Tashkent GMT +5
EY
Inconel Business Center
3rd Floor 75 Mustaqillik Avenue Tashkent 100000
Uzbekistan
Indirect tax contacts
Doniyorbek Zulunov +998 78 140-6482 +7 727 258-5960 doniyorbek.zulunov@kz.ey.com
Dilovar Mavlonov +998 78 140-6482 dilovar.mavlonov@uz.ey.com
A. At a glance
Name of the tax
Value-added tax (VAT)
Local name Qo’shilgan qiymat solig’i (QQS)/Налог на добавленную стоимость (НДС)
Date introduced 1992
Trading bloc membership None. Observer status at Eurasian Economic Union (EAEU)
Administered by State Tax Committee (www.soliq.uz)
Ministry of Finance (www.mf.uz)
VAT rates
Standard 15%
Other
Zero-rated (0%) and exempt
VAT number format 12-digit number (XXXXXXXXXXXX), where X is a digit between 0-9
VAT return periods
Thresholds
Registration
Mandatory
Monthly
More than UZS1 billion (approx. USD92,271) of annual turnover
Voluntary Less than UZS1 billion are eligible to pay revenue-based tax under simplified tax regime instead of CIT and VAT. However, they may register for VAT on voluntary basis.
Recovery of VAT by non-established businesses No
B. Scope of the tax
VAT is levied on turnover derived from the supply of goods and services in Uzbekistan (based on place of supply rules), including imports, unless they are zero-rated or specifically exempt. Any excise taxes paid are included in the taxable base for VAT purposes.
C. Who is liable
A taxable person is a person or legal entity that carries out a taxable transaction. A taxable trans action is a transaction involving the sale or importation of goods or services that is subject to VAT even if such transaction occurs only once. A person liable to VAT in Uzbekistan must register with the local tax service.
Uzbek legal entities, individual entrepreneurs with an annual turnover more than UZS1 billion (approx. USD92,271), as well as permanent establishments of foreign legal entities have to reg ister with tax authorities for VAT purposes. Importers of goods have to register with tax authorities for VAT purposes regardless of the annual turnover.
Exemption from registration. The tax law in Uzbekistan does not contain any provisions for exemption from VAT registration, except for the threshold for Uzbek legal entities and entrepre neurs (see the Voluntary registration and small businesses subsection below).
Voluntary registration and small businesses. Uzbek legal entities and individual entrepreneurs with an annual turnover less than UZS1 billion (except importers of goods and certain other organizations) are eligible to pay revenue-based tax under simplified tax regime instead of CIT and VAT. There is no requirement for them to register for VAT; however, they may voluntarily register for CIT and VAT.
Group registration. Group VAT registration is not allowed in Uzbekistan.
Non-established businesses. Non-established businesses selling goods or services in the territory of Uzbekistan are subject to VAT if the place of supply is deemed to be Uzbekistan. The basic place of supply rule for services is where the recipient of the service is located. There are some exceptions to the general place of supply rule, for example, for advertising services and immov able property (located in Uzbekistan).
If the recipient of services supplied by a non-established supplier is registered for VAT in Uzbekistan, the recipient is responsible for accounting for the respective VAT (via the reversecharge mechanism).
For supplies made by non-established businesses where the contract states VAT, the recipient in Uzbekistan withholds VAT at source. If the contract does not state VAT, the recipient accounts for VAT by way of the reverse charge or withholding mechanism.
Tax representatives. Tax representatives are not required as the concept of tax representatives is not used in Uzbekistan. However, new rules for VAT on digital services were introduced from 1 January 2020. As such for non-established businesses supplying digital services to individuals in Uzbekistan, i.e., business-to-consumer (B2C), digital services are subject to VAT, and the nonestablished business must register for VAT in Uzbekistan. See the Digital economy subsection below for more details.
When registering for digital VAT in Uzbekistan, a non-established business must indicate its officer (i.e., an authorized person/tax representative) who will be provided with the access details for the online platform for filing electronic VAT tax returns and interacting with the tax authori ties.
Reverse charge. For supplies of services made by non-established businesses to businesses in Uzbekistan, i.e., business-to-business supplies (B2B), where the contract does not state VAT, the recipient must self-account for VAT by way of the reverse charge. However, this does not apply to supplies of digital services supplied to consumers (B2C). See the Digital economy subsection below for more details.
Domestic reverse charge. There are no domestic reverse charges in Uzbekistan.
Digital economy. From 1 January 2020, nonresident providers of electronically supplied services for business-to-consumer (B2C) supplies are required to register and account for VAT in Uzbekistan (if place of supply is deemed to be Uzbekistan).
Digital services subject to the rules outlined above do not include the following:
• Supply of goods, if the goods are delivered without using the internet, even if they are ordered through the internet
• Supply (transfer of rights of use) of software for computers (including computer games) and databases, if the transfer is carried out on tangible data storage mediums
• Supply of consulting services via email
• Provision of internet access services
Nonresident providers of electronically supplied services for B2B supplies are not required to register and account for VAT on supplies in Uzbekistan. Instead, the customer is required to selfaccount for the VAT due by way of the reverse charge (or withholding (depending on contrac tual terms) (see the Reverse-charge subsection above).
The import of goods is subject to import VAT at customs. There are no other specific e-commerce rules for imported goods in Uzbekistan.
Online marketplaces and platforms. The definition of digital services includes rendering services on provision of technical, organizational, informational and other opportunities, via the internet, carried out with the implementation of information technologies and systems for the purposes of establishing contacts and deals between sellers and purchasers (including the provision of a trade platform or marketplace, operating online where potential customers bid their price through the automated procedures, and parties are informed about sales by automatically generated messag es).
Hence, services of online marketplaces and platforms may be subject to Uzbek VAT (if rendered to Uzbek private individuals, i.e., B2C). If digital services are provided by a non-established busi ness to Uzbek private individuals through intermediary nonresidents that are collecting money from Uzbek private individuals based on commission, assignment, agency and other similar agreements with the supplier, then such foreign intermediary organization may be considered as a taxable person for Uzbek VAT purposes, and it would have an obligation to independently cal culate and pay the VAT due.
Registration procedures. For Uzbek-established businesses, registration for VAT is completed by submitting an online application. In special circumstances, registration for VAT can be carried out by filing a paper application.
For non-established business supplying B2C digital services, the relevant notice for registration for VAT should be submitted to the tax authorities via the online platform (website http://tax.uz/ en) or by an application in a written form. Based on using the platform, the following information is required to be filled in the application form for VAT registration:
• Company’s name
• Address
• Website
• Official email address
• Country of registration
• Other identifying information
• Information about the services provided
• Information about the authorized person
Additionally, an application must include an extract from the register of legal entities of the respective country where the non-established business is registered (or another document confirming the legal status of the non-established business in its home country).
There are no established rules for the process of registration for non-established businesses that do not supply B2C digital services. As indicated earlier in the subsection Non-established busi nesses, B2B supplies of services made by a non-established business are subject to the reverse charge or withholding (depending on contractual terms), and there is no requirement for the non-established business to register. Import of goods is subject to import VAT at customs.
Deregistration. Taxable persons may deregister for VAT if their turnover falls below the registra tion threshold (only for those taxable persons to whom the threshold may apply). Taxable persons for whom the threshold does not