This memorandum describes the regulatory measures adopted during the COVID-19 pandemic in 2020; the regulatory acts mentioned were of a temporary nature.

On March 16, 2020 the Government have announced introduction of the following restrictions:

suspension of all regular flights between Uzbekistan and the rest of the world;
suspension of entry into the territory of the Republic of Uzbekistan through all border points of citizens of foreign states (stateless persons) and passenger transport;
suspension of business activities of all entertainment facilities;
suspension of all types of public events;
suspension of educational processes in all educational institutions.

The Government introduced extra measures for preventing the spread of coronavirus infection (hereinafter referred to as the “Quarantine Regime”). In accordance with it the following measures have been taken:

entry and exit points to markets (shopping centers) where equipped with thermal imagers, antiseptics and presence of specialists;
compulsory disinfection of all vehicles and goods arriving in the Republic from abroad and other regions;
reception of individuals and provision of public services in government institutions remotely (online);
closure of all markets (shopping centers), with the exception of dekhkan markets in the city of Tashkent, Nukus and Regional Centers;

Until October 1, 2020 (1) the deadline for conducting an audit for 2019 by legal entities subject to a mandatory auditing was extended; (2) annual general meetings of shareholders following the results of 2019 was suspended; (3) pharmacies were permitted to salein-house medicines, medical devices and other products; and (4) entrepreneurs that were forced to suspend their activities during Quarantine Regime are except from paying rental payments for the use of state property. The requirement for a mandatory annual audit of LLCs with assets of more than 100,000 BCA was introduced based on the results of 2020.

During the Quarantine Regime, the limitation period was suspended (Art. 156 of the Civil Code), if the former was introduced or continued to operate in the last 6 months of the limitation period. At the same time, when it is impossible to carry out procedural actions in connection with the introduction of Quarantine Regime, the courts extended and restored procedural terms (deadlines) as missed for valid reasons.

Court orders which (1) did not enter into legal force before the introduction of, which (2) were rendered during Quarantine Regime and (3) were not appealed are to be enforced after the Quarantine Regime is lifted.

Below we will analyze the impact of government decisions on business during pandemic.

AMENDMENTS TO LEGISLATION CONCERNING COVID-19

During the Covid-19 pandemic, the following laws and regulations were adopted:

The Law of the Republic of Uzbekistan of 26.03.2020, No. LRU-613 “On Introduction of Changes and Additions to the Criminal, Code of Criminal Procedure of the Republic of Uzbekistan and the Code of the Republic of Uzbekistan on Administrative Responsibility”;
Decree of the President of the Republic of Uzbekistan dated 19.03.2020, No. UP-5969 “On Urgent measures for Mitigating the Negative Impact of Coronavirus Pandemic and the Global Crisis Phenomena on the Sectors of the Economy”;
Decree of the President of the Republic of Uzbekistan dated 27.04.2020 “On Additional Measures to Support the Population and Businesses during the Coronavirus Pandemic”;
Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated 23.03.2020 No. 176 “On Additional Measures to Prevent the Spread of Coronavirus Infection”;
Resolution of the Plenum of the Supreme Court of the Republic of Uzbekistan dated 28.04.2020 No. 08 “On some Issues of the Application by the Courts of Legislation in Connection with the Introduction in the Republic of Uzbekistan of Measures to Prevent the Spread of Сoronavirus Infection (COVID-19)”.

1.1. Creation of the Republican Commission for Combating the Coronavirus

Special Republican Commission on the Preparation of the Program of Measures for the Prevention of the Importation and Spread of New Types of Coronavirus in the Republic of Uzbekistan (hereinafter – “the Republican Commission“) was formed in accordance with the Order of the President dated 29.01.2020, No. P-5537. The Commission has the following rights:

to control the spread of coronavirus infection in all organizations, regardless of legal form;
to decide on introduction of Quarantine Regime and quarantine activities in localities;
to require reports from organizations, regardless of legal form, on sanitary-hygienic, anti-epidemic and other measures taken to prevent coronavirus infection;
on bringing officials (officers) to administrative or criminal liability in the presence of guilt in the spread of coronavirus infection.

