The activities of consolidated tax groups (herein after – CTG) in the Republic of Uzbekistan are regulated by the Tax Code and other legal acts. The concept of a CTG in the legislation of the Republic of Uzbekistan appeared with the adoption of the Tax Code in the new version dated 30.12.2019, which came into force on 01.01.2020 (hereinafter – the TC). The participants of a CTG summarize profits and losses from the result of activities of each of them and form a consolidated tax base for the payment of income tax. Tax accounting, calculation, and payment of income tax at CTG are the responsibility of the responsible participant.

Chapter 1. General provisions.

1.1. What is a CTG?

The legislation of the Republic of Uzbekistan defines the concept of CTG in Art. 61 of the TC, according to which it is a voluntary association of taxpayers, on the basis of a relevant agreement in the manner and on the terms provided for in the TC, the purposes of calculation and payment of income tax, taking into account the aggregative financial result of economic activity of these taxpayers.

Only a legal entity can be a part of the agreement on the establishment of a CTG (hereinafter – the agreement) and meet all the requirements established by the TC for participants of such groups.

The responsible participant of CTG is the participant who, according to the agreement, is responsible for the calculation and payment of income tax on CTG. The agreement is proof of the authority of a responsible participant in CTG. A responsible participant in a CTG has the same rights and obligations as a payer of income tax in the legal relationship concerning the calculation and payment of income tax.

1.2. Conditions for establishing a CTG.

The conditions for establishing a CTG are stipulated in Art. 62 of the TC, according to which the right to establish a CTG is granted only to legal entities which intend to establish or participate in a CTG and which must fulfill these conditions during the term of the agreement. A CTG may be established by legal entities provided that a legal entity directly and/or indirectly participates in the charter capital of the legal entities and the share of such participation in each of these legal entities is not less than 90 %.

A legal entity, as a party to the agreement, shall be subject to the following conditions:

not be in the process of reorganization or liquidation;
not be the subject of bankruptcy proceedings;
the amount of its net assets, calculated on the basis of the financial statement as of the last reporting date prior to the date of the submission to the tax authority of documents for registration of an agreement on the establishment (amendments) of CTG, must exceed the amount of its charter capital.

In addition, all legal entities participating in the CTG must meet the following conditions:

the total amount of value-added tax, income tax and subsoil use tax paid by them during the calendar year is not less than 100 billion sums;
the total revenue for the sale of goods, services, and other income according to the financial statement for the calendar year is not less than 500 billion sums;
the total value of assets according to the financial statement at the end of the calendar year is not less than 1 trillion sums;
the same tax rate is applied to income tax.

All the above indicators are calculated on the basis of the result of the year preceding the year in which the documents for the registration of the agreement on the establishment of a CTG are submitted to the tax authority.

The following legal entities may not be participants in CTG:

legal entities – participants in special economic zones;
legal entities applying special tax regimes;
banks, unless all other legal entities included in the consolidated group are banks;
insurance companies, except for the case when all other legal entities included in this consolidated group are insurance companies;
professional securities market participants that are not banks, except for the case when all other legal entities included in this consolidated group are professional securities market participants that are not banks;
legal entities that are not recognized as income taxpayers;
cleaning organizations;
microcredit organizations.

CTG may be established only if the legal entities establishing the CTG meet the requirements of Art. 62 of the TC. The composition of the participants in CTG may be changed only by the accession to the CTG of legal entities that meet these requirements or by the mandatory exclusion from the CTG of participants that no longer meet these requirements.

CTG that is established in violation of the above requirements or ceases to comply with them shall be deemed to have been established unlawfully or to have ceased to operate from the date of violation of that requirement.

CTG shall be established for a period of at least 2 calendar years.

1.3. Agreement to establish a CTG.

By concluding an agreement, legal entities that meet all the requirements of Art. 62 of the TC voluntarily unite for the purpose of calculating and paying income tax in CTG. CTG is not a separate legal entity, its establishment is not the result of the creation of a new legal entity.

