzbek legal entities, non-residents acting in Uzbekistan via PE |
Turnover from sales of goods and services, import of goods and services |
General rate - 12%; 0% rate applies to certain supplies |
|
3. |
Personal income tax |
Personal income tax (withheld by employers from total income) |
Individuals earning taxable income - employer shall be a withholding agent |
12% - for tax residents; 20% - for tax nonresidents; 6% - for highly skilled foreign labor force** |
|
4. |
Social tax |
Employers, recipients of seconded personnel |
Employment income paid to employees. Secondment fees paid to secondment provider |
General rate - 12%; rate may vary for certain organisations, e.g. 25% - budget organisations |
|
5. |
Property tax |
Legal entities of the Uzbekistan having taxable property on the territory of Uzbekistan |
Average annual net book value of immovable property, overdue construction-in-progress |
2%; double rate may apply in certain cases |
|
Non-residents having immovable property on the territory of Uzbekistan. |
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|
6. |
Land tax |
Legal entities / individuals owning, using or renting land plots |
Total area of a land plot |
Rates vary depending on the location of land and the type of land |
|
7. |
Water use tax |
Legal entities – residents of Uzbekistan, non-residents acting in Uzbekistan via PE |
Volume of water used |
Rates vary depending on type of activity and type of water source |
|
8. |
Excise tax |
Legal entities producing, selling or importing excisable goods |
Tax base depends on type of goods/services, e.g. volume of excisable goods in kind / value of excisable goods sold |
Rates vary depending on type of goods/services |
|
9. |
Subsurface use tax |
Legal entities/individuals engaged in search, exploration of minerals and artificial (man-made) mineral formations as well as processing of those minerals in Uzbekistan |
Volume of minerals extracted |
Rates vary depending on type of the mineral |
*An individual permanently residing in the Republic of Uzbekistan or staying in Uzbekistan for 183 days or more, for any period up to twelve months beginning or ending in the financial year, is considered as a resident of the Republic of Uzbekistan. Individuals who are not residents of the Republic of Uzbekistan are taxed on income derived from sources in Uzbekistan as mentioned in the first paragraph of this table.
**The highly skilled foreign labor force is defined by the Resolution of President No. 4008 dated dated November 7, 2018 (https://lex.uz/ru/docs/4045563), as graduates of top 1000 universities based on the rating of internationally recognized organizations, with an experience of at least 5 years and annual remuneration for work in Uzbekistan of at least USD 60,000.
Tax Incentives and Preferences
According to Section 21 of the Tax Code, tax benefits in the form of exemption from land tax, property tax and water use tax are provided to legal entities created with the attraction of foreign direct investment and specializing in the production of goods (services) in the sectors of the economy in the list approved by legislation.
Tax exemptions are granted to entities attracting foreign direct investments for a certain period which varies depending on investment amount, when investing:
from USD 300,000 to 3 million USD - for a period of 3 years;
more than 3 million USD up to 10 million USD - for the period of 5 years;
over 10 million USD - for the period of 7 years.
The above tax incentives are granted if the following, without limitation, conditions are met:
the enterprises shall be specialized in production of goods or provision of services/ works in certain industries as per the approved list (https://www.lex.uz/acts/561818);
the enterprises are located in any city or rural area settlement of Uzbekistan except for Tashkent region and Tashkent city (exception is provided to companies providing travel services and waste management services);
the Republic of Uzbekistan does not provide sovereign guarantees for such foreign investment;
the share of foreign participants in the authorized fund (authorized capital) of legal entities is not less than 33 percent, and for joint stock companies - not less than 15 percent;
the investment should be made in hard currency or new/modern technological equipment, and at least 50% of the respective tax savings should be reinvested for further development of enterprises.
An enterprise with the participation of foreign direct investment has the right to enjoy other tax incentives provided for by tax legislation.