The Head of the Republican Commission is the Prime Minister. The duration and conditions of the quarantine were determined by decisions of the Republican Commission and remained in effect until its official cancelation.

1.2. Creation of the Anti-Crisis Commission

based on the Presidential Decree date 19.03.2020, No. UP-5969, the Republican Anti-Crisis Commission (hereinafter referred to as the “Anti-Crisis Commission“) was formed. The main task of the Anti-Crisis Commission were to resolve issues and ensure the work of economic sectors, social support of the population during the period of counteracting the pandemic. The territorial headquarters of the Anti-Crisis Commission are headed by the Chairman of the Council of Ministers of the Republic of Karakalpakstan, khokims of regions, districts and cities respectively. The Prime Minister is also the head of the Anti-Crisis Commission.

1.3. Creation of the Anti-Crisis Fund and the Provision of Financial Support from the State Budget

The amount of funds of the Anti-Crisis Fund was 10 trillion Soums (approx. US$1,050,000,000).

These funds were directed to:

repaying loans raised under the state guarantee of the Republic of Uzbekistan;
compensating a portion of the expenses of entrepreneurs engaged in foreign trade activities; and
providing interest-free budgetary loans to local budgets.
financing of investment projects – construction, reconstruction, and repair infrastructure facilities in small industrial zones, settlements, public roads, water supply and sewerage, irrigation and land reclamation; health care, education and other social sector facilities;
other facilities that promote economic activity and expand employment, including mortgage lending.

The Ministry of Finance paid monthly compensation from the Anti-Crisis Fund to local budgets for shortfalls resulting from the granting of deferrals (installment plans) for the payment of property tax, land tax, and tax on the use of water resources.

FORCE MAJEURE

According to UP-5969, the Ministry of Investment and Foreign Trade (hereinafter “MIFT”) and the Chamber of Commerce and Industry of the Republic of Uzbekistan (hereinafter “CCI”) issued certificates of force majeure upon requests from entrepreneurs.

In the legislation of the Republic of Uzbekistan, the doctrine of force-majeure is present in three acts:

Art.333 (3) of Civil Code (hereinafter – the “CC”);
Art.14 of Customs Code (hereinafter – “CtC”);
Para.2 of the Regulation on the Procedure for Confirming Force Majeure Circumstances, approved by Resolution of CMRU dated 15.02.2005 No. 63 (hereinafter – “RCM No. 63”).

When resolving the issue of liability for breach of obligations, the reasons for the breach should be established and if it is established, then the courts are to deny the lawsuit.

2.1. Exemption from Civil Liability

In accordance with Art. 333 (3) CC, in case of non-performance or improper performance of its obligations, the entrepreneur is liable for damages, payment of penalites, etc., unless he proves that proper performance was impossible due to force majeure (extraordinary and unavoidable circumstances under these conditions), unless otherwise provided by law or contract. The Civil Code contains a number of special provisions exempting a party from liability in cases of force majeure: regarding the seller’s liability for defects in goods (Art. 409, para. 2), the liability of the carrier and the consignor (Art. 719, para. 2, and Art. 720, para. 1), the trustee (Art. 852, para. 2), the professional custodian (Art. 889, para. 2), hotels (Part 1 of Article 899), as well as owners of sources of increased danger (Part 1 of Article 999). Such law is, first of all, the Civil Code itself, which contains the following provisions exempting a party that has failed to perform or has performed improperly from (contractual or non-contractual) liability:

Secondly, in addition to the above-mentioned articles of Civil Code, legislation and judicial practice provides for a number of cases when an entrepreneur:

is exempted from liability in accordance with special legislative acts (laws, transport charters and codes, rules for the provision of certain services, etc.);
has the right to postpone the fulfillment of obligations to a later date (for example, to have extra delivery time of goods during force majeure);
cannot recover the mortgaged property, if the obligation by the mortgagor has not been fulfilled for reasons related to force majeure.

