Tajikistan - Doing Business in the Republic of Tajikistan 2012-1.eng (1) by Enterprise Europe Network - St. Petersburg branch

GEORGIA KYRGYZSTAN MONGOLIA TAJIKISTAN KAZAKHSTAN TURKMENISTAN UAE UZBEKISTAN #22, Shotemur str. Office 22 Tajikistan Hotel Dushanbe Republic of Tajikistan tajikistan@colibrilaw.com www.colibrilaw.com

DOING BUSINESS IN THE REPUBLIC OF TAJIKISTAN Legal Aspects General Review

October 2012 www.colibrilaw.com

All data contained in this brochure are purely informative and based on the laws of the Republic of Tajikistan effective and published at the time when this brochure is made. The information provided in the brochure is not legal or other consultancy on any particular matter and may not serve as a source of the same. The firm and co-authors hereby fully relieve themselves of the responsibility to anyone in respect of any act or omission as well as in respect of its implications having taken place in full or part as a result of full or partial use of the â&#x20AC;&#x153;Doing Business in the Republic of Tajikistanâ&#x20AC;? brochure contents. Client or other reader shall not act or refrain from acting in respect of any matter contained in this brochure without first receiving appropriate legal or any other professional consultancy in relation to the specific facts and circumstances.

Respectfully,

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TABLE OF CONTENTS

Background 1.

STARTING A BUSINESS IN THE REPUBLIC OF TAJIKISTAN ……………………

1.1. Joint-Stock Company ..............................................................................................

1.2. Limited Liability Company .......................................................................................

1.3. Registration of legal entities ....................................................................................

BRANCH AND REPRESENTATIVE OFFICES ............................................................

2.1. State registration of Branch and Representative Offices of foreign legal entities ....

LICENSING ................................................................................................................

INVESTMENT CLIMATE ..............................................................................................

4.1. Legal regulation, investor guarantees, form of investment. Direct private investment 15

4.2. Free economic zones ............................................................................................

4.3. Agreements on mutual protection of investments …………………………..….

TAXATION IN THE REPUBLIC OF TAJIKISTAN .......................................................

5.1. Income tax .............................................................................................................

5.2. Profit tax ................................................................................................................

5.3. Value added tax ....................................................................................................

5.4. Excise tax ..............................................................................................................

5.5. Social tax ...............................................................................................................

5.6. Land tax .................................................................................................................

5.7. Taxes on subsoil users ...........................................................................................

5.8. Royalty ..................................................................................................................

5.9. Tax on users of automobile roads .........................................................................

5.10. Tax paid under a simplified procedure .................................................................

5.11. Unified tax for agricultural producers ...................................................................

5.12. Tax on sale of lint cotton and primary aluminum ..........................................................

5.13. Minimal income tax ..............................................................................................

5.14. Local taxes. Immovable property tax ...................................................................

5.15. Tax on vehicle owners ........................................................................................

5.16. Retail sale tax ......................................................................................................

5.17. Taxation of construction of hydroelectric power plants ......................................... 5.18. Taxation of newly established companies performing full cycle of lint cotton processing

into final products (from cotton yarns to cotton textiles)…………… ………………….…………

5.19. Tax on products of merchandise processing …………………………………………

5.20. Taxation under Production Sharing Agreements…………………………………….

5.21. Water royalty……………………………………………………………………………..

EMPLOYMENT ............................................................................................................

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6.1. Employment agreement ........................................................................................ .

6.2. Working hours ..................................................................................................... ..

6.3. Minimal labor compensation ................................................................................. .

6.4. Employment and use of foreign workforce in the Republic of Tajikistan ................

DISPUTE SETTLEMENT ............................................................................................ ..

7.1. Dispute settlement in the Republic of Tajikistan…………...........................................

7.2. Arbitration………………………………. ..................................................................... ..

7.3. Enforcement of foreign judgments in the Republic of Tajikistan…… ....................... ..

ABBREVIATIONS

JSC

Joint-Stock Company;

World Bank;

CC RT TNN MI RT MFA RT

Civil Code of the Republic of Tajikistan; Taxpayer identification number; Ministry of Interior of the Republic of Tajikistan; Ministry of Foreign Affairs of the Republic of Tajikistan;

MM MO RT

Majlisi Milli Majlisi Oli of the Republic of Tajikistan (upper chamber of the Parliament);

MN MO RT Parliament);

Majlisi Namoyandagon Majlisi Oli of the Republic of Tajikistan (lower chamber of the

NBT TC RT CNCEO

National Bank of Tajikistan; Tax Code of the Republic of Tajikistan; Code of the national classification of enterprises and organizations;

LLC

Limited Liability Company;

Republic of Tajikistan;

FEZ

Free Economic Zone;

CIS

Commonwealth of Independent States;

LC RT

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Labor Code of the Republic of Tajikistan.

Background 1

The Republic of Tajikistan is located in the south-east of Central Asia, sharing boundaries with Uzbekistan, Kyrgyzstan, China, and Afghanistan. Tajikistan is a mountainous country with the altitude ranging from 300 to 7,495 meters above the sea level; as much as 93% of Tajikistanâ&#x20AC;&#x2122;s territory belongs to one of the world-highest mountainous systems. Thousands of glaciers located in Tajikistan feed numerous rivers of Central Asia. Since 22 July 1989 national language of the country is Tajik. The Republic of Tajikistan gained its independence on 9 September 1991. Thereupon, it remained in the Russian rouble circulation zone till 10 May 1995; then the national currency of rubl was introduced, to be replaced with somoni on 30 October 2000. The Republic of Tajikistan is a unitary state. It has one autonomous region (Gorno Badahshanskaya, the GBAO), two Oblasts (provinces), and cities and districts of central subordination. In accordance with the Constitution (adopted on 6 November 1994, amended in September 1999 and June 2003), the country is a presidential democracy. The President is elected nation-wide for the term of 7 years. No person may be elected as the President for more than two consecutive terms. National governance in the Republic of Tajikistan is based on the separation of powers (that is, executive, judicial, and legislative power). Executive power is represented by the Government of the Republic of Tajikistan. The supreme representative and legislative authority is the Majlisi Oli (the Parliament) of the Republic of Tajikistan. The Majlisi Oli consists of two Majlises: Majlisi Milli and Majlisi Namoyandagon. Judicial power is represented by the Constitutional Court, the Supreme Economic Court, the Court Martial, and the Court of Gorno Badahshanskaya Region, as well as by the local courts. The Republic of Tajikistan was included into the WB Doing Business project in 2006. In 2010 the country th

ascended from the 164 to the 152

place (among the total of 183 countries). The reforms of 2008 â&#x20AC;&#x201C; 2009

made the Republic of Tajikistan one of the ten reformer nations, together with such countries as the United Arab Emirates, Egypt, Belarus, Macedonia, and others.

Information available at: www.mfa.tj;

Information available at: www.doing business.org/russian

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STARTING A BUSINESS IN THE REPUBLIC OF TAJIKISTAN

The Republic of Tajikistan allows establishment of legal entities in a variety of organizational legal forms Most frequent choices are: ■

limited liability company; and

■

joint-stock company.

The principal legislation governing activities of legal entities includes Part 1 of the Civil Code of the Republic 3 4 of Tajikistan , the Law of the Republic of Tajikistan on Limited Liability Companies” of 10 May 2002, # 53, 5 and the Law of the Republic of Tajikistan on Joint-Stock Companies of 5 March 2007, #237. 1.1.

Joint-Stock Company

A joint-stock company is a for-profit organization share capital of which is divided into a certain number of shares; shareholders are not liable for the company’s liabilities and bear the risk of its losses limited to the value of the shares held. A joint-stock company may issue shares value of which is represented in the national currency of the Republic of Tajikistan, regardless of the form in which contributions to its share capital have been made. In addition to shares, a joint-stock company may issue other securities (such as bonds) to raise its working capital. A joint-stock company is founded based on the respective decision of its founder(s). If a joint-stock company is founded by one person, the respective decision is taken by this person. A joint stock-company consisting having one shareholder may not be a sole founder of another joint-stock company. The following two types of joint-stock companies exist in the Republic of Tajikistan: open (public) joint-stock company and closed (private) joint-stock company. The respective information must be included into the company’s charter and name. A joint-stock company, which shares are issued only to its founders or another limited group of persons as specified in advance, qualifies as a closed joint-stock company. A closed joint-stock company may not offer its shares for open subscription or otherwise offer them for purchase to an unlimited group of persons. Number of shareholders in a closed joint-stock company may not exceed 50. Minimal amount of the share 6 capital of a closed joint-stock company may not be less than 1,000 (One Thousand) Somoni (US$ 210). Should the number of shareholders in a closed joint-stock company exceed the established limit, the jointstock company must within one year be re-organized into an open joint-stock company. Otherwise, should the number of shareholders fall below to the established limit, the company is subject to liquidation under the judicial procedure. Shareholders of a closed joint-stock company enjoy a preemptive right to purchase shares offered for sale by other shareholders of the company, at the same price as offered to other persons. Charter of a closed jointstock company may provide for preemptive right of the company to purchase its shares offered for sale by its shareholders, in case other shareholders have not used their preemptive right thereto.

Civil Code of the Republic of Tajikistan of 30 June 1999, #802 (as amended on 29 December 2010, #640); Law of the Republic of Tajikistan on Limited Liability Companies of 10 May 2002, #53 (as amended on 12 December 2010, #656) 5 Law of the Republic of Tajikistan on Joint-Stock Companies of 5 March 2007, #237 (as amended on 29 December 2010, #657); 6 At the rate of the National Bank of Tajikistan as of 05 October 2012. 4

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Procedure and terms, under which the preemptive right to purchase shares offered for sale by shareholders can be exercised, shall be specified in the closed joint-stock company’s charter. The period, within which the preemptive right can be exercised, must be not less than 30 and not more than 60 days from the date, on which the shares were offered for sale. Open joint-stock company is a joint-stock company, which shares may be alienated by their shareholders freely without consent of the other shareholders. An open joint-stock company may hold open subscription for the shares it issues and offer its shares for open sale on the terms set forth by law. A joint-stock company founded by the Republic of Tajikistan (in cases set forth by law, and with the exception of companies established as a result of privatization of state enterprises) may only have the status of an open joint-stock company. An open joint-stock company with more than 500 shareholders, or a joint-stock company that has offered at least one of its share issues for open/public placement, must annually publish in the mass media an annual report on its financial and business performance. Minimal amount of the share capital of an open joint-stock company must be not less than 5,000 (Five 7

Thousand) somoni (US$1,052) . Founders of a joint-stock company Individuals and/or legal entities that have made a decision to found a company and to approve its charter may act as the company founders. Public authorities may not act as founders of a joint-stock company, except for the cases provided by law. Unitary state enterprises may only act as founders of joint-stock companies with consent of the state represented by the authority responsible for management of state property. Management bodies of a joint-stock company: A joint-stock company has the following management bodies: - supreme body – General Shareholder Meeting; - supervsion body – Board of Directors (supervisory board) of a joint-stock company; - executive body – Director, Director General, Management, Administration; - supervisory body – Audit Committee (Auditor); and - other bodies, as may be provided by the company’s charter and law of the Republic of Tajikistan.