1.3.1. Requirements for the agreement establishing a CTG.

The agreement must contain the following provisions:

the subject of the agreement;
the list and details of the legal entity;
the name of the responsible legal entity:
the list of powers delegated by the CTG participants to the responsible participant of this group;
the procedure and conditions for fulfilling the obligation, exercising the rights of the responsible participant and other participants of the CTG not provided for in the TC, liability for failure to fulfill the established obligations;
the period, calculated in calendar years, for which the group is established, if it is established for a certain period, or an indication that there is no certain period for which the group is established;
indicators, necessary for the determination of the tax base and the payment of income tax for each participant of CTG, taking into account the specificities provided for in the TC. The selected indicators may not be changed during the entire period of validity of the agreement on the establishment of the CTG.

The legal relations arising from an agreement on the establishment of CTG are governed by tax legislation, and the part that not governed by tax legislation is governed by civil legislation.

If the provisions of an agreement do not comply with the legislation, the agreement may be declared invalid by a court. The agreement on the establishment of CTG must be registered with the tax authority at the location of the responsible participant of the CTG.

1.4. The procedure for registering an agreement to establish a CTG.

The registration of the agreement on the establishment of a CTG is carried out in accordance with the procedure established in Art. 64 of the TC.

In order to register the agreement, the responsible participant of a CTG must submit the following documents to the tax authority of the place of its registration:

an application for registration of the agreement signed by authorized representatives of all participants of the established CTG;
two copies of the agreement;
documents confirming the fulfillment of the conditions specified in Art. 62 of the TC, certified by the responsible participant of the CTG. Such documents include, in particular, copies of payment orders for the payment of taxes, copies of decisions of the tax authority on the set–off of such, balance sheets, reports on the financial results for the previous calendar year for each of the participants of the groups;
documents confirming the powers of the persons who signed the agreement.

These documents must be submitted to the tax authority not later than 30 October of the year preceding the tax period from the income tax on a CTG is calculated and paid.

Within 15 days of the submission of the above documents, the head of the tax authority issues a decision on registration or a reasoned decision on refusal to register the agreement on the establishment of a CTG. If any violations are found that need to be remedied within a short period of time, the tax authority notifies the responsible participant of the CTG, who must remedy them within the above-mentioned period of time. If all conditions are met, the authority is obligated to register the agreement.

Within 5 days from the date of the registration of the agreement, the tax authority is obliged to hand over a copy of the agreement with a registration mark to the responsible participant of the CTG against a receipt or in any other way that proves the date of receipt. Within the same period of time, the information on the registration of the agreement shall be sent to the tax authority at the location of the legal entities that are participants in the CTG. The date of establishment of a CTG is the first day of the calendar year following the year in which the agreement was registered. For example, if the agreement is registered on 1 September 2023, the date of establishment of the CTG will be 1 January 2024.

1.5. Refusal to register an agreement to set up a CTG.

According to Art. 64 of the TC, there are cases in which at least one of them is a refusal to register an agreement. Such cases are:

failure to comply with the conditions for establishing a CTG (see section 1.2.);
non-compliance of the agreement with the established requirements (see section 1.3.);
failure to submit or incomplete submission of documents for registration of the agreement to the competent tax authority or failure to comply with the deadline for submitting the documents;
signing of documents by unauthorized persons.

In case of refusal to register an agreement, the responsible participant of the CTG does not lose the right to apply for registration again if the violations are eliminated. A copy of the decision on refusal of registration shall be sent within 5 days to the representative of the responsible participant against a receipt or in any other manner indicating the date of receipt.

The decision of the tax authority to refuse registration may be appealed by the responsible participant of the CTG to a higher authority or to the court.

1.6. Amendments to the agreement on the establishment of a CTG and extension of its validity.

Amendments and prolongation of the agreement are subject to the provisions of Art. 65 of the TC. In case of amendment of the agreement, an agreement must be adopted by all participants of the CTG, including new participants and excluding participants who leave the group.