2.2. Exemption from Fines on Export Operations

In accordance with the legislation, within 120 days (in some cases – 180 days), the entrepreneurs was required to ensure the receipt of foreign currency earnings on the exported goods or the return import of the goods. If the deadline was not met, recorded accounts were receivable from export transactions, and penalties were imposed, amounting to 10% of the amount not received of funds – for delays of up to 180 days, additional 20% of the amount of unpaid funds – for delays of 180 to 365 days, additional 70% of the amount not received of funds – for a delay of more than 365 days.

In the event of force majeure circumstances, the period of receipt of foreign currency earnings w extended for the period of force majeure, confirmed by the authorized body of the relevant state (See: para. 1 (g) of the Presidential Decree dated 03.11.2017 No. PP-3351). However, the application of these penalties for overdue receivables for export operations was suspended until October 1, 2020 (paragraph 1 of clause 8 of UP-5969).

2.3. Exemption from Public Procurement Procedures

When concluding contracts for government needs, State customer should select counterparties using one of the procurement procedures, as an electronic store, reverse auction, competition, tender, public procurement from a single supplier (natural monopoly or supplier of unique goods, works and services).

According to Presidential Decree No. UP-5969, during the period of the Quarantine Regime, the Ministry of Health and the Agency for the Development of the Pharmaceutical Industry were allowed to conclude direct contracts by selecting the best offers in relation to medicines, medical devices, medical technology, and materials and substances used for their production.

2.3.1. Exemption from carrying out procurement procedures when providing private medical services

Private medical organizations provided medical services to infected individuals based on contracts concluded with the Ministry of Health, without conducting procurement procedures.

2.4. Procedure for Confirmation of Force Majeure in Foreign Trade Agreements

According to RCM No. 63 (currently CMR No. 625 dated October, 2022), the MIFT was authorized to confirm force majeure that occurred on the territory of the Republic of Uzbekistan only in accordance with the terms of foreign trade contracts and international treaties (for example, Vienna Convention 1980, CISG). To obtain a certificate, the aggrieved party applied to the MIFT and submitted a written application with an attachment regarding the circumstances of force majeure:

duly certified copies of contracts and specifications thereto;

information on the volume of fulfilled obligations under the contract;
a copy of the document on the payment of stamp duty.

For each contract, party was required to obtain a separate certificate, which was issued in the period of one business day from the date of appeal (UP-5969, para. 22).

2.5. Changing the Term of Payment of Taxes

The payment term was changed through deferrals or installment payments for existing or future tax debt (including interests and penalties) with a one-off or phased payment respectively (Art. 97 of Tax Code). The total deferral (installment plan) period did exceed not one year, and in certain cases up to two years, local government bodies in accordance with Resolution of the Cabinet of Ministers of the Republic of Uzbekistan No. 951 dated November 2019 (Appendix No. 1 CMR to Resolution No. 776, dated December 11 2020– valid for 2026) — regarding the tax on the use of water resources, property tax, and land tax and the Cabinet of Ministers — regarding all nine types of taxes, even if a criminal case has been initiated against the taxpayer-applicant on charges of violating tax legislation or a bankruptcy case has been initiated, there are sufficient grounds to believe that this person will conceal their funds, or intends to leave the Republic of Uzbekistan for permanent residence or within three years prior to filing the application the terms of a previously granted deferral or installment plan have been violated.

Suffering damage as a result of force majeure was the basis for granting a deferment or installment plan for payment of tax for an amount not exceeding the value of the net assets of a legal entity without charging interest on this amount of debt (Art. 100 of Tax Code).