1.2.

Limited liability company

A limited liability company (“LLC”) is one of the most widespread organizational legal forms in which legal entities exist in the Republic of Tajikistan. Such popularity is explained by a number of its advantages such as:

At the rate of the National Bank of Tajikistan as of 05 October 2012.

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■ shareholders of an LLC are not liable for its liabilities and their risk of losses related to the LLC activities is limited to the amount of their respective contributions; ■

Management bodies of an LLC have a rather flexible structure and functions. 8

Authorized capital of an LLC must be not less than 500 somoni (US$105) . An LLC may be founded by one person that becomes its sole shareholder. An LLC can also become a company with a sole shareholder during its existence. An LLC may not, however, a sole shareholder, if this shareholder is another entity having also a sole shareholder. Number of shareholders in an LLC may not exceed 30. Should the number of LLC participants exceed the established limit, the LLC must within one year be reorganized into an open joint-stock company or a production cooperative. Should the company fail to reorganize within the established period, then, unless the number of its shareholders falls below 30, it shall be subject to liquidation under the judicial procedure based on claim of the public authority in charge of state registration of legal entities or claim of another public authority or local authority entitled by law to bring such a claim. Management bodies of an LLC A limited liability company has the following management bodies: - General Meeting of Shareholders - supreme management body; - Executive body (may be sole or collective). Charter of a company may provide that a company must also have the Board of Directors (supervisory board) and an Audit Committee (Auditor). Shareholding Shareholders of an LLC may sell or otherwise assign their share in the authorized capital of an LLC or part thereof to one or more shareholders of the same company, or to third parties, subject to the procedure set forth by the company’s charter. If share of a shareholder has not been fully paid in, only the portion that has been fully paid in may be alienated prior to the full payment. Company’s shareholders enjoy a preemptive right to purchase share (portion of a share) of another company’s shareholder at the price offered to the third party pro rata to their respective shares, unless the company’s charter or foundation agreement sets forth a different procedure for exercising the preemptive right. Company’s charter may provide for preemptive right of the company to purchase a share (or portion thereof) offered for sale by the company participant, in cases where other company participants have not exercised their preemptive right to purchase this share or portion thereof. If company’s shareholders or the company itself do not use their preemptive right to purchase the complete share or portion thereof offered for sale within one month from the date on which they received respective notification, the respective share or part thereof may be sold to a third party at the price and on the terms communicated to the company and its shareholders, unless the company’s charter or foundation agreement provides for a different period of time. Should a share or portion thereof be sold in breach of the preemptive right, any company’s shareholder or the company itself (if the company’s charter provides for preemptive right of the company) may, within three months from the date on which they learned or should have learned about the breach, demand that the rights and obligations of the purchaser be tranferred over to them under the judicial procedure.

At the rate of the National Bank of Tajikistan as of 05 October 2012.

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Assignment of the preemptive right is not allowed. Company’s charter may require consent of the company or other company’s shareholders for cession of a share or portion thereof to the third parties by the procedure other than sale. Transaction on transfer of share or portion thereof in the authorized capital of LLC shall be executed in a simple written form, unless the company’s charter requires notarization of such a transaction. Failure to comply with the established format when transferring a share or portion thereof invalidates the respective transaction. The company must be notified about the transfer of a share or portion thereof in writing, with documental proof of the transfer. Purchaser of the share or portion thereof acquires rights and bears obligations of a company’s shareholder from the date, on which the company was notified about the respective transfer and also acquires all rights and obligations of a company’s shareholder that have arisen prior to transfer of the share or portion thereof.

1.3.

Registratioin of legal entities

With a view to improve the international rating of the Republic of Tajikistan in the framework of the WB Doing Business Project, the Government of the Republic of Tajikistan resolved to introduce the one-stop-shop principle that simplified the procedure of business registration. Legal entities in the Republic of Tajikistan are recognized as such upon their state registration with the authoriy responsible for such registration (that is, the tax authority of the Republic of Tajikistan). Establishment of a legal entity is registered by the tax authority at the location (address) of the respective legal entity within five days upon submission of the following documents: 1.

Application for state registration of a legal entity in the established format;

Resolution of the founder (Minutes of the Founders’ Meeting) on establishment of a legal entity. Resolution on establishment of a legal entity must bear the signature(s) of the legal entity founder(s);

3. Copies of the document proving identity of the head of the executive body of the legal entity founded; 4. Copies of the documents proving identity of each individual founder of the legal entity; 5. Copies of the document proving state registration of a legal entity, or extract from the legal entity registry of a foreign nation (or other document of equal legal power proving legal status of the foreign legal entity) in cases where a foreign legal entity acts as a founder; 6. receipt proving payment of the state duty for registration. State registration is made based on the above documents; the above list is exhaustive and no other documents may be requested.

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Documents are submitted for state registration by the applicant in the national language. The authority responsible for the state registration shall issue a note confirming receipt of the documents to the applicant. The note shall contain a list of the document submitted and the date on which they were received. Law of the 9 10 Republic of Tajikistan on State Duty provides for a state duty of 1000 somoni , or 25 calculaiton calculation units (approx. US$210) payable for state registration of for-profit organizations, regardless of their organizational legal form and intended activity, as well as for state registration of the branch and representative offices of foreign legal entities.

BRANCH AND REPRESENTATIVE OFFICES

Branch and representative offices of foreign companies do not qualify as legal entities of the Republic of Tajikistan. They are provided with the property of legal entities that have established them and act based on the regulation approved by these legal entities. Law of the Republic of Tajikistan makes a distinction between branch and representative offices. Representative office can only represent a foreign legal entity, protect its interests, and execute transactions or other legal actions on behalf of the legal entity. Branches, on the other hand, are allowed to perform all or part of the functions of the foreign legal entity (including the functions of representation). Laws of the Republic of Tajikistan state that branch and representative offices have rights and bear obligations same as the legal entities have and bear under the laws of the Republic of Tajikistan including: ■

opening bank accounts and effecting payments in any currency;

■

hiring local employees;

■

hiring foreign employees and obtaining respective work permits for them;

■ entering into any contractual relations with local and foreign companies and performance or bearing obligations under any agreements related to payments in local or foreign currency; ■

2.1

having a permit to purchase/rent immovable property.

State registration of branche and representation offices of foreign legal entities

State registration of a branch or representative office of a foreign legal entity is made by the authority in charge of the state registration at the location (address) of the respective branch or representative office, within five business days from ubmission of the following documents: 1.

Application for state registration of a branch or representative office of a foreign legal entity in the established format;

Resolution of the authorized management body of the foreign legal entity to establish a branch or representative office in the Republic of Tajikistan and to appoint head of the branch or the representative office signed by authorized signatories of the foreign legal entity;

Law of the Republic of Tajikistan on State Duty of 28 February 2004, #19 (as amended on 29 December 2010, #664); Pursuant to the Law of the Republic of Tajikistan on Calculation Units of 05 January 2008, #350, one calculation unit in the Republic of Tajikistan is 40 somoni, or $8,4 US as at the rate of the National Bank of Tajikistan as of 05 October 2012; 11 Law of the Republic of Tajikistan on State Registration of Legal Entities and Sole Proprietors of 19 May 2009, #508. 10

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Copies of a document proving identity of the head of the branch or representative office of a foreign legal entity in case when the documents are submitted by the head of the branch or representative office of a foreign legal entity; copies of a document proving identity and power of attorney proving the powers of the authorized person in cases when the documents for state registration of a branch or representative office of a foreign legal entity are submitted by the attorney;

Power of attorney issued to the head of the branch or representative office;

Copies of the document proving state registration of the foreign legal entity, or another document of equal legal power proving its legal status;

Receipts proving payment of the state duty.

All of the above documents submitted for the purposes of the established branch or representative office state registration shall be translated into the national language of the Republic of Tajikistan. A copy of the document proving state registration of a foreign legal entity, or another document of equal legal power proving the status of the foreign legal entity, must be legalized subject to the established procedure. Translations of all other documents must be notarized.

LICENSING

Issues of licensing are governed by the Law of the Republic of Tajikistan on Licensing

and the Regulation

on Licensing Certain Types of Activities in Tajikistan. Activities of banks and other financial and credit institutions are licensed subject to the Laws of the Republic of Tajikistan on the National Bank of Tajikistan

and on Banking Activities , and subject to other normative

legal acts as may be issued by the National Bank of Tajikistan. The same conditions and grounds of licensing apply to all persons (including foreign nationals and stateless persons), regardless of their ownership, agency affiliation, or location. Licensing is only required for activities provided by law and not restricted for reasons of national security, state monopoly, law and order protection, environment protection, and protection of property, life and health of the public. Laws of the Republic of Tajikistan states that the following activities are subject to licensing: # 1.