According to this article, the obligation to amend the agreement arises in the case of

a decision on liquidation of one or more participants of a CTG;
a decision on the reorganization of one or more participants in a CTG;
admission of one or more new participants to a CTG;
the withdrawal of a legal entity if it no longer fulfills the conditions set for the participants of the CTG;
the decision to extend the term of the agreement.

Reorganized participants of a CTG are subject to mandatory inclusion in this consolidated group if they meet the established requirements.

1.6.1. Deadlines for registering an agreement to amend an agreement on the establishment of a CTG.

An agreement to amend an agreement on the establishment of a CTG (hereinafter agreement on amendments) must be submitted to tax authority for registration with the following deadlines:

not later than one month before the expiration date of the agreement, if a decision is made to extend the term of the agreement;
within one month from the date of the occurrence of circumstances for amending the agreement in other cases.

1.6.2. Documents required for registration of an agreement on amendments.

In order to register an agreement on amendments, the responsible party should submit the following documents to the tax authority:

the notice of the amendment of the agreement;
two copies of the agreement on amendments, including the extension of its term, signed by the authorized representative of the participants of the CTG;
documents confirming the powers of the singing the agreement on amendments;
documents confirming the fulfillment of the conditions for the establishment of a CTG.

1.6.3. Registration of the agreement on amendments and reasons for refusing to register the agreement.

The tax authority is obliged to register the agreement on amendments within 10 days from the date of submission of the documents and to issue a copy of the amendments with a registration mark to the authorized representative of the responsible participant of the specified group.

The grounds for refusing to register an agreement on amendments are:

failure to meet the conditions for the establishment of a CTG;
documents signed by unauthorized persons;
failure to comply with the deadline for submitting documents for amending the said agreement;
failure to submit documents or documents submitted were incomplete.

1.6.4. Procedure for entry into force of an agreement on amendments.

An agreement on amendments shall be entered into in the following order:

amendments to the agreement on the establishment of a CTG related to the inclusion of new legal entities in such group (except for cases of reorganization of the group members) shall enter into force not earlier than on the first day of the calendar year following the year in which the relevant amendments to the agreement are registered by the tax authority;
amendments to the agreement on the establishment of a CTG relating to the withdrawal of participants from such a group shall enter into force on the first day of the calendar year following the year in which the circumstances for making the relevant amendments to the agreement arose;
in other cases, amendments to the establishment of a CTG shall enter into force on the date determined by the parties to the agreement, but not earlier than the date of registration of the relevant amendments by the tax authority.

In cases of rejection, the introduction of obligatory amendments to the agreement will result in the termination of the agreement as of the first day of the calendar year in which the relevant obligatory amendments to the agreement should have entered into force.

1.7. Registration of a legal entity as a responsible participant of a CTG.

In accordance with Art. 129 of the TC, a legal entity that is a responsible participant under the agreement is registered as a responsible participant of a CTG by the tax authority that registered the agreement on the establishment of the CTG within 5 days from the date of registration. Within the same period, such legal entity shall be issued (sent) a notice of registration with the tax authority as a responsible participant of the CTG.

The tax authority shall deregister the legal entity as a responsible participant of a CTG within 5 days from the date of termination of the CTG. Within the same period, the legal entity shall be issued (sent) a notice of deregistration with the tax authority as a responsible participant of a CTG.

1.8. Termination of a CTG.

CTG is terminated upon the occurrence of at least one of the circumstances specified in Art. 68 of the TC. Such circumstances are:

expiry of the term of the contract;
cancellation of the contract;
entry into force of a court decision declaring the agreement invalid;
failure to timely submit to the tax authority an agreement on amendments due to a change in the composition of its participants;
reorganization (except for transformation) or liquidation of the responsible participant of the CTG;
the commencement of insolvency (bankruptcy) proceedings against the responsible participant in a CTG;
non-compliance by the responsible participant of the CTG with the terms and conditions of the formation of the CTG;
evasion of obligatory amendment to the agreement.