The new Tax Code envisages that tax incentives can be generally provided by the Tax Code only. However, benefits for certain taxes, except VAT, excise tax, and tax for subsoil use, can be provided by the President of Uzbekistan only in the form of reduction of the established tax rate but not more than for 50% and for the period not more than three years. The new Tax Code also makes it clear that tax incentives cannot be individualized (previously, individual tax incentives used to be provided to major investment projects).
Article 75 of the Tax Code establishes that the tax incentives on certain tax, with the exception of VAT, excise tax on goods produced and sold, and subsurface usage tax can be provided by the decisions of the President of Uzbekistan only in form of rate reduction (up to 50%) for a period not exceeding 3 years.
Additional tax incentives may be provided under an Investment Agreement concluded by a foreign investor with the Government of the Republic of Uzbekistan under the Law of Uzbekistan on Investments and Investment Activity.
Moreover, as noted above, special tax regime envisaging provision of certain tax incentives are available for participants of special economic zones, entities attracting foreign direct investments, etc.
Trade Incentives.
Over recent years, a number of structural reforms have been implemented in the sphere of foreign trade aimed at strengthening the export potential, improvement of customs administration as well as creation of an effective system of incentives for businesses to engage in foreign trade activities.
Thus, in order to stimulate exports of domestic products as well as in accordance with the Resolution of the President of the Republic of Uzbekistan dated May 24, 2019, subsidies and compensations are provided to exporting enterprises to cover interest expenses on pre-export credits of commercial banks and transportation by railroad transport when exporting certain products.
Also, in accordance with the above-mentioned Resolution, legal entities that have a share of exports of finished products in the total revenue from the sale of goods (works, services) of more than 50 percent at the end of the reporting period, including through the commissioner (agent), at the request, may be deferred for the payment of value added tax for up to 120 days from the date of acceptance of the customs declaration for the import of raw materials, components and materials used in the manufacture of exported products.
The Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated December 31, 2020 PKM-826 (https://lex.uz/docs/5201216) approved the procedure of financial assistance of the Export Promotion Agency under the Ministry of Investment and Foreign Trade to the exporter organizations for compensation of costs associated with the introduction of international standardization and certification systems both in the country and abroad, registration of national products in foreign authorized bodies, creation of exhibition stands and participation in international exhibitions and fairs, presentations and promotional campaigns, including the promotion of traditional as well as participation in international tenders and competitions.
Furthermore, an accelerated seven days VAT refund process is introduced for exporters.
Other incentives are available below:
|
No. |
Object of Incentives, Eligibility Criteria |
Type of Incentives |
Period of Validity of Incentives |
|
|
Construction materials not produced in Uzbekistan and imported by SEZ participants for implementation of projects as per the investment agreement |
Exemption from the customs payments (except for VAT and customs processing fee) |
For the period of construction |
|
2. |
Technological equipment not produced in Uzbekistan (as per approved list), and imported by the participants of SEZ* (https://lex.uz/docs/2144911) |
Exemption from the customs payments (except for customs processing fee) |
Unlimited |
|
3. |
Raw materials, materials and components imported by SEZ participants used for production of goods intended for export. |
Exemption from the customs payments (except for customs processing fee) |
Unlimited |
|
4. |
Goods imported by the participant of FEZ |
deferred payment of VAT |
120 days |
|
5. |
Transport vehicles, used for international shipments and passenger transportation, and items needed for their maintenance and regular exploitation during expedition (fuel, equipment etc.) |
Customs duty |
Unlimited |
|
6. |
National and foreign currency (except for currency used for numismatic purposes) |
Customs duty, VAT |
Unlimited |
|
7. |
Goods transported under customs control in the customs regime of transit through the customs territory and intended for use in the third countries |
Customs duty |
Unlimited |
|
8. |