Licensable activities Activities related to digital signatures and activities in the field of information protection

Licensing authority Central Department for Protection of National Secrets under the Government of the Republic of Tajikistan

Law of the Republic of Tajikistan on Licensing of 17 May 2004, #37 (as amended on29 December 2010, #662); Regulations on Licensing Certain Types of Activities in new edition of 3 April 2007, #172 15 Law of the Republic of Tajikistan on the National Bank of Tajikistan of 28 June 2011, #772. 16 Law of the Republic of Tajikistan on Banking Activities of 19 May 2009, #524 (as amended on 21 July 2010, #623). 14

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Licensable activities

Licensing Authority

Production of print materials protected against counterfeit, including securities; trade in such materials

Ministry of Finance of the Republic of Tajikistan

Activities of pawn shops

Ministry of Finance of the Republic of Tajikistan

Audit

Ministry of Finance (General Audit), National Bank of Tajikistan (Audit of Banks)

Appraising activities

National Committee on Management of State Property under the Government of the Republic of Tajikistan

Activities on assembling, repairs and maintenance of fire safety facilities

Ministry of Interior of the Republic of Tajikistan

Activities in the area of armament and military equipment

Ministry of Interior of the Republic of Tajikistan

Maintenance and repair of lifting gears and devices, use of explosive hazardous and chemically hazardous production facilities

Central Department on State Supervision of Industrial Safety and Mining Supervision under the Government of the Republic of Tajikistan

Supervision of industrial safety

Central Department on State Supervision of Industrial Safety and Mining Supervision under the Government of the Republic of Tajikistan

10. Activates of production, safekeeping, use, distribution, and transportation of explosives of industrial purposes; production and distribution of fireworks

Central Department on State Supervision of Industrial Safety and Mining Supervision under the Government of the Republic of Tajikistan

11. Activities in the field of energy

Ministry of Energy and Industry of the Republic of Tajikistan

12.

State Agency on Architecture and Construction under the Government of the Republic of Tajikistan

Construction activities

13. Engineering and geodesic research, geodesic activities, surveying, mapping, and space activities

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State Agency on Space, Geodesy and Mapping under the Government of the Republic of Tajikistan State Agency on Architecture and Construction under the Government of the Republic of Tajikistan

Licensable activity

Licensing authority

14. Mine survey activities

Central Department for State Supervision on Safety in Industry and Mining Supervision under the Government of the Republic of Tajikistan

15. Hydrometeorology and related activities, including works having impact on the hydrometeorological and geophysical processes and phenomena

National Committee on Environment Protection under the Government of the Republic of Tajikistan

16. Management of hazardous waste

State Service on Environment Protection under the Government of the Republic of Tajikistan

17. Pharmaceutical activities, production of disinfection, desinsection and deratisation facilities

Ministry of Health of the Republic of Tajikistan

18. Maintenance of medical equipment and activities related to use of pathogens

Ministry of Health of the Republic of Tajikistan

19. Activities involving harvesting medicinal plants and preparation of crude drugs

Ministry of Health of the Republic of Tajikistan

20. Private medical services

Ministry of Health of the Republic of Tajikistan

21. Activities involving cultivation of drug-containing crops for scientific purposes; development of new narcotic and psychotropic substances; activities related to legal turnover of narcotic and psychotropic substances and precursors

Ministry of Health of the Republic of Tajikistan â&#x20AC;&#x201C; on the activities related to lawful turnover of narcotic drugs, psychotropic substances and precursors used in health care. State Agency on Drug Control under the President of the Republic of Tajikistan â&#x20AC;&#x201C; on activities related to lawful turnover of precursors.

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Licensable activities

Licensing authority

22. Activities related to sources of ionizing radiation (generation thereof) and activities related to use of radioactive substances

Academy of Sciences of the Republic of Tajikistan

23. Transport

State Service on Supervision on Transport of the Ministry of Transport of the Republic of Tajikistan State Service on Supervision on Transport of the Ministry of Transport of the Republic of Tajikistan

24. Air transportation

25. Totalizator and gambling activities

Ministry of Finance of the Republic of Tajikistan

26. Tourism

Committee on Youth Affairs, Sport and Toursim under the Government of the Republic of Tajikistan

27. Activities of patent administrators

Ministry of Economic Development and Trade of the Republic of Tajikistan Ministry of Energy and Industry of the Republic of Tajikistan

28. Activities on procuring, processing and selling scrap ferrous and non-ferrous metals 29.. Activities related to employment of Tajik citizens outside of the Republic of Tajikistan and employment of foreign nationals within the Republic of Tajikistan 30. Private veterinary services 31

Acitivities related to production, import and export of tobacco products

Ministry of Interior of the Republic of Tajikistan

State Service on Veterinary Control of the Ministry of Agriculture of the Republic of Tajikistan Ministry of Energy and Industry of the Republic of Tajikistan

32. Paid legal services

Ministry of Justice of the Republic of Tajikistan

33. Educational activities

Ministry of Education of the Republic of Tajikistan Ministry of Health along with the Ministry of Education of the Republic of Tajikistan in the field of medidal and pharmaceutical education

34. Activities related to turnover of precious metals and precious stones

Ministry of Energy and Industry of the Republic of Tajikistan - on licensing recycling waste of precious metals into the final product; refining precisous metals; recuperation of precious metals. Ministry of Finance of the Republic of Tajikistan - licensing of the purchase of jewelry and other household items made of precious metals and precious stones and scrap of such items, wholesale and retail sale&purchase of precious metals and stones.

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Activities subject to licensing

Licensing authority

35. Activities in the area of television and radio broadcasting and production of audiovisual materials

Committee on Television and Radio Broadcasting under the Government of the Republic of Tajikistan

36. Licensing of the acquisition, sale, use, utilization and destruction of substances depleting the ozone layer and products containing such substances, as well as all activities associated with installation, maintenance and repairs of equipment, working with substances depleting the ozone layer

State Service for Control on Use of Resources and Conservation

37. Activities related to private retirement funds

Ministry of Finance of the Republic of Tajikistan

Stock exchange activities

Ministry of Finance of the Republic of Tajikistan

Insurance activities

Ministry of Finance of the Republic of Tajikistan

Activities in professional securities market participants

Ministry of Finance of the Republic of Tajikistan

Activities related to Credit Bureau

National Bank of Tajikistan

Activities of crediting institutions (including banks)

National Bank of Tajikistan

Activities related to production and turnover of ethanol, alcoholic and alcohol containing beverages

Ministry of Energy and Industry of the Republic of Tajikistan

Activities in the area of telecommunications

Communication Service under the Government of the Republic of Tajikistan

Activities related to subsoil use

Central Office on Geology for prospecting, evaluation, exploration of subsoil and collection of mineral, palaeontological rock under the Government of the Republic of Tajikistan; Ministry of Energy and Industry of the Republic of Tajikistan for mining and extraction of oil, gas, coal; mining and extraction of other minerals and non-minerals including use of waste from the extracted and processed minerals.

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National Committee for Environment Protection and the Forestry â&#x20AC;&#x201C; use of forest resources, flora and fauna.

Actiivities related to use of flora and fauna included in the Red Book of the Republic of Tajikistan

47. Works and services related to use of atomic power

State Service for control on use of resources and conservation Academy of Sciences of the Republic of Tajikistan.

Licensing Procedure Applicant must submit the following documents to the relevant licensing authority in order to obtain a license: 1. Application for a license specifying the activity subject to licensing; 2. Copies of the foundation documents and copy of the state registration certificate of the applicant in cases when applicant is a legal entity; 3. Copy of the state registration certificate of a sole proprietor in cases where the applicant is an individual; 4. Copy of the applicantâ&#x20AC;&#x2122;s certificate of registration with the tax authority; 5. Document evidencing payment of the license fee for consideration of the application by the licensing authority; 6. Information on qualification of the applicantâ&#x20AC;&#x2122;s employees.

An addition to the above documents, Regulation on Licensing Certain Types of Activities may require other documents proving that the applicant meets the established requirements and conditions. It is not allowed requesting any documents other than those provided by the Law of the Republic of Tajikistan on Licensing and Regulation on Licensing Certain Types of Activities from the applicant.

Decision on issuance or refusal to issue a license The licensing authority normally makes a decision on issuance or refusal to issue a license within 30 days from submission of the license application with all required documents enclosed. The respective decision must be formalized by an order issued by the licensing authority. Decision on refusal to issue a license may have the following grounds: a. incomplete or inaccurate information in the documents submitted by the applicant; b. failure of the applicant, or of the facilities owned or used by the applicant, to meet the licensing conditions; c. negative opinion issued by the respective authority regarding compliance with the terms and requirements established for the activity in question. License termination A license may be terminated in cases of liquidation of a legal entity, expiration of the sole propritorâ&#x20AC;&#x2122;s registration certificate, effective court decision on license cancellation, license expiration, or based on a written request of the licensee to terminate the license. License fee www.colibrilaw.com

Licensing of activities not qualifying as special activities is subject to a fee in the amount of 4 calculation 17 18 units, or 160 somoni (US$33) . Licensing of special activities is subject to a fee in the amount of 10 calculation units, or 400 somoni 19 (US$84) .

INVESTMENT CLIMATE

4.1.

Legal regulation, investor guarantees, form of investment. Direct private investment

Investments evidently assure further economic development of the Republic of Tajikistan; therefore, investment legislation of the country is rather liberal. Thus, laws of the Republic of Tajikistan provide foreign investors with domestic treatment, that is, the treatment that applies to individuals and legal entities of the Republic of Tajikistan. Laws define a rather broad scope of rights and guarantees granted to the foreign investors including the guarantee to freely export or repatriate out of the Republic of Tajikistan the investment, property and information, the guarantees against expropriation of investment, reimbursement of losses to the investors, guarantee to use the income gained, freedom of currency transactions, etc. Pursuant to the WB Doing Business survey held in cooperation with the International Financial Corporation, in 2009 the Republic of Tajikistan rated 65 in the rating of investment protection among 183 nations of the world. 17

At the rate of the National Bank of Tajikistan as of 05 October 2012; Law of the Republic of Tajikistan on Calculation Unit of 05 January 2008, #350; 19 At the rate of the National Bank of Tajikistan as of 05 October 2012. 18

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State guarantees granted to foreign investors Laws of the Republic of Tajikistan grant the following guarantees to the foreign investors:

Equal rights of foreign and domestic investors, no discrimination of investors.

Stabilization clause in the legislation. Should investment legislation of the Republic of Tajikistan be amended, investors

for 5 years from the date of the amendment have the right to choose the conditions that are more favorable for them. This treatment, however, does not apply to amendments and addenda to the Constitution of the Republic of Tajikistan, to the legislation of the Republic of Tajikistan regulating the issues of national security, health protection, environment protection, moral and ethics. 3.

Investorâ&#x20AC;&#x2122;s right to reimbursement of damages caused by acts of the public authorities in violation of

legislative acts of the Republic of Tajikistan, or action or inaction of public officials that qualifies as illegal under the legislation of the Republic of Tajikistan. 4.

Stable conditions of agreements executed between the investors and public authorities, with the exception

of cases when such agreements are amended with mutual consent of the parties; 5.