The purchase and sale of shares in the authorized capital do not constitute grounds for the termination of a CTG. If there are grounds for termination of the CTG, the responsible participant is obliged to send the decision on termination of the CTG, signed by the authorized representatives of all legal entities – participants, to the tax authority that registered the agreement on its establishments. The decision must be sent to the tax authority within 5 days of its adoption.

When the circumstances referred to in para. 1, 3-7 above arise, a responsible participant in a CTG must send a notification to the tax authority starting the date on which such circumstances arise. Such notification shall be made in any form and sent to the tax authority within five days from the date of the occurrence of the relevant circumstance.

Upon receipt of the aforementioned documents, the tax authority will send information on the termination of a CTG to the tax authorities at the location of the legal entities included in the CTG.

CTG is terminated as of the first day of the calendar year following the year in which the circumstances giving rise to the termination of the CTG occurred.

If a court declares an agreement on the establishment of a CTG to be invalid, the CTG is deemed to be terminated as of the first day of the income tax reporting period in which the court decisions take effect.

If the reason for the termination of the agreement on the establishment of a CTG is failure to submit to the tax authority an agreement on the amendments due to change in the composition of its participants within the specified time limit, the CTG is considered to have been terminated as of the first day of the income tax period in which the condition was violated.

In the case of para. 5, 6, or 7 above, a CTG is deemed to have been terminated as of the first day of the calendar year in which the relevant circumstance occurred.

Chapter 2. Participants in а CTG.

2.1. Responsible participant.

After acquiring the status of a responsible participant in a CTG, a legal entity has not only the rights and obligations of an income tax but also the rights and obligations of a responsible participant, which are specified in Art. 67 of the TC.

2.1.1. Rights and obligations of a responsible participant.

In accordance with Art. 67 TC, the responsible participant of a CTG has the following rights:

to submit to the tax authorities and their officials any explanations on the calculation and payment of income tax (advance and current payments) on CTG;
to be present at field tax audits and audits conducted in connection with the payment of income tax to CTG at a location of each participant and its separate subdivisions;
to receive copies of tax audit acts and decisions of the tax authority issued on the basis of the results of tax audits conducted in connection with the payment of income tax under the CTG as well as requests for payments and other documents related to the payment of income tax on CTG;
to participate in the consideration by the head (deputy head) of the tax authority of the materials of the audits and additional tax control measures carried out in connection with the payment of profit tax on CTG;
to receive from the tax authorities information on the participants of a CTG that constitutes a tax secret;
to appeal in accordance with the established procedure against acts of tax authorities and other authorized bodies, actions (inactions) of their officials, including in the interests of certain participants of a CTG, in connection with the performance of their duties (exercise of rights) in the calculation of the income tax on the CTG;
to apply to the tax authority with a request for credit (refund) of overpaid income tax on CTG.

Obligations of a responsible participant:

to submit to the tax authority for registration the agreement on the establishment of a CTG, the agreement on changes, the decisions or notification on the termination;
keep tax records, calculate and pay income tax (advance and current payments) under the CTG;
submit to the tax authorities tax reports on CTG’s income tax and documents received from other group members;
upon termination of a CTG, to provide its participants with the information necessary for the calculation and payment of income tax (advanced and current payments) and the preparation of tax reports for the relevant reporting and tax periods, in the manner and within the terms set forth in the agreement establishing a CTG. In a similar procedure in case of withdrawal of one or more legal entities from a CTG, such information shall be provided to other participants of this group, entities who have withdrawn from it;
to repay tax debts incurred in connection with the fulfillment of the obligation of an income tax within a CTG;
to notify the participants of the CTG of the receipt of the tax demand within five days from the date of its receipt;
to request from the participants of the CTG documents, explanation, and other information necessary for tax authorities to carry out tax control measures and to fulfill the obligations of income taxpayers under the CTG;
to submit primary documents, tax accounting registers, and other information on a CTG within the framework of tax control measures requested by the authority that registered the agreement on the establishment of the CTG.

