October 25, 2024

System of taxes and fees in the Republic of Uzbekistan

Content:

1. Legislation (laws and bylaws)

The main regulatory legal acts in the field of taxation are:

Constitution of the Republic of Uzbekistan;
Tax Code of the Republic of Uzbekistan of December 30, 2019, No. ZRU-599;
Resolution of the Legislative Chamber of the Oliy Majlis of the Republic of Uzbekistan “On the State Budget of the Republic of Uzbekistan, budgets of state trust funds and the main directions of tax and budget policy for 2019” dated 17.11.2018, N 2119-III;
Decree of the President of the Republic of Uzbekistan “On the concept of improvement of tax policy of the Republic of Uzbekistan” June 29, 2018, No. UP-5468;
Decree of the President of the Republic of Uzbekistan “On the forecast of the main macroeconomic indicators and parameters of the state budget of the Republic of Uzbekistan for 2019 and budget guidelines for 2020-2021” dated December 26, 2018, No. PP-4086;
Decree of the President of the Republic of Uzbekistan “On measures to further improve the tax policy of the Republic of Uzbekistan” dated September 26, 2019, No. UP-5837;
Decree of the President of the Republic of Uzbekistan “On measures to further streamline the provision of tax and customs benefits” dated June 27, 2019, No. UP-5755.

2. Taxation system

First of all, it should be noted that the Tax Code of the Republic of Uzbekistan was revised and adopted in a new wording in the following years:

from January 1, 1998 to January 1, 2008 ( during ten years) the Tax Code of the Republic of Uzbekistan approved by the Law of the Republic of Uzbekistan dated April 24, 1997 No. 396-I was in force;
from January 1, 2008 to January 1, 2020 ( within twelve years) the Tax Code of the Republic of Uzbekistan approved by the Law of the Republic of Uzbekistan dated December 25, 2007 №ZRU-136 was in force;
from January 1, 2020 the Tax Code was enacted in a new version by the Law of the Republic of Uzbekistan dated December 30, 2019 №ZRU-599.

In accordance with Article 17 of the new edition of the Tax Code of the RUz, the taxation system consists of taxes and fees. General information on the relevant taxes and fees is provided below.

3. Authorized bodies

In accordance with Art.25 of the Tax Code of the RUz the authorized bodies in the sphere of taxation are:

1) tax authorities– the State Tax Committee of the Republic of Uzbekistan, Interregional State Tax Inspectorate on large taxpayers, state tax departments of the Republic of Karakalpakstan, regions, and the city of Tashkent, as well as state tax inspections of districts (cities);

2) customs authorities – the State Customs Committee of the Republic of Uzbekistan, departments of the State Customs Committee in the Republic of Karakalpakstan, regions, Tashkent city, specialized customs complex “Tashkent-AERO” and customs posts;

3) state bodies and organizations performing the functions of levying fees.

4. Types of taxes

According to Article 17 of the Tax Code, there are the following types of taxes:

value-added tax;
excise tax;
profit tax;
personal income tax;
tax for the use of subsurface resources;
special rent tax on the extraction of mineral resources;
tax for the use of water resources;
property tax;
land tax;
social tax.

5. Approval procedure

In accordance with Article 93 of the Constitution of RUz, the establishment of taxes and other compulsory payments belongs to the joint jurisdiction of the Legislative Chamber and the Senate of the Oliy Majlis of the Republic. It should be borne in mind that the concept of “other compulsory payments” in the new edition of the Tax Code of RUz is absent and instead the concept of “fees” is used.

6. Rates

According to Article 72 of the Tax Code RUz, the tax rate is the amount of tax charges per unit of measurement of the tax base in percent or absolute amount. As a general rule, tax rates are established by this Code. However, the rates of excise tax, land tax, tax for the use of water resources, and personal income tax in a fixed amount are established by the Law on the State Budget. Excise tax rates may be revised by decisions of the President of the Republic of Uzbekistan during the year based on the dynamics of prices and the volume of sales of products.

6.1 Taxes and fees[1]

In the system of taxes and fees, there is also a system of simplified procedures for calculating the tax base.

7. Tax base

The tax base is one of the obligatory elements of taxation, which should be determined by the legislation (Article 69 of the Tax Code of the Republic of Uzbekistan). In accordance with the Tax Code of the RUz, the tax base is a cost, physical, or other characteristic of the object of taxation (Art. 71 of the Tax Code of the RUz).

The concepts of the object of taxation and tax base are interrelated. The object of taxation is property, action, result of action, or other circumstance having cost, quantitative, or physical characteristics, the presence of which the tax legislation binds the taxpayer to incur a tax liability (Article 70 of the Tax Code of the RUz).

There are no questions about the value characteristic if the object is, say, profit or the amount of income.

How to determine the tax base, for example, for land tax from legal entities? In the tax legislation of the Republic of Uzbekistan, the object of taxation of land tax from legal entities is land plots owned, owned, used, or leased by legal entities (Article 426 of the Tax Code of the Republic of Uzbekistan). When determining the taxable base for a land plot, the total area of the land plot less the areas of land plots not subject to taxation in accordance with part two of Article 427 of the Tax Code RUz is taken into account. It follows that each tax has its own procedure for determining the tax base.

8. Peculiarities of payment

In addition to the obligation to calculate the tax, the taxpayer is obliged to pay this tax correctly and within the established time limit. If we talk about the terms of tax payment, these terms are established for each tax. For example, according to Article 293 of the Tax Code of the Republic of Uzbekistan, excise tax is paid monthly not later than the tenth day of the month following the tax period.