Free movement throughout the territory of the Republic of Tajikistan, with the exception of the territories

where procedures and conditions of stay are subject to respective legislation of the Republic of Tajikistan. 6.

Guaranteed right to

use income and other funds after payment of taxes and

other mandatory

payments; 7.

Right to transfer abroad income and salaries in foreign currency received on legal grounds as a result of

investment and production activities; 8.

In case of cessation of investment activities through no fault of the investor, the investors are entitled to

repayment of the investments due to them, as well as the income received from the investment, in cash or in kind, at their actual value as of the date of cessation; 9.

Right to freely convert national currency of the Republic of Tajikistan into other freely convertible

currencies, and to purchase foreign currency for transactions outside the Republic of Tajikistan. Investors shall execute currency transactions subject to the Law of the Republic of Tajikistan on Currency Regulation 21

and Currency Control . Restrictions to transfer foreign currency into and out of the Republic of Tajikistan may only be introduced based on the law with the purpose of preventing transactions aimed at legalization of illegally gained income. 10. Protection of investorâ&#x20AC;&#x2122;s rights to intellectual property; 11. Investors obtain rights to use lands and other natural resources subject to legislation of the Republic of Tajikistan. Transfer of title to buildings and structures entails transfer of the right to use the respective land plots to the investor subject to the procedure and conditions set forth by legislation of the Republic of Tajikistan. The right to lease land may be obtained by the investor subject to the established procedure in accordance with the Land Code of the Republic of Tajikistan;

20 21

Chapter 2 of the Law of the Republic of Tajikistan on Investment of 12 May 2007, #260; Law of the Republic of Tajikistan on Currency Regulation and Currency Control (as amended on 30 July 2007, #314).

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12. Right of the investor to re-invest to the Republic of Tajikistan the profit remaining after payment of due taxes. In the course of re-investment investors enjoy full scope of legal protection, guarantees and benefits provided by law. The authority in charge of the national investment policy is the National Committee for Investment and 22

Management of State Property that develops and implements the unified national policy in the area of macro economy, finance, taxation and customs, as well as economic development, foreign economic activity, and foreign trade. This authority is also responsible for attraction of investment, technical regulation, development and support of 23

entrepreneurship, and development of free economic zones. 4.2.

Free Economic Zones

Free Economic Zones (FEZ) are subject to special legal treatment that includes benefits applying to foreign 24

economic activities and business performed therein.

Types of free economic zones (FEZ) in the Republic of Tajikistan Free economic zones of different functional types can be established in the Republic of Tajikistan. A functional type of a free economic zone is defined based on the purposes of its establishment and on the direction of investment activities performed therein. Activities that may be performed in free economic zones include production, science and technology, export, import, trade, tourism and recreation, investment, exchange, insurance, banking, and other activities set forth by the laws of the Republic of Tajikistan. A free economic zone may combine functions of several functional types (so-called complex type of a free economic zone). Type, terms and conditions of a free economic zone functioning are set forth in the Regulations on Free Economic Zones

submitted by the Government of the Republic of Tajikistan for approval

by the Majlisi Namoyandagon Majlisi Oli of the Republic of Tajikistan (lower chamber of the Parliament). Currently, the following 4 free economic zones function in the Republic of Tajikistan: 1.

Pyandzh free economic zone;

Sugd free economic zone;

Dangara free economic zone; and

Ishkoshim free economic zone.

FEZ participants Participants of a free economic zone are business entities duly registered with the administration of the free economic zone and performing their activities within the free economic zone (regardless of their organizational and legal form provided by the Civil Code of the Republic of Tajikistan) and branches of foreign legal entities duly accredited in the free economic zone subject to the laws of the Republic of Tajikistan. 22

Regulations on the National Committee on Investment and Management of State Property of 28 December 2006, #590; Information available at: www.amcu.gki.tj; Law of the Republic of Tajikistan on Free Economic Zones in the Republic of Tajikistan of 17 May 2004, #24; 25 Regulation on Free Economic Zones in the Republic of Tajikistan of 05 December 2005, #191. 23 24

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Procedure of registration of FEZ participants State registration of the free economic zone participants is made in accordance with the legislation of the Republic of Tajikistan. Record registration of the branches and offices of the FEZ participants is made by the administration of a free economic zone subject to the procedure set forth by the Regulation on Free Economic Zone. Special treatment of a FEZ A free economic zone is subject to special treatment in the area of customs, currency and finance, and taxation; in addition, it has a simplified procedure of entry, stay, and exit of residents and non-residents, in accordance with the Regulation on Free Economic Zone, and is subject to other treatments aimed at raising investment, encouraging business and fostering social and economic development of the zone. To assure such treatment, relevan public authorities establish the customs and taxation units in the free economic zones subject to the established procedure. Special customs treatment A free economic zone enjoys the special customs treatment that includes: ■

Full and partial exemptions from the customs dues for merchandise imported into the free

economic zone; ■

Simplified procedure for relocation of merchandise and vehicles across the boundaries of the

free economic zone; ■

Cancellation of non-tariff policy measures.

Tax benefits Individuals and legal entities duly registered in a free economic zone are, in accordance with the tax legislation of the Republic of Tajikistan, fully or partially exempt from taxes for the period of their activities within the free economic zone. Tax benefits provided by laws of the Republic of Tajikistan further apply to the income of the FEZ participants profit received in course of their activities in the free economic zone and used for production purposes in other regions of the Republic of Tajikistan. 4.3.

Аgreements on mutual protection of investments

The Republic of Tajikistan has executed a number of bilateral international agreements on mutual support, promotion and protection of investment / capital investment. Thus, the following agreements have been executed: 1.

Agreement between the Government of the Republic of Tajikistan and the Government of

France on Promotion and Mutual Protection of Investments of 4 December 2002; 2.

Agreement between the Government of the Republic of Tajikistan and the Government of the

Republic of Moldova on promotion and mutual protection of investment of 5 November 2002; 26

All Agreements have come into effect for the Republic of Tajikistan.

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Agreement between the Government of the Republic of Tajikistan and the Government of the

Kingdom of the Netherlands on Promotion and Mutual Protection of Investments of 24 July 2002; 4.

Agreement between the Government of the Republic of Tajikistan and the Government of the

Republic of Armenia on Promotion and Mutual Protection of Investments of 2 April 2002; 5.

Agreement

between

the

State

Agency

Anti-Monopoly

Policy

and

Protection

Entrepreneurship under the Government of the Republic of Tajikistan and the Ministry of Entrepreneurship and Investment of the Republic of Belarus on Cooperation in the field of Entrepreneurship, Investment and Development of Bilateral Mutually Beneficial Cooperation of 26 July 2001; 6.

Agreement between the Government of the Republic of Tajikistan and the Government of the

Republic of Belarus on Assistance in Mutual Protection of Investment of 3 September 1998; 7.

Agreement between the Government of the Republic of Tajikistan and the Government of the

Republic of Kazakhstan on Promotion and Mutual Protection of Investments of 16 December 1999; 8.

Agreement between the Government of the Republic of Tajikistan and the Government of the

Russian Federation on Mutual Protection of Investment of 17 April 1999 (effective); 9.

Agreement between the State of Kuwait and the Republic of Tajikistan on Promotion and Mutual

Protection of Investments of 13 June 1995; 10. Agreement between the Government of the Republic of Tajikistan and the Government of the Czech Republic on Mutual Protection of Investments of 11 February 1994; 11. Agreement between the Government of the Republic of Tajikistan and the Government of the United States of America on Assistance in Capital Investments of 25 June 1992; 12. Agreement between the Government of the Republic of Tajikistan and the Government of Mongolia on Promotion and Mutual Protection of Investments of 27 March 2009.

TAXATION

Tax legislation of the Republic of Tajikistan consists of the Tax Code of the Republic of Tajikistan

and

normative legal acts adopted in furtherance of the Tax Code. The Tax Code recognizes priority of international agreements and treaties over the Tax Code provisions. Please, note that on September 05, 2012 Parliament of the Republic of Tajikistan has adopted the new Tax Code. The new Tax Code provides for the simplification and transparency of taxation procedure and accounting, with the purpose of increasing the efficiency and equity of taxes and to ease the tax burden. The tax rate was reduced from 21% to 10% (from January 2017, it will be reduced to 9%), including the reduction of state taxes from 17% to 8% and local taxes from 4% to 2%. In addition, from 2007, the income tax rate for manufactures will be decreased from 15% to 13% and for other types of activities from 25% to 23%. Tax Code will come into force from 1 January 2013. The Tax Committee

under the Government of the Republic of Tajikistan supervises full and timely payment of

taxes and allocations to the budget of the Republic of Tajikistan. Taxes of the Republic of Tajikistan include national and local taxes. www.colibrilaw.com

National taxes are:

1. Income tax of individuals (tax on individual income); 2. Profit tax of legal entities; 3. Value added tax; 4. Excise tax; 5. Social insurance tax; 6. Land tax; 7. Tax on subsoil users; 8. Taxes on automobile road users; 9. Tax paid under a simplified procedure; 10. Unified tax for agricultural producers; 11. Customs duties and other customs payments; 12. State duties; 13. Sales tax (lint cotton, primary aluminum); 14. Minimal income tax; 15. Tax on products after processing; 17. Water royalty; 18. Other mandatory local payments 2. Local taxes are: 1. Immovable property tax; 2. Vehicle owner tax; 3. Retail sale tax;| 4. Other mandatory local payments. 5.1.

Income Tax. Payers of income tax are resident and non-resident individuals having taxable items.

Taxable item for residents is their taxable income calculated as the difference between the gross income within a calendar year and the expenditures as provided by the Tax Code of the Republic of Tajikistan. A non-resident taxpayer operating in the Republic of Tajikistan through its permanent office qualifies as a payer of income tax on the taxable income related to the permanent establishment and calculated as a difference between the gross income received within a calendar year from the sources in the Republic of Tajikistan, related to the permanent establishment, and the amount of deductions provided by the Tax Code of the RT for such income for the respective period. A non-resident individual receiving income from a source in the Republic of Tajikistan as a result of employment or as a result of sale or transfer of property not related to the non-residentâ&#x20AC;&#x2122;s permanent establishment in the Republic of Tajikistan shall pay income tax on the gross income of this type for the calendar year, with the subtraction of the deductions provided by the Tax Code of the Republic of Tajikistan and applying to the respective income in the relevant period. Income tax rates. Taxable income of individuals is subject to taxation at the following rates. www.colibrilaw.com

27 28 29

Tax Code of the Republic of Tajikistan of 12 November 1998, #664 (as amended on 29 December 2010, #667) Information available at: www.andoz.tj; Article 6 of the Tax Code of the RT of 03. 12. 2004.