The authorized bodies for making decisions on changing the term for paying taxes are the Cabinet of Ministers, the tax committee, the customs committee and local government bodies. According to Presidential Decree No. UP-5969, local government bodies were obliged to provide entrepreneurs with deferment or installment plan on payment of tax for the use of water resources, property tax and land tax. At the same time, the deferment (installment plan) is carried out on the basis of a taxpayer statement and the conclusion of the Ministry of Finance without providing additional documents (para. 7 (3)).

RESPONSIBILITY DURING THE QUARANTINE

3.1. Administrative responsibility

The Code of Administrative Liability (hereinafter “CAdL”) provided for liability for failure to take measures in the event of an accident and force majeure stipulated by Art. 224 CtC, which states that the carrier is required, inter alia, to take measures for the safety of the goods and the vehicle.

The following were added to the CAdL: (1) a compulsory medical measure in the form of treatment or quarantine and (2) a fine for being in public without a mask and breaking quarantine rules in the amount of up to 5 BCA (approx. $ 170, for March 2026) and from 20 to 30 BCA ( approx. US US$ ,679 and US$ ,1019respectively, for March 2026).

3.2. Criminal liability

The Law of March 26, 2020 No. LRU-613 introduced liability for the dissemination of untrue information on the spread of quarantine and other infections dangerous to humans in the context of the emergence and spread of quarantine and other infections dangerous for humans. The commission of this act is punishable by:

a fine of up to 200 BCA (approximately US $ 6,793); or
compulsory community service up to 300 hours; or
correctional labor up to 2 years.

If such information was disseminated in the media (including the Internet), then such an act shall be punishable by:

a fine of 200 to 400 BCA (approximately US $13,587); or
compulsory community service from 300 to 360 hours; or
correctional labor from 2 to 3 years; or
restriction of liberty up to 3 years; or
imprisonment of up to 3 years (Art. 244-5 of Criminal Code).

In addition, violation of sanitary legislation or epidemic control regulations is punishable by a fine of 50 to 100 BCA, or deprivation of a specific right for up to 5 years, or community service for up to 2 years or restriction of liberty for a term of 1 to 3 years, or imprisonment for up to 5 years. The same act resulting in the death of a person is punishable by correctional labor for two to three years, or restriction of liberty for a term of three to five years, or imprisonment for a term of five to seven years. The same act resulting in human casualties is punishable by imprisonment for a term of seven to ten years (Article 257-1 of the Criminal Code).

INCENTIVES

In accordance with the Tax Code (hereinafter – the “Tax Code”) tax benefits are provided exclusively to the Tax Code. With the exception of VAT, excise tax and subsoil use tax, tax incentives may be granted by Presidential decisions only in the form of a reduction in the established tax rate, but not more than 50% and for a period not exceeding 3 years.

4.1. Tax and customs benefits for entrepreneurs

According to Presidential Decree No. UP-5969, following benefits were granted in 2020:

tax rates for the use of water resources for the irrigation of agricultural land were reduced by 50 % of the established rates;
the accrual and payment of the tourist (hotel) tax were suspended;
for individual entrepreneurs, the minimum social tax amount was reduced to 50% of the monthly gross income;
the contribution rate for enterprises engaged in the wholesale trade of alcoholic beverages was reduced from 5% to 3%;
The fees for the right to engage in retail sales of alcoholic beverages for food service establishments were reduced by 25% from the established rates.

Also, small enterprises and individual entrepreneurs who suspended their activities or whose revenue reduced by 50 % or more compared to the first quarter of this year have the right to interest-free deferment (instalment plan) of the following taxes:

turnover tax, property tax, land tax, water tax – with instalment plan of 12 months;
social tax – with instalment plan of 6 months.

In the area of customs regulation, the State Committee of Customs (hereinafter – SCC) organized “green” corridors for the duty-free import of medicines, medical devices, and materials for their production; these goods were exempt from customs duties and VAT. For the import goods of essential zero were applied rates of customs duties and excise tax.