Items of material and technical supplies and equipment, food and other property, export outside the customs territory to ensure the activities of the vessels of the Republic of Uzbekistan and vessels leased (chartered) by legal entities and individuals of Uzbekistan, engaged in sea fishing as well as their products imported to the customs territory |
Customs duty |
Unlimited |
|
9. |
Goods to be converted into state revenue |
Customs duty |
Unlimited0 |
|
10. |
Goods imported as humanitarian aid, in the manner determined by the Cabinet of Ministers of the Republic of Uzbekistan |
Customs duty, VAT |
Unlimited |
|
11. |
Goods imported for charitable purposes, including the provision of technical assistance, through states, governments, international organizations |
Customs duty, VAT |
Unlimited |
|
12. |
Goods imported by legal entities at the expense of loans (credits) provided by international and foreign government financial organizations in accordance with international treaties of the Republic of Uzbekistan as well as imported at the expense of grants |
Customs duty, VAT |
Unlimited |
|
13. |
Property imported for the personal needs of foreign investors, foreign citizens and stateless persons permanently residing outside of the Republic of Uzbekistan and staying in Uzbekistan in accordance with labor contracts concluded with foreign investors |
Customs duty |
Unlimited |
|
14. |
Goods imported by foreign legal entities that made direct investments to Uzbekistan economy for a total amount equivalent to more than fifty million US dollars, provided that the imported goods are produced by the foreign legal entity |
||
|
15. |
Technological equipment imported to Uzbekistan, as per the list approved list as well as components and spare parts, provided that their supply is envisaged by the terms of the contract (agreement) for the supply of technological equipment* |
Customs duty, VAT |
|
|
16. |
Technical means of systems of operational-search measures purchased by telecommunications operators and a special body for certification of technical means of systems of operational-search measures, in the presence of a written confirmation of the authorized state body |
VAT |
Unlimited |
|
17. |
Medicines, veterinary medicines, medical and veterinary products as well as raw materials imported according to the list determined by legislation for the production of medicines, veterinary medicines, medical and veterinary products, and not produced in Uzbekistan |
||
|
18. |
Goods transported across the customs border in the form of humanitarian aid, gratuitous aid or for charitable purposes, including the provision of technical assistance |
Customs processing fees |
Unlimited |
|
19. |
Goods transported across the customs border by individuals for non-commercial purposes within the limits of duty-free importation established by law |
||
|
20. |
Goods placed under customs regimes of temporary storage and refusal in favor of the state |
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|
21. |
Goods imported into the customs territory for the official use of diplomatic missions and consular offices of foreign states, international associations and organizations enjoying customs privileges as well as goods exported from the customs territory and intended to ensure the functioning of diplomatic and equivalent representations of the Republic of Uzbekistan |
||
|
22. |
Cultural valuable items temporarily exported from the customs territory and imported back to this territory which are in permanent storage in the funds of state museums, information and library institutions, archives and other state repositories of cultural values of the Republic of Uzbekistan |
||
|
23. |
Goods imported by legal entities, the cost of which is ten times the size of Base Calculation Unit value or less |
||
|
24. |
Importation of equipment imported for re-equipment of research institutions and organizations within the framework of the ongoing modernization according to lists approved in the prescribed manner |
Exemption from the customs payments (except for VAT and processing fees) |
unlimited |
|
25. |
Organizations-members of the organizational structure of the State Roads Committee of the Republic of Uzbekistan on import of equipment, raw materials and materials, spare parts and components and assemblies imported for the construction, reconstruction, repair and operation of highways according to the lists approved in accordance with the established procedure |
Exemption from the customs payments (except for VAT and processing fees) |
till January 1, 2025 |
|
26. |
Non-governmental educational institutions according to lists formed in accordance with the established procedure on import of modern educational and laboratory equipment, computer equipment, software products, educational and scientific-methodical literature, inventory and material-resources not produced in the Republic of Uzbekistan, required for the operation of those institutions |