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Taxable income (monthly average)

Not subject to income tax

Does not exceed one calculation unit 2.

5.2.

(zero rate)

Exceeds one calculation unit but does not exceed 100 somoni 8% of the sum exceeding the calculation amount (US$2)

Tax rate and amount

The above amount plus 13% of the sum exceeding 100 32

Exceeds 100 somoni (US$21)

somoni

Profit Tax on Legal Entities. Payers of the profit tax on legal entities (“Profit tax”) are domestic and

foreign companies. Taxable item of a resident company is its profit for the calendar year. Profit is calculated as a positive difference between the taxpayer’s income and the deductions provided by the Tax Code of the Republic of Tajikistan. It must be noted that the property received as a contribution to the authorized fund of a legal entity does not qualify as income. Object of taxation of a foreign company operating in the Republic of Tajikistan through its permanent establishment is the profit gained from the respective activities, i.e., income received from the sources in the Republic of Tajikistan and related to the permanent establishment less the deductions provided by the Tax Code of the Republic of Tajikistan with respect to such income. Profit of enterprises is taxable at the rate of 15%; profit of transport and communication enterprises, service enterprises and banks is taxable at the rate of 25%. 5.3.

VAT. Value added tax (“ VAT”) is a form of withdrawing to the budget a part of the value added in the

process of production and circulation of goods, works, or services in the territory of the Republic of Tajikistan, as well as part of the value of all taxable goods imported into the Republic of Tajikistan. Value added tax is an indirect tax payable at all stages of production and circulation of goods, performance of works and services. The VAT amount payable from the taxable turnover is calculated as the amount of tax calculated on the respective turnover less the amount of tax to be offset under the the VAT invoices. VAT payer is a person to be registered as a VAT taxpayer as required by the Tax Code. Any business entity with the volume of taxable transactions within the period not exceeding 12 full consecutive months higher than 200,000 somoni (US$45,620)

must, no later than 30 days at the end of the respective period, apply to

the tax authority at the location of its registration for the VAT registration.

One calculation unit in the RT is 40 somoni, or $8,4 US, as at the rate of the National Bank of Tajikistan for 05 October 2012; At the rate of the National Bank of Tajikistan of 05 October 2012; 32 At the rate of the National Bank of Tajikistan of 05 October 2012. 31

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Taxable items include taxable transactions and taxable import. Taxable transactions are delivery of goods, performance of works and services (with the exception of delivery of goods, performance of works and services that are exempt from the VAT) in the course of business activities, if such activities qualify as performed within the territory of the Republic of Tajikistan. Tax legislation provides for deliveries that are exempt from the VAT, as well as for deliveries at the zero VAT rate. Rate of the VAT tax is established at 18% of the taxable turnover, with the exception of export, and/or 18% of the taxable import. 5.4

Excise Tax. Excise tax is an indirect tax included into the sales price of excise taxable goods.

Production in the Republic of Tajikistan and/or import of goods subject to excise tax is taxable, with the exception of established cases of exemption. Payers of excise tax are all legal entities and individuals manufacturing in or importing into the Republic of Tajikistan goods being subject to the excise tax. Taxable activities The following transactions qualify as taxable: 1.

In case of excise taxable goods produced in the Republic of Tajikistan, taxable transaction is delivery

of the excisevtaxable goods out of the production premises, including: a. delivery of excise taxable goods, with the exception of export deliveries; b. excise taxable raw materials supplied by customer (to be processed and returned without change of ownership); c. shipment (supply) of excise-taxable goods produced as a result of processing raw materials supplied by the customer without change of ownership, including excise-taxable raw materials; d. contribution of excise taxable goods to the authorized capital; e. use of excise taxable goods for in-kind payment; f.shipment (dispatch) of excise taxable goods by producer to its individual units; g. use of excise-taxable goods by their producer for the producerâ&#x20AC;&#x2122;s own production needs; 2.

In case of import a taxable transaction is import of excise taxable goods into the Republic of

Tajikistan subject to customs legislation; a. shipment (dispatch) of confiscated and/or abandoned, inherited by the state, and gratuitously transferred into state ownership excise taxable goods; b. loss of or damage of excise taxable goods.

At the rate of the National Bank of Tajikistan as of 05 October 2012;.

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5.5.

Social insurance tax.

Social insurance tax is a mandatory payment that, for the purposes of social

insurance, must be made by the social insurance tax payers at the rate established by the Tax Code, from amount of the salary or other tax base as specified in this Section. The Tax Code states that payers of the social tax are: 1. sole proprietors and legal entities - employers (including permanent establishments of non-resident entities) that pay compensation for work of individual residents hired in the Republic of Tajikistan; 2. sole proprietors and legal entities (including permanent offices of non-resident organizations) that in the course of their business pay compensation for work of individual residents who provide services or perform work in the Republic of Tajikistan based on a civil legal agreement or in the absence of agreements; 3. individuals receiving compensation; 4. individual residents engaged in sole proprietorship in the Republic of Tajikistan; 5. unless otherwise provided by international legal acts recognized by Tajikistan - individual residents of the Republic of Tajikistan working in diplomatic and consular missions of foreign nations that, subject to the laws of the Republic of Tajikistan or to international agreements to which the Republic of Tajikistan is a party, are exempt from social tax payment and do not act as tax agents for the nationals of the Republic of Tajikistan. The Ministry of Foreign Affairs of the Republic of Tajikistan submits information on such individuals to the th

relevant public authority on a quarterly basis, no lather than the 15 day of the month following the reporting quarter. 6. members of dekhan (peasant) farms not having status of a legal entity. Tax rates. Social insurance tax is paid to the budget at the rate of 25% by the insurers and at the rate of 1% by the insured persons with the exception of individual residetnts of the Republic of Tajikistan employed by the diplomatic and and consular offices of foreign nations. 5.6.

Land tax

Land tax is payable by land users allocated with the land for permanent use, use for a fixed term, or based on the life-time inheritable right of use. Land tax rates on land of the cities and settlements of urban type: 1. City of Dushanbe â&#x20AC;&#x201C; 500 somoni (US$105)

per hectare; 35

2. Cities of Hujand, Kurgantube, and Kulab â&#x20AC;&#x201C; 375 somoni (US$78) per hectare; 3. Cities of national subordination, cities of regional subordination, and the city of Horog - 250 somoni 36 (US$52) per hectare; 4. Other cities and settlements of urban type â&#x20AC;&#x201C; 180 somoni (US$37) www.colibrilaw.com

per hectare. 26

Rates of land tax on land outside cities and settlements of urban type Crop lands and perennials (irrigated/non-irrigated, respectively)

Pastures

Hayfields

Other land not used for agricultural purposes

Roads, streets, buildings of public use, forests, squares, channels, irrigation channels and collectors 7

Sogd including mountainous regions

60.0/11.0

Gissar including mountainous areas

64.0/26.0

4 4

6 5

6 6

0.8 1

Rasht Kulabs including mountainous areas

52.0/38.0 66.0/31.0

4 4 3

5 6 5

5 6 6

0.8 0.8 1

Vahshs including mountainous areas

93.0/23.0

4 2

6 4

5 7

0.8 1

Gorno Badahshan Autonomy (excluding the Murgab zone)

18.0/8.0

4 2

4 3

5 3

0.8 0.8

Type of land, name of cadastre zone

Land of pastures, hayfields, forests, and other land not used for agricultural production and used for gardens and vineyards, is exempt from taxation for 5 years commencing one year after establishment of the respective garden or vineyard. Land Tax Exemption

The following types of land are exempt from the land tax: 1.

Territories of preserves, national and dendrological parks, botanical gardens in accordance with the list of these organizations and size of their respective territories, as established by the Government of the Republic of Tajikistan;

Land used by budget-funded organizations for the purposes, tasks and functions provided by the foundation documents of these organizations;

Land of the organizations where the building used by them and protected by the state as historic, cultural, or architectural monuments, are located in accordance with the list of respective organizations and size of land established by the Government of the Republic of Tajikistan;

At the rate of the National Bank of Tajikistan as of 05 Jctober 2012; At the rate of the National Bank of Tajikistan as of 05 October 2012; At the rate of the National Bank of Tajikistan as of 05 October 2012; 37 At the rate of the National Bank of Tajikistan as of 05 October 2012;

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Land received for use based on the opinion issued by the National Committee for Land Management of the Republic of Tajikistan in coordination with the competent public authority; land in need of recultivation; land undergoing agricultural development - during the year it was received (for development) and 5 years immediately following the year when it was received (the year in which its development commenced);

Tracking zone along the national boundary;

Land of common use in settlements and land used for municipal infrastructure, including land of cemeteries, with the exception of the plots used for business purposes;

Land under glaciers, mudslides, rivers, and lakes;

Land of the free national reserve;

Land under automobile roads of common use, land under railroads, land under the national water supply facilities and hydraulic structures;

10. Land allocated to support activities of public authorities and governance agencies, to assure defense and security of the Republic of Tajikistan, (location and land sized are established by the Government of the Republic of Tajikistan); 11. Household lands and land for residential construction allocated to veterans of the World War II and persons of equal status; 12. Household plots allocated to individuals arriving (migrating) from other areas of the Republic of Tajikistan for permanent residence in the areas specified by the Government of the Republic of Tajikistan - during the year of allocation and 3 calendar years immediately following the year of allocation of such lands; 13. Household lands and land for residential construction allocated to rural teachers of general education institutions – for the period of their work in these respective institutions; 14. Land directly used for research and education purposes and land used for testing agricultural plants, decorative and fruit bearing trees by research institutions, experimental and scientific organizations, and educational institutions specializing in agriculture and forestry, in accordance with the list of land users and size of land plots developed by the Government of the Republic of Tajikistan; 15. Household land plots and land for residential construction allocated to the disabled of all categories in the absence of a family member capable of working; 16. Land allocated to enterprises and organizations in cases where no less than 50% of their employees are disabled. 5.7.