Henceforth, entrepreneurs could export goods without a guarantee payment if they had overdue accounts receivable of up to 10% of total exports for the reporting year and carried out one-time import transactions for technological equipment and raw materials in exchange for the repayment of overdue receivables from foreign trade operations.

4.1.2. Tax benefits for individuals

Incomes of individuals from charitable organizations were exempt from taxation. The individual declaration of income of individuals for 2019 was extended until August 1, 2020. The deadline for the payment of property tax and land tax of individuals was. Moreover, individuals were entitled to an interest-free deferral of payment of tax on personal income received from rental payments. The amount of material assistance not subject to personal income tax paid to an employee increased from 4.22 to 7.5 times the minimum wage. pension payments to working retirees were made directly by the extrabudgetary Pension Fund, and as of April 20, 2020, the amounts owed by retirees for overpaid pensions were written off.

4.2. Preferential terms for the payment of loans

Until October 1, 2020 the Government introduced moratorium to bankruptcy of enterprises faced with financial difficulties due to countering COVID-19 measures. Commercial banks will provide a deferral on loan repayments (without penalty charges) totaling 5 trillion soums to tour operators, hotel businesses, transport and logistics companies, and other enterprises in the tourism sector, as well as business entities facing financial difficulties due to restrictions on foreign trade operations.

The State Fund for Entrepreneurship Support has provided a guarantee of up to 75% of the debt amount (but not exceeding 10 billion soums) for loans to replenish working capital, issued to entrepreneurs, as well as compensation for interest expenses on loans not exceeding 1.75 times the Central Bank’s base rate.

The Central Bank provided with commercial banks an additional 2.6 trillion soums of liquidity by easing reserve requirements and introducing a special liquidity provision mechanism in the amount of 2 trillion soums for a term of up to 3 years. The Central Bank deferred 7.9 trillion soums in loan debt owed by legal entities.

LABOR ACTIVITY

5.1. Transfer to Remote (Online) Labor

In accordance with the Quarantine Regime, employers were required to send employees on paid leave or take measures to transfer to a remote (online) mode of employment. Employers were obliged to:

observe the admission of visitors only with a medical mask and the use of medical devices;
measure the temperature of employees at workplaces and immediately bring information about high-temperature employees to health authorities;
take measures to identify individuals who have been in contact with an employee infected with COVID-19 and to disinfect the areas where the infected person has been;
assist employees in complying with quarantine requirements.

5.2. Remote Transfer Procedure

In accordance with the Labor Code (article 457), the employer, having issued an appropriate order, can transfer the employee to work remotely, or provide flexible working hours, or permit to work from home.

The basis for issuing such an order is the amendment of the employment contract with the employee. Remote work is a method of performing an employee’s work duties, in accordance with the employment contract, outside the permanent workplace (premises or facility) under the direct or indirect supervision of the employer.

5.3. Sanitary rules for labor during a pandemic

State control over compliance with the Sanitary Rules is carried out by the Bodies of State Sanitary Supervision of the Republic of Uzbekistan. Employers must implement COVID-19 measures in the following aspects:

preventing the introduction of the infection into the organization (establishing an “entry screening” process before the start of each work shift, including body temperature checks, a “disinfection barrier” at the entrance, and restricting access to unauthorized persons);
taking measures to prevent the spread of COVID-19 among employees (providing employees with a supply of disposable masks, organizing centralized meals using disposable tableware, and canceling mass gatherings);

implementing organizational and technical measures to prevent infection among employees (daily wet cleaning, disinfecting all contact surfaces every 2–4 hours, regularly ventilating rooms every 2 hours, maintaining a supply of disinfectants sufficient for at least five days and personal protective equipment);
implementation of electronic communication, and implement other organizational measures to prevent employee infection.

Anti-Crisis Measures: Mitigating Economic Consequences of COVID -19

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