In addition, if one of the participants of a CTG leaves the group, the responsible participant is obliged to make the relevant changes to the tax accounting from the beginning of the tax period in which the legal entities withdrew from the group. Also, recalculate advance and current payments of a CTG.

2.1.2. The representative role of a reasonable participant.

Pursuant to Art. 24 of the TC, a taxpayer may participate in tax relations through a legal or authorized representative. The authorization of the representative must be confirmed by documents. Legal representatives may be persons authorized to represent the legal entity by law or its constituent document. According to this article of the TC, the responsible participant is an authorized representative of all participants of a CTG on the basis of the law.

Irrespective of the provisions of the agreement on the formation of a CTG, the responsible participant of the group has the right to represent the interests of the participants of the consolidated group in the following legal relations related to:

the registration of the agreement on the establishment of a CTG with the tax authorities, as well as the amendments of the agreement, the decisions on extending the term of the agreement and its termination;
the compulsory collection of income tax arrears from a participant in a CTG;
the nature of actions (inactions) of a tax authority official, if they directly affect the rights of a legal entity that is a participant of a CTG.

A responsible participant has the right to delegate its powers to represent the interests of the participants of the group to third parties on the basis of a concluded agreement.

2.2. Other participants in a CTG.

A participant of a taxpayer group is a legal entity that is a party to an agreement on the establishment of a CTG and meets all the conditions set out in the TC.

2.2.1. Rights and obligations of participants in a CTG.

Pursuant to Art. 66 of the TC, the participants of a CTG have the following rights:

to receive from the responsible participant copies of acts, decisions, claims, settlements, and other documents submitted by the tax authority to the responsible participant in connection with the operation of this CTG;
to appeal to a higher tax authority or court against acts of tax authorities, actions (inactions) of their officials;
to voluntarily fulfill the obligations of a responsible participant of a CTG to pay income tax on the CTG;
to be present at the tax inspectors conducted in connection with the calculation and payment of the income tax on CTG of the responsible participant, as well as to participate in the examination of the materials of such tax inspectors.

Participants in a CTG that meets the requirements of the TC may not voluntarily terminate their participation in the group during the term of the agreement establishing the CTG.

The members of a CTG are obliged to:

to perform all actions and submit all documents required for the registration of the agreement on the establishment of a CTG and its amendments;
to provide the responsible participant of a CTG with the data necessary for it to fulfill its obligations and exercise its rights as a taxpayer of income tax under the CTG. Such data shall include calculations of the tax base for income tax in respect of income received and expenses incurred, data from accounting registers and other documents;
to provide the tax authorities with the required documents and other information when the tax authorities carry out tax control measures in connection with the CTG;
to fulfill the obligations to pay income tax (advance and current payments) on CTG, as well as related penalties and fines, in case of failure or improper fulfillment of such obligations by the responsible participant of this group;
in case of non-compliance with the terms and conditions set forth in the TC, immediately notify the responsible participant of the CTG and the tax authority where the agreement on the formation of the said group is registered;
to keep records for tax purposes.

If a responsible participant does not properly fulfill the income tax liabilities of a CTG, a participant or several participants of that CTG may fulfill these liabilities. Upon fulfillment, the participant or participants acquire the right of recourse.

On leaving the group, a legal entity must:

firstly, make accounting changes from the beginning of the income tax period in which it withdrew from the CTG;
secondly, calculate and pay income tax on the basis of the profits actually received by the legal entity from the beginning of the tax period in which the legal entity withdrew from the group, taking into account the amounts of CTG actually paid by the responsible participant of the group;
thirdly, to submit an income tax return to the tax authority of its place of registration.

The withdrawal of a legal entity from a CTG does not relieve it of its liability in respect of the income tax on the CTG arising during the period in which the legal entity was a member of that group.

Consolidated taxation in the Republic of Uzbekistan. Part 1.

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