Taxes on Subsoil Users

Special payments for subsoil use ( “special payments”) must be made by individuals and legal entities using subsoil of the Republic of Tajikistan ( “subsoil users”). Activities related to subsoil use include extraction of mineral resources from mineral formations induced by production. Tax treatment that applies to a subsoil user may only be established by the respective contract on subsoil use (“contract”) executed between the subsoil user and a competent state agency duly authorized by the Government of the Republic of Tajikistan subject to the procedure established by the Government of the Republic of Tajikistan. Should subsoil be used in the absence of a contract, royalty for the entire period of such use must be paid at the highest rate established by the Tax Code of the Republic of Tajikistan, while the subsoil user must be held liable subject to the procedures established by law. Tax treatment provided in the contract must comply with requirements of tax laws of the Republic of Tajikistan as of the date of execution (endorsement) of the contract. It is prohibited to include issues related to taxation and social www.colibrilaw.com

insurance payments into any documents other than subsoil use contracts (for example, into licenses or other documents related to subsoil use). Should subsoil be used by several taxpayers under the same contract, the tax treatment established in the respective contract must apply equally to all of them. For the purposes of taxation, taxpayers operating under one contract qualify as a single taxpayer. They must keep consolidated records, pay all relevant taxes, and make special allocations in accordance with the tax law of the Republic of Tajikistan. Should a subsoil user operate under more than one contract, revenues received or costs incurred by such a subsoil user under different contracts may not be consolidated for the purpose of taxation and social allocations. Revenues and costs under each contract must be recorded individually as well as taxes and special allocations must be calculated and recorded separately. The above provision does not apply to the cases when a subsoil user operates under more than one contract, but all of these contracts are related to mining of the widespread minerals and/or ground water, and none of the contracts provides for mining of any other mineral resources. A subsoil user must record and calculate tax obligations that are subject to the tax treatment under the contract separately from the tax obligations resulting from activities outside the scope of the contract i.e. activities not related to subsoil use). Stability of tax treatment. Tax treatment stipulated by a duly executed contract that has undergone the mandatory tax examination shall remain unchanged until expiration of the contract with the exception of the cases where amendments made to the legislation after the contract execution date make further compliance with the original contract term impossible. Subsoil user and representatives of the competent authority, authorized public agency and the Ministry of Finance of the Republic of Tajikistan may introduce amendments or addenda to the contract to reinstate the economic interests of the parties that existed as of the contract execution date. Such amendments or addenda to the contract shall be introduced within 60 days from the date of a written notification sent by the authorized public agency or by the subsoil user to its counterpart. Assignment of rights. Income gained as a result of assignment of rights provided by a contract is taxable. 5.8.

Royalty

Royalty is a payment that a subsoil user makes individually for each type (for all types) of mineral resources mined in the Republic of Tajikistan, regardless of their further shipment (delivery) to purchasers (recipients) or use for the subsoil userâ&#x20AC;&#x2122;s own needs. Royalty is paid by the subsoil users engaged in mining of the mineral resources, including subsoil users that extract mineral resources from mineral formations induced by production, regardless of the fact of shipment (delivery) of the respective mineral resources within the reporting period.

Royalty for subsoil use is established for the widespread minerals and ground water at the following rates:

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Mineral resources of common occurrence and ground water

Sand (except molding sand and glassmaking sand for porcelain and cement production)

Molding sand and glassmaking sand for production of porcelain and cement

Sand-gravel aggregates

Clay (except fire clay, high-melting clay, molding clay for porcelain and cement production, fullerâ&#x20AC;&#x2122;s earth, colored clay, betonies, acid-resistant clay, and porcelain clay)

Fire clay, high-melting clay, molding clay for porcelain and cement production, fullerâ&#x20AC;&#x2122;s earth, colored clay, betonies, acid-resistant clay, and porcelain clay

Clay loam (except for production of cement)

Clay loam for production of cement

Rabble stone

Sandstone (except bituminous sandstone, sandstone for facing, silica, and sandstone used in glass production)

10.

Bituminous sandstone, sandstone for facing, silica, and sandstone used in glass production

11.

Chalk-stone (except for the stone used in production of cement, chemical industry, production of rubber and for gaining alumina out of elaeolite)

12.

Chalk-stone used in production of cement, chemical industry, production of rubber and for gaining alumina out of elaeolite

13.

Quartz rock (except for silica quartzite, flux quartzite, quartzite used for facing, ferruginous quartzite used in production of silicon carbide, crystalline silicon in ferroalloys)

14.

Silica quartzite, flux quartzite, quartzite used for facing, ferruginous quartzite used in production of silicon carbide, crystalline silicon in ferroalloys

15.

Dolomite rock (except for bituminous dolomite and dolomite used in production of cement)

16.

Bituminous dolomite and dolomite used in production of cement

17.

Marlstone (except for bituminous marlstone and marlstone used in production of dement) Bituminous marlstone and marlstone used in production of dement

Limestone (except for bituminous limestone, limestone used for facing, sawn limestone, limestone used in production of cement, in metallurgy, in chemical industry, in production of glass, production of paper and pulp, production of sugar, and production of alumina)

18. 19.

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Royalty rate, percentage of royalty calculation basis

20.

Bituminous limestone, limestone used for facing, sawn limestone, limestone used in production of cement, in metallurgy, in chemical industry, in production of glass, production of paper and pulp, production of sugar, and production of alumina

21.

22.

Shell rock (except for shell rock used for facing and decorative shell rock) Shell rock used for facing and decorative shell rock

23.

Slate stone (except for slate coal and roofing slate)

24.

Slate coal and roofing slate

25.

Argillites and slitstones (except for those suitable for production of cement)

26.

Argillites and slitstones suitable for production of cement

27.

Magmatic rock, volcanic rock, metamorphic rock (except for those used for facing and decorative purposes and for production of fire-resisting and acid-resisting materials, stone casting, production of mineral wool, or those suitable for production of cement)

28.

Magmatic rock, volcanic rock, metamorphic rock used for facing and decorative purposes and for production of fire-resisting and acidresisting materials, stone casting, or production of mineral wool, or suitable for production of cement

29.

Ground water except for the ground waters extracted by the agricultural producers for and state utility enterprises for the public needs

30.

Ground water extracted by the state utility enterprises for the public needs Gypsum

31.

Royalty for subsoil use is established at the following rates for the mineral resources other than those listed above:

Name of Mineral Resource

Royalty rate, as percent of royalty estimate basis

Oil, gas condensate, natural gas

Coal, peat

Ferrous metals (iron, manganese, chrome, vanadium)

Non-ferrous and rare metals (copper, lead, zinc, tin, nickel, cobalt, molybdenum, mercury, antimony, висмут, cadmium, aluminum, strontium, titanium, zirconium, lithium, wolfram, tantalum, niobium, etc.)

Dispersed minerals

Precious metals (gold, silver, platinoids)

Precious stones

Semiprecious stones and piezooptic raw materials

Radioactive materials

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10.

Mining chemical feedstock and thermal water

11.

Mining raw materials (concentrate) and/or non-or raw materials for metallurgy

12.

Other minerals not specified in this table and table of the widespread minerals and ground waters Non-ferrous and rare metals (copper, lead, zinc, tin, nickel, cobalt, molybdenum, mercury, antimony, висмут, cadmium, aluminum, strontium, titanium, zirconium, lithium, wolfram, tantalum, niobium, etc.), precious metals (gold, silver, platinoids) extracted from the mining wastes

13.

0.5

Royalty is not paid by: 1. Individuals – for ground water extracted within the lands allocated for use or for life-long inheritable use, on condition that the ground water is not delivered to any third parties and is not used for production and technological needs that may arise in course of the business activities; 2. State-owned agricultural producers extracting ground water for the needs of their production; 3. Subsoil users that use the ground water extracted in the process of mining to maintain formation pressure. b.

Bonus

Bonuses are single time monetary payment made by the subsoil users including: 1. Signature bonus; 2. Commercial discovery bonus. Payers of the bonuses are all subsoil users excluding those engaged in geological exploration funded from the state budget. Signature bonus is paid to be qualified as a subsoil user within the boundaries specified by the license area, rate of the bonus is determined under the procedure defined by the Government of the Republic of Tajikistan and is set forth in a subsoil use contract. The signature bonus shall be paid within the timeframe defined in a subsoil use contract. Declaration on the signature bonus shall be filed to the tax authority at the payer’s th registration not later than 15 day of the month following the month when payment of the signature bonus is due. Commercial discovery bonus is paid for each commercial discovery in case of geological exploration and is not paid for the discoveries of minerals not envisaging their further extraction due to the economic inexpediency. Rate of the commercial discovery bonus is set forth under the procedure determined by the Government of the Republic of Tajikistan and is specified in a subsoil use contract. Declaration on the commercial signature bonus shall be filed by a subsoil user to the tax authority at the user’s location of registration within 30 days from the date when the commercial discovery is approved and the commercial discovery bonus shall be paid within this time period. 5.9.

Tax on Users of Automobile Roads

Tax on users of automobile roads must be paid by: 1. resident companies; 2. foreign companies operating in the Republic of Tajikistan through their permanent establishments; 3. sole proprietors, with the exception of those subject to income tax, social tax, and retail sale tax. www.colibrilaw.com

Tax rate is 2% of the tax base.

Tax exemption is granted to: •

organizations funded from the budget, agencies of public authority and governance, including the National Bank of Tajikistan and its offices;

•

religious associations and organizations, national cultural associations (with the exception of cases when they engage in business activities).

5.10.

Tax paid under a simplified procedure

Payers of the tax under a simplified procedure are companies and sole proprietors whose gross income for the period not exceeding 12 consecutive calendar months (less VAT and retail sale tax) does not exceed 4 threshold amounts established by the Tax Code for registration as a VAT payer, i.e. 800,000 somoni (or approx. US$182,500). Taxable Item. Taxable item is the gross income gained within the reporting period. Gross income is calculated cash-based, as amount of the proceeds from supply of goods (works, services), sales price of property supplied within the reporting period, and extraordinary income gained in the course of business activities, less the retail sale tax. Gross income must be proven by the respective reports on reciept of the established format. Tax rate is 4% of the taxable item. 5.11. Unified tax for agricultural producers Payers of the unified tax for producers or agricultural production ( “unified tax for agricultural producers”) are legal entities and dekhan (peasant) farms, partnerships and / or production cooperatives established on their basis, provided that their main production facility is land ( “agricultural producers”). Agricultural producers are exempt from the following taxes In the part of their activities that qualifies as subject to the unified tax (that is, agricultural activity): • Value added tax on supplies of agricultural products grown on the land plots subject to the unified tax; • Tax on users of automobile roads on supplies of agricultural products grown on land plots subject to the unified tax; • • • •

Profit tax of legal entities; Minimal income tax; Land tax; and Tax paid under the simplified procedure.

