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Business Tax Advisory
Doniyorbek Zulunov
Sergey Bachmanov
Maryna Tarnavska
A. At a glance
(b)
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and Capital Gains
Net Operating Losses (Years)
Carryback 0
Carryforward Unlimited (e)
(a) This is the general corporate profits tax rate. See Section B for other rates.
(b) The withholding taxes are generally considered to be final taxes.
(c) The 5% rate applies to dividends paid to Uzbek tax resident companies as well as to dividends and interest paid to resident individuals. The 10% rate applies to dividends and interest paid to foreign (nonresident) companies and individuals. Interest paid to Uzbek tax resident companies is not subject to withholding tax. Instead, the recipient of the interest is subject to corporate profits tax on the interest.
(d) The withholding tax is imposed on payments to foreign companies without a permanent establishment in Uzbekistan.
(e) See Section C.
B. Taxes on corporate income and gains
Corporate profits tax. Most enterprises in Uzbekistan, including Uzbek companies with foreign participation, are subject to the general profits tax regime. Enterprises with annual turnover of less than UZS1 billion (approximately USD78,772) may choose a simplified taxation regime and pay a Revenue Tax (at various rates). Foreign companies that are deemed by the tax authorities to have a permanent establishment (PE) in Uzbekistan are taxable on profits derived from business activities of the PE in Uzbekistan. The definition of a PE in Uzbek legislation is somewhat similar to
the definition of a PE in the model treaty of the Organisation for Economic Co-operation and Development (OECD), with certain exceptions. However, the legislation regarding the taxation and treatment of PEs in Uzbekistan is undeveloped. If a foreign company renders auxiliary and preparatory activities in Uzbekistan for the benefit of other entities leading to creation of a PE of a foreign company and if no remuneration is charged for these services, the taxable base of such a PE equals 20% of deductions.
Rates of corporate tax. The regular corporate profits tax rate is 15%. This rate also applies to Uzbek enterprises with foreign participation and to PEs of foreign companies. For commercial banks, mobile telecommunication operators, manufacturers of polyethylene granules, markets and shopping malls, the profits tax rate is 20%. For taxpayers included in the National Register of e-commerce that carry out electronic trade of goods or services, the corporate profits tax rate is 7.5%. For taxpayers carrying out activities in the social sphere, producers of certain agricultural goods, profits from the sale of goods and services for export and certain other taxpayers, the corporate profits tax rate is 0% (if certain conditions are met).
From 1 January 2023 to 1 January 2026, for business entities registered and operating in areas classified as Category 5 (regions with a low level of economic activity), the corporate profits tax rate is 1%. However, it is not applied to large taxpayers, permanent establishments, budget organizations and state enterprises, as well as legal entities of which the state share of the charter capital is 50% or more. For full implementation of the above-mentioned benefits, the state bodies are mandated to draft and introduce a draft law that provides for amendments and changes to the tax legislation.
Foreign legal entities without a PE in Uzbekistan are subject to withholding tax on income derived from their activities in Uzbekistan. The following are the withholding tax rates for payments to nonresidents.
The withholding tax rate for certain types of income is 0%. Also, see the Dividends and interest section.
Capital gains. Capital gains are generally included in taxable profits and are subject to tax at the regular corporate tax rate. Capital gains derived by nonresidents from disposals of shares in Uzbek resident legal entities or real estate located in Uzbekistan are subject to withholding tax at the general rate of 20%.
Administration. The tax year is the calendar year.
Tax declarations must be filed quarterly not later than the 20th day of the month following the reporting quarter and annually not later than 1 March of the year following the tax year.
assessing and paying corporate income tax considering the total financial result of the economic activities of these taxpayers.
A consolidated group of taxpayers may be created by legal entities (subject to certain criteria, for example, total revenue of legal entities that are members of the consolidated group of taxpayers from the sale of goods and services, as well as other income according to the financial statements for the calendar year, is at least UZS500 billion [approximately USD39,385,988], provided that the entity directly and/or indirectly participates in the charter [authorized] capital of other legal entities and the share of such participation in each legal entity is at least 90%). These conditions must be met during the entire term of the agreement on the creation of a consolidated group of taxpayers.
D. Other significant taxes
The following table summarizes other significant taxes.
Nature of tax
Value-added tax (VAT), on the supply of all goods and services, including imports, unless they are zero-rated or exempt
Excise tax; imposed on an extensive number of specified goods produced in Uzbekistan or imported into Uzbekistan; goods subject to tax include oil and gas products, alcohol, tobacco and mobile telecommunication services Various Property tax; imposed on the annual average depreciated value of immovable property and certain other assets; land is exempt
Subsurface use tax; imposed on the extraction of natural resources; tax imposed on the sales price of extracted natural resources and components and on waste derived from the extraction or processing of natural resources
Special rental tax on mineral extraction; imposed on the rental income received by the taxpayer from the sale of mined metal or hydrocarbon raw materials (the rate may be higher in certain cases)
Signing and commercial discovery bonuses for subsurface users; payable to the state budget through the tax authorities Various Vehicle utilization fees; imposed on imported and manufactured (assembled) vehicles in Uzbekistan; various rates depending on the model, engine, capacity and other items
30 to 1,410 times the base specified value, which is UZS340,000 (approximately USD26.80)
Water use tax; general rates per cubic meter
Underground water UZ415 (approximately USD0.03)
Land tax; imposed at a fixed rate per hectare, which varies depending on the location, quality and purpose of the land plot; rate in Zone 1 of Tashkent UZS271 million (approximately USD21,347)
Social Tax; payable by employers
On the total payroll of state-funded organizations 25%
On the total payroll of all other entities 12%
Contributions to individual accumulative pension accounts of citizens (maintained at Peoples Bank); payable by employers on salaries of local employees; amounts of the contributions are deducted from the amounts of accrued individual income tax
E. Miscellaneous matters
Foreign-exchange controls. The currency in Uzbekistan is the Uzbek soum (UZS).
Uzbekistan imposes various foreign-exchange controls, including the following:
• Mandatory exchange rates set by the Central Bank of the Republic of Uzbekistan for accounting, reporting, tax and customs duty calculations
• Strict control over payments in foreign currencies to parties outside Uzbekistan
• Limitations on the circulation of foreign currencies in Uzbekistan, and limitations on the domestic foreign currencies markets
Thin-capitalization rules. If the controlled liability of the taxpayer (that is, loans provided by a foreign individual or entity holding at least a 20% share of the taxpayer or by an affiliated party of such individual or entity) exceeds by 3-fold the equity of the taxpayer (for banks and leasing organizations, 13-fold), thincapitalization rules should be applied and interest expenses above calculated thresholds are considered as nondeductible.
Controlled foreign companies. A controlled foreign company (CFC) is a foreign legal entity (not qualified as a tax resident of Uzbekistan) or a foreign structure without a status of a legal entity whose controlling persons are legal entities qualified as Uzbek tax residents.
For a CFC with a status of a legal entity, the controlling persons are legal entities that meet the following conditions:
• Its share in a foreign company exceeds 25%.
• Its share in a foreign company exceeds 10% if the shares of all other shareholders recognized as tax residents of Uzbekistan exceed 50%.
• It exercises control over a foreign company (regardless of the participation share).
For a CFC without a status of legal entity, the controlling person is its founder.