Exemption from the customs payments (except for VAT and processing fees) |
till January 1, 2025 |
*For the list of the technological equipment exempt from customs duty and VAT at importation to the territory of Uzbekistan, refer to the https://lex.uz/docs/5445273#5451314
Investment Benefit/Advantage,
The provision of tax incentives is generally regulated in the new Tax Code. Below is an overview of the tax and customs incentives outlined in the new Tax Code:
|
Object of incentives |
Nature of incentives |
Eligibility requirements |
Duration/expiration date |
|
Enterprises attracting FDI |
Exempt from • Property tax • Land tax and • Water usage tax |
•Operation in the following manufacturing sectors: computer components; electronics; light industries; silk; construction materials; food and food processing; chemicals and pharmaceuticals •Location outside the city of Tashkent or Tashkent region •Minimum share of foreign capital at least 33% (15% for joint-stock companies) •Investment not subject to a sovereign guarantee •At least 50% of tax savings spent on reinvestment for further development |
•3 years: investment of 300 K to 3 M USD •5 years: investment of 3 M to 10 M USD •7 years: investment of more than 10 M USD |
|
Exempt from •Customs dues |
Goods imported by enterprises with foreign shareholdings exceeding 33% |
2 years from the date of state registration
|
|
|
Goods imported by enterprises with FDI exceeding $50 million, provided that these goods are produced by the foreign entity |
2 years from the date of state registration |
||
|
SEZ participants |
Exempt from • Property tax • Land tax • Water usage tax |
•Provision of export-oriented production •Alignment of projects with technical and environmental regulations and energy-efficiency requirements •Alignment with the functional and industrial specialization of the FEZ •Ensuring that 90% of staff are local workers |
•3 years: investment of 300 K to 3 M USD •5 years: investment of 3 M to 5 M USD •7 years: investment of 5 K to 10 M USD •10 years: investment of more than 10 M USD |
|
Exempt from Tax on profit (CIT) |
•Provision of export-oriented production •Alignment of projects with technical and environmental regulations and energy-efficiency requirements •Alignment with the functional and industrial specialization of the FEZ •Ensuring that 90% of staff are local workers |
•3 years: investment of 3 M to 5 M USD •5 years: investment of 5 M to 15 M USD •10 years: investment of more than 15 M USD |
|
|
Exempt from •Customs dues (except for VAT and customs processing fees) |
•Materials not produced in Uzbekistan and used in a project's construction phase •Technological equipment not produced in Uzbekistan as per the approved list •Raw materials and components used to produce export-oriented goods |
Unlimited |
|
|
Investment agreement pares |
When not specified in legislation, the nature of incentives may vary, depending on the project's •volume of investment, •location, •industry, •and socioeconomic impact and job creation |
Specified upon conclusion of the investment agreement |
Specified in the investment agreement |
|
Production sharing agreement (“PSA”) participants |
Should be determined by the PSA terms |
Specified upon conclusion of the PSA |
Specified in the investment agreement |
|
Specific territories in the Fergana region (the Sokh district; the Chungar mahalla in the Rishtan district; the Shakhimardan mahalla; and the Yordan, Tashtepa, and Khosilot mahallas) |
1% CIT rate |
Registering and carrying out activities in a specific territory |
Unlimited |
|
1% rate turnover tax |
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|
1% social tax rate on payroll of employees working in a specific territory |
Engagement of employees in activities in a specific territory |
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|
Applications of 0.1 coefficient on property tax and land tax rates, respectively |
Location in a specific territory |
||
|
Applications of 0.1 coefficient on water usage tax rate |
Usage of water resources in a specific territories
|
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|
1% PIT rate |
Individuals engaged in employment activities in a specific territory |
|
|
|
Tax benefits for newly established business entities in the Republic of Karakalpakstan |
50% reduction of the following taxes: •property tax •land tax •turnover tax •CIT •water tax
|
Newly established entities designated as “points of growth” for all districts and cities of the Republic of Karakalpakstan by decree of the President of Uzbekistan |
For a period until 1 January 2027
|