Rate of the unified tax for agricultural producers The unified tax for agricultural producers per hectare of land per calendar year is established at the following rates (somoni):

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Land type Name of the cadastre zone:

Seeding lands Irrigated Natural Mechanical irrigation irrigation

1. Sogd including mountainous regions 2. Gissar including mountainous areas 3. Rasht 4. Kulyab including mountainous areas Vahsh, including mountainous areas 5. Gorno-Badakshan Autonomy (excluding 6. the Murgab zone)

Perennials Unirrigated

Irrigated Natural Mechanical irrigation irrigation

Unirrigated

120

140

100

104

112

128

140

100

108

112

104

132

140

100

108

140

104

164

112

120

140

5.12. Tax on sale of lint cotton and primary aluminum Payers of the tax on sale of lint cotton and primary aluminum are individuals and legal entities supplying lint cotton and primary aluminum (“taxable merchandise”) produced in the Republic of Tajikistan to the domestic and international markets, as well as individuals and legal entities independently processing taxable merchandise or handing it over for processing or for other purposes, with the exception of the persons qualifying as payers of tax on products of merchandise processing. Rate of the tax on sale is calculated as the following percentage of the the taxable merchandise exchange value: 1. Lint cotton – 10%; 2. Primary aluminum – 3%.

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5.13. Minimal Income Tax Payers of the minimal income tax are: 1. resident companies; 2. foreign companies operating in the Republic of Tajikistan through their representative offices; 3. sole proprietors. Tax rate is 1% of the taxable item. 5.14. Local Taxes. Immovable Property Tax Payers of the immovable property tax are individuals and legal entities – owners of the property, or persons using the property qualifying as a taxable item. Rate of the immovable property tax is established as a multiple of the land tax within the following limits: - immovable property used as residential premises – 10 to 20 rates of the respective land tax; - immovable property used for trade purposes, public catering and consumer services – 20 to 50 rates of the respective land tax; - immovable property used for other purposes – 15 to 40 rates of the respective land tax. Tax rates may differ depending on the location (city, district, settlement, microdistrict, detached territory, street, etc.), function of the taxable item, and other factors (including type of construction materials used for construction of the immovable property in question, level of depreciation (year the immovable property was commissioned in), that may affect the tax base value. 5.15. Tax on Vehicle Owners Payer of the tax is any person who owns a vehicle duly registered with a unit of the State Inspectorate of Motor Vehicles of the Ministry of Interior of the Republic of Tajikistan. The following categories of vehicles are exempt from the tax on vehicle owners: 1.

Crawler-mounted machines and mechanisms;

Engine-powered grain headers and combine harvesters, including cotton harvesters;

Buses and trolleybuses used by public transportation companies for public transportation in cities;

Cycle-cars and manually controlled automobiles owned by the disabled;

One automobile, regardless of its engine power, if it is owned by a Hero of the Soviet Union, a Hero of Socialist Labor, a hero of Tajikistan, a person awarded the Order of Glory of all three categories, a veteran of the World War II, a person of equal status, a veteran of any other military operation for defense of the USSR who has belonged to a military regiment, headquarters of office of the combat forces, a former member of the guerilla forces, a member of the internationalist military forces, or a member of forces involved in liquidation of the Chernobyl catastrophe.

Tax Rates. Tax rates are differentiated by vehicle type and are established (per one horse power of the engine per annum) as follows:

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Name of the taxable item Motorcycles and motor scooters Motor cars

Tax as percent of the calculation unit established as of the date of tax payment 2.5% 5%

Buses of up to 12 seats

6.25%

Buses of 13 to 30 seats

7.5%

Buses of more than 30 seats

8.75 %

Trucks and other vehicles with the capacity of up to 10 tons

10%

Trucks and other vehicles with the capacity of 10 to 20 tons

11.25%

Trucks and other vehicles with the capacity of 20 to 40 tons

12.5%

Trucks with the capacity of over 40 tons

13.75%

5.16. Retail Sale Tax Payers of the retail sales tax are sole proprietors and legal entities engaged in retail sale of goods. Tax rate is established at 3% of the free market prices, and retail sale price of the goods is the free market price increased by the tax amount.

5.17. Taxation of construction of hydroelectric power plants. Construction owner and general contractor for the period of construction in the Republic of Tajikistan of hydroelectrip plants are exempt from the following taxes directly related to the construction process (commencing on the date these taxes are due): • Value added tax; • Tax on users of automobile roads; • Profit tax of legal entities; • Minimal income tax; • Land tax; • Tax on vehicle owners; • Tax on immovable property; • Social insurance tax – for persons directly involved in construction of a hydroelectric power plant if these persons are not citizens of the Republic of Tajikistan; • State fee for registration of the issuance prospectus of non-state securities issued in relation with construction of the hydroelectric power plant. 5.18. Taxation of newly established companies engaged in full cycle of lint cotton processing into final products (from cotton yarns to cotton textiles)

Goods imported by the newly established enterprises engaged infull cycle of lint cotton processing into final products from cotton yarns to cotton textiles are exempt from the customs dues and value added tax. Newly established enterprises are also exempt from the profit tax of legal entities, minimal income tax, tax on immovable property, and land tax. These tax benefits are provided based on decision of the Government of www.colibrilaw.com 36

the Republic of Tajikistan for the period up to 12 years starting 1 January of the year of state registration of such newly established enterprise.

5.19.

Tax on products of merchandise processing

Payers of the tax on products resulting from processing of merchandise imported into the Republic of Tajikistan for processing within its customs territory are the persons that export the respective products outside the Republic of Tajikistan. Tax rate. Rate of the tax on products of merchandise processing are set by the Government of the Republic of Tajikistan either as percentage of the merchandise value, or as a fixed amount per in-kind unit of the outcome products.

5.20.

Taxation under Production Sharing Agreements

Par. 2 of Article 10 of the Law of the Republic of Tajikistan on Production Sharing Agreements states that share of the state in the overall volume of products is set forth by a Production Sharing Agreement. Operation under a Production Sharing Agreement that envisages production sharing subject to Part 1 of Article 10 of the Law of the Republic of Tajikistan on Production Sharing Agreements subjects investor / operating company / operator to the following taxes, fees, and other mandatory payments: • Tax on subsoil users (royalty); • Social insurance tax; • Land tax; • Tax on users of automobile roads; • State fee; • Customs dues; • Local taxes (tax on immovable property, tax on vehicle owners); • Other mandatory payments related to operation under a Production Sharing Agreement. 5.21.

Water royalty

Payers of the water royalty are legal entities and sole proprietors using water in the Republic of Tajikistan with the purpose of generating electric power. Exemption. Use of water for the purpose of electric power generation is exempt from the water royalty if the power of the respective energy generating facility does not exceed 1000 kilowatt. Tax rate. In case water is used for generation of electric power, rate of the water royalty is established at 38 0.06 calculation units per each 1000 kilowatt/hour of the power generated by the end of the taxation period. 38

One calculation unit is 40 somoni, or US$8.4 at the rate of the National Bank of Tajikistan as of 05 October 2012.

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EMPLOYMENT 39

Employment relations in the Republic of Tajikistan are governed by the Labor Code of the Republic of Tajikistan.

Employment relations between employee and employer arise from an employment agreement. Employment relations may arise prior to execution of an employment agreement based on other documents, in cases of: • • • • •

election for a position; contest-based selection for a vacant position; appointment for a position or approval of appointment; job placement by the duly authorized agencies based on the established quota; court decision on execution of an employment agreement;

• actual permission to work with consent or upon request of employer or the employer’s duly authorized representative, regardless of presence or absence of a properly formalized employment agreement. Parties of an employment agreement are employee and employer. A person of 16 years of age or older may qualify as an employee. Employment of 15-year-old persons is allowed in the exceptional cases, with consent of the elected representation body of employees of the respective organization or with consent of the duly authorized public agency in charge of the employment issues. Employer is an individual or legal entity (organization) having employment relations with the employee. Parties of individual employment relations are: - employee; - employer. Parties of collective employment relations are: - elected body of employees (such as a trade union, a joint elected body, a council of employees, or other); - association of employers; - other parties defined by the relevant legislation. Labor laws provide for establishment of social partnerships. Social partnerships in the area of employment relations are subject to regulation by the Labor Code of the Republic of Tajikistan and by the Law of the 40 Republic of Tajikistan on Social Partnerships, Agreements, and Collective Agreements , as well as by other normative acts.

6.1.

Employment Agreement (Contract)

An employment agreement (contract) is an agreement between employer and employee, under which employee must perform work in one or more specializations, professions, or positions, with the respective qualification, following the internal work regulations, while employer must compensate the employee for the work performed and provide labor conditions required by the legislative acts, other normative legal acts on labor, and by the agreement between the parties. 39

Labor Code of the Republic of Tajikistan of 15 May 1997 (as amended on25 March 2011); Law of the Republic of Tajikistan on Social Partnership, Agreements, and Collective Agreements of 28 July 2006, #202.

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Parties of a Labor Agreement (Contract). An individual 15 years of age or older may qualify as an employee (a party to a labor agreement). Students 14 years of age may also execute employment agreements (contracts). Employer (a party of an employment agreement (contract)), may be: 1. public agency or entity duly registered as a legal entity subject to the procedure established by law; a branch or representative office of such an agency or entity; 2. an individual duly registered as a sole proprietor subject to the procedure established by law, or using labor of other persons for the needs of his/her own household. Term of an employment agreement. Employment agreements (contracts) may be: 1. unlimited term; 2. limited term (not exceeding 5 years); 3. for replacement of an absent employee who remains hired; 4. for the time required for performance of a specific task; 5. for seasonal work. Employment agreements (contracts) for seasonal work are exected in cases when work can only be performed during a specific period (season) not exceeding 6 months due to the natural/climatic conditions. If an employment agreement (contract) does not specify any duration period, this agreement (contract) qualifies as termless; it may not be re-executed for a limited term without consent of the employee. Employment agreements/contracts for a limited term are executed in cases when no termless agreement is possible due to the work nature or conditions, or due to the employeeâ&#x20AC;&#x2122;s interests, as well as in other cases specified by law.