9. Tax reporting

Tax reporting is a document of the taxpayer, which includes calculations and tax declarations for each type of tax or income paid, as well as annexes to the calculations and tax declarations, prepared according to the form approved by the State Tax Committee of the Republic of Uzbekistan in coordination with the Ministry of Finance of the Republic of Uzbekistan (Article 81 of the Tax Code of the RUz).

10. Avoidance of double taxation (countries, peculiarities of regulation)

Double taxation is a simultaneous imposition of the same taxes on income in different countries. Double taxation is caused by the fact that a non-resident taxpayer (an individual or a legal entity that does not reside permanently in the territory of the country of which it is a citizen or subject) must pay taxes on global profits simultaneously at the place of its actual location and at the place of its citizenship. To avoid such conflicts, countries conclude agreements on the avoidance of double taxation.

Currently, Uzbekistan has concluded more than 50 double taxation treaties.

Peculiarities of regulation. If an existing treaty establishes rules that differ from those provided for by the tax legislation of Uzbekistan, the rules of the treaty should be applied. However, it should be remembered that Uzbekistan has a mechanism for applying the rules of treaties, which is based on the thesis that a foreign legal entity wishing to receive a benefit (in terms of lowering the rate of taxation down to zero) must prove that it has a permanent residence in the country to which the agreement with which it refers.

11. Permanent establishments

A permanent establishment of a foreign legal entity in the Republic of Uzbekistan (hereinafter – PE) is a permanent place of business through which this foreign legal entity fully or partially carries out entrepreneurial activity in the Republic of Uzbekistan (part 1, article 36 of the Tax Code of the RUz).

A permanent establishment means, in particular:

any place of management, branch, department, bureau, office, office, cabinet, agency, factory, workshop, shop, laboratory;
any place where production, processing, kitting, packing, and packaging of goods is carried out;
any place, including a warehouse, used as a retail outlet;
mine (mine), oil or gas well, quarry, or any other place where natural resources are extracted;
an installation or structure (including its installation) used for the study (exploration), development, extraction, and/or exploitation of natural resources, but only if the installation or structure is used or ready for use for more than one hundred eighty-three days;
any place of performance of activities (including control or observation) related to a pipeline, or gas pipeline;
any place of performance of activities related to the installation, adjustment, and operation of gaming machines (including consoles), computer networks and communication channels, and amusement rides.

A permanent establishment is also recognized as:

A construction site, construction, installation or assembly facility or related supervisory (control) activity, provided that such site, facility or activity exists or continues for more than one hundred eighty-three days during any consecutive twelve-month period;
Provision of services, including consulting services, performed by that foreign legal entity through its employees or other personnel employed by it for such purposes, provided that such activity continues (for the same or a related project of the foreign legal entity or a related party of the foreign legal entity) for at least one hundred eighty-three days during any consecutive twelve-month period (Article 36 of the RUz Tax Code).

12. Formation of a PE

The activity of a foreign legal entity forms a permanent establishment in accordance with the provisions of Article 36 of the Tax Code from the date of commencement of such activity in the Republic of Uzbekistan.

The date on which a foreign legal entity begins to carry out activities in the Republic of Uzbekistan for the purposes of application of the Tax Code shall be recognized as the date of:

The conclusion of any following contract (contract, agreement) for:
- rendering services in the Republic of Uzbekistan, including under a joint activity agreement;
- authorization to perform actions on its behalf in the Republic of Uzbekistan;
- purchase of goods in the Republic of Uzbekistan for use or sale in the territory of the Republic of Uzbekistan;
- Acquisition of services for the provision of services in the Republic of Uzbekistan;
Conclusion of the first labor contract (agreement, contract) for the purpose of carrying out activities in the Republic of Uzbekistan;
Arrival in the Republic of Uzbekistan of a non-resident individual, hiring of an employee or other personnel by a foreign legal entity to fulfill the terms of the contract (agreement, contract) specified in the above paragraphs 1 or 2 (paragraphs 13-14 of Article 36 of the Tax Code of the Republic of Uzbekistan).

13. Registration of a PE with tax authorities

A legal entity – non-resident of the Republic of Uzbekistan, carrying out activities in the Republic of Uzbekistan through a permanent establishment, no later than one hundred eighty-three calendar days from the date of commencement of such activities is obliged to submit to the tax authority an application for registration as a taxpayer. This application shall be accompanied by original or notarized copies translated into the state language:

Document confirming state registration in the country where this legal entity – non-resident of the Republic of Uzbekistan – is established;
Special permits or licenses (if any);
Power of attorney or other document (if any), certifying the right to act on behalf of a legal entity – non-resident of the Republic of Uzbekistan in the Republic of Uzbekistan;
Contract (if any), the execution of which leads to the formation of a permanent establishment.

However, the fact of registration of a permanent establishment in the state tax service body is not the moment of formation of this permanent establishment. A permanent establishment of a non-resident will be considered to be formed regardless of the will of the non-resident.

[1] The information provided is not exhaustive.

[2] Tax agents are persons who, in accordance with the present Code, are responsible for calculating, withholding from the taxpayer and remitting taxes to the budget system (Article 23 of the Tax Code of the Republic of Uzbekistan).

[3] In the Republic of Uzbekistan, the basic calculation value is set at 340,000 sums, which is equivalent to 28 US dollars

[4] This tax is introduced instead of the Single Tax Payment (STP).

System of taxes and fees in the Republic of Uzbekistan

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