Execution of an Employment Agreement (Contract). An employment agreement may be executed either in writing or verbally, while a contract may only be executed in writing. An employment agreement (contract) executed in writing must exist in two copies signed by the parties. One copy of the employment agreement (contract) is handed over to the employee, while the other is kept by the employer. At the time of hiring employee must provide the following documents: 1. labor record (with the exception of cases where the employee has not worked earlier); 2. passport (birth certificate for persons under 16); 3. education certificates in cases provided by normative acts; 4. for persons liable for military service â&#x20AC;&#x201C; military card or military service registration certificate. An employer may demand no other documents from a newly hired employee, unless otherwise provided by law. www.colibrilaw.com

A company head or a person duly authorized by the company head documents the fact of hiring by issuing a respective order. The order must be announced to the employee against the employee’s signature. An employment agreement (contract) enters into force on the date of actual commencement of work, unless otherwise provided in the agreement. Should an employee, in the absence of a written employment agreement (contract), actually commence work with consent of the employer, the employment agreement (contract) qualifies as executed on the date on which employee’s work commenced, and must be formalized within three days from the date of the work commencement. Individual provisions of an employment agreement qualify as invalid if such provisions: 1. worsen the employees’ status as compared to the terms set forth in the Labor Code, other normative legal acts containing labor provisions, a collective agreement, agreements, or local normative legal acts regulating labor relations; 2. have discriminatory nature. Probationary Employment. An employment agreement (contract) may be executed with a probation period. This period is established with consent of the parties and may not exceed three months, with the exception of cases set forth by law. During the probation period the employee is subject to provisions of legislative and other normative legal acts. No probationary employment is allowed in case of hiring a person under 18, hiring a young professional, transfer of an employee to another location or enterprise, or in case of contest-based hiring. Periods of temporary loss of working ability and other periods during which an employee is absent at work for a valid reason do not count towards the probation period. Probation period must be specified in the employment agreement (contract). In the absence of the respective provisions an employee qualifies as hired without a probation period. Should neither party announce termination of the employment agreement (contract) at the end of the probation period, the agreement shall remain in effect, and may be further terminated on general grounds. Amendment of employment agreement: •

relocation;

•

transfer;

•

change of substantial terms;

•

temporary transfer to another position due to production needs;

•

temporary transfer to another position due to down time;

•

temporary replacement;

•

transfer to another position due to health reasons.

Termination of an employment agreement (contract) An employment agreement (contract) may be terminated: 1. with consent of the parties; www.colibrilaw.com

2. on the employee’s initiative; 3. on the employer’s initiative; 4. upon its expiration; 5. for reasons beyond control of the parties. 6.2.

Work hours

Normal duration of work is 40 working hours per week. An employment agreement may provide for the less work time per week. Shorter working hours are established for: 1. employees under the age of 18; 2. the disabled; 3. employees performing hazardous work – working time must not exceed 35 working hours per week. Labor compensation Labor compensation is a system of relations involving payments from the employer to the employees for the work they perform subject to laws, other normative legal acts, collective agreements, agreements, local normative legal acts, and employment agreements. Employer must compensate employees at the established time rate, piece rate, or other established rate. Amount of employee’s compensation may not fall below the minimal amount of labor compensation established by the laws of the Republic of Tajikistan (for 2010 this minimal amount was 60 somoni, or 41 US$14.8 ). Compensation is paid in cash, in somoni, no less frequently than every half month. Should employer delay the due payment, the employer must additionally pay the employee for each day of the delay, the established accounting rate of bank interest at the location where the work has been performed as of the date of its performance. 6.4.

Employment and use of foreign workforce in the Republic of Tajikistan

Provisions of the Labor Code of the Republic of Tajikistan and other normative legal acts on labor apply to the foreign nationals employed by entities and enterprises of the Republic of Tajikistan. Work permits are issued to the foreign employees within the established foreign labor quota. The foreign labor quota is established by Decree of the President of the Republic of Tajikistan as proposed by the 42 Government of the Republic of Tajikistan. Business entities of the Republic of Tajikistan may engage in the activities related to employment of Tajik citizens abroad and attraction of foreign labor to the Republic of 43 Tajikistan; these activities are subject to licensing by the License Committee of the Ministry of Interior o f the 44 Republic of Tajikistan and National Agency on Social Protection, Employment and Migration of the Ministry of Labor and Social Protection of the Republic of Tajikistan.

At the rate of the National Bank of Tajikistan, as of 05 October 2012; Law of the Republic of Tajikistan on Migration of 11 December 1999, #881; 43 Regulation on the Licensing Committee of the Migration Service of the Ministry of the Interior of the Republic of Tajikistan, as of 04 June 2009, #318; 44 Regulation on the National Agency for Social Protection, Employment and Migration of the Ministry of Labor and Social Protection of the Republic of Tajikistan of 03 March 2007, #102; 42

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DISPUTE SETTLEMENT

7.1.

Judicial procedure of economic dispute settlement in the Republic of Tajikistan

Disputes can be settled by economic courts of the Republic of Tajikistan or by arbitration courts based on an arbitration clause. A person whose rights have been breached may seek protection of the violated or disputable civil right by the court in accordance with the jurisdiction of cases established by the 45

procedural legislation . Should legislation or an agreement provide for a pre-trial settlement procedure for the given category of cases, the respective cases may only be considered by the court upon completion of the pre-trial settlement procedures. 46

Parties of a dispute may seek resolution of their economic dispute by a third party court , international arbitration court, or by ad hoc arbitration. Subject to the legislation of the Republic of Tajikistan, investment disputes between investment parties are settled subject to the terms provided by agreements between the parties. In the absence of such agreements, investment disputes between investment parties must be resolved, where possible, nonjudicially, by consultation of the parties. Should resolution of an investment dispute subject to the executed agreement(s) be impossible, the dispute must be settled by a court of the Republic of Tajikistan, an international arbitration court, or a third party court of the parties’ choice, 47

subject to legislative acts of the Republic of Tajikistan and subject to international legal acts. 7.2.

Resolution of an economic dispute by a third party court

A third party court settles disputes based on the Constitution of the Republic of Tajikistan, laws and other normative legal acts of the Republic of Tajikistan, international legal acts recognized by the Republic of 48

Tajikistan, and based on agreement provisions and established business practices.

To have a dispute settled by a third party court, the parties shall exeucte an arbitration agreement (or arbitration clause). 7.3.

Enforcement of Foreign Judgments in the Republic of Tajikistan

Foreign judgments on the disputes and other cases that may arise in the course of business and other economic activities, awards of foreign arbitration courts and international commercial arbitral tribunals issued in the foreign countries with respect to the disputes and other cases that may arise in the course of business or other economic activities, are recognized and enforced in the Republic of Tajikistan by economic courts, if such recognition and enforcement is provided by an international act ratified by the Republic of Tajikistan.

One of such effective international agreements on recognition and enforcement of foreign judgment is the Kiev Agreement on the Procedure for Settlement of Disputes Related to Implementation of Business Activities (“the Kiev Agreement”) signed by a number of the CIS countries on 20 March 1992. For the Republic of Tajikistan this Agreement became effective on 19 December 1992.

45 46 47 48 49

Code of Civil Procedure of the Republic of Tajikistan of 01 January 2008, as amended on 12 January 2010; Regulation on the Third Party Court Resolution of Business Disputes of 15 May 1997, #426; Article 22 of the Law of the Republic of Tajikistan on Investment of 12 May 2007, #260; Article 5 of the Law of the Republic of Tajikistan on Arbitration Courts of 05 January 2008, #344; Code of the Republic of Tajikistan on Economic Court Procedure of 05 January 2008.

Under the Kiev Agreement the CIS nations mutually recognize and enforce effective judgments of their competent courts. Judgments issued by a competent court of a CIS nation are enforceable throughout the territories of other CIS nations.

In furtherance of the Kiev Agreement, Agreement on Mutual Enforcement of Decisions of Arbitral, Commercial and Economic Courts within the Territories of the Commonwealth Participant Nations (‘the Moscow Agreement’) was executed.

The Moscow Agreement sets forth the procedure, under which the

parties thereto mutually enforce decisions of arbitration, commercial, and economic courts issued on economic disputes within the respective court jurisdiction and having come into legal effect. Should any aspects of mutual enforcement of court decisions fall beyond the scope of the Kiev Agreement and Moscow Agreement, a reference shall be made to the Minsk Convention on Legal Assistance and Legal Relations on Civil, Matrimonial, and Criminal Cases of 22 January 1993.

Section 3 of the Minsk Convention provides that the Agreement Parties must recognize and enforce 53

decisions issued within the territories of other parties to the Agreement.

In 2002 the nations of the Commonwealth of Independent States joined the Kishinev Convention on Legal 54

Assistance and Legal Relations on Civil, Matrimonial and Criminal Cases.

Under the Kishinev

Convention, each of the parties to the Agreement recognizes and enforces decisions of the other party’s justice authorities as may be issued within the territory of any party to the Agreement on such cases a: settlement agreements approved by courts; notarial acts on financial liabilities; sentences (decisions) of criminal courts in the part of damage reimbursement, fine collection, and confiscation; court decisions on property arrest, including arrest of money on bank accounts, as may be required to secure a claim.

It must be noted that on 30 May 2012 the Republic of Tajikistan has aceeded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958.

Article 7 of the Agreement on the Procedure of Settlement of Disputes Related to Implementation of Business Activities of 20 March 1992; 51 Agreement on the Procedure of Mutual Enforcement of Decisions of Arbitration, Commercial, and Economic Courts within Territories of the Commonwealth Participant Nations was concluded on 6 March 1998 and ratified by the Resolution of the Majlisi Namoyandagon Majlisi Oli of the Republic of Tajikistan on 13 December 2000, #197. 52 Article 1 of the Agreement of the Procedure of Mutual Enforcement of Decisions of Arbitration, Commercial, and Economic Courts within the Territories of the Commonwealth Participant Nations of 6 March 1998; 53 Article 51 of the Convention on Legal Assistance and Legal Relations on Civil, Matrimonial, and Criminal Cases of 22 January 1993; 54 Convention on Legal Assistance and Legal Relations on Civil, Matrimonial, and Criminal Cases of 7 October 2002; 55 Article 54 of the Convention on Legal Assistance and Legal Relations on Civil, Matrimonial, and Criminal Cases of 7 October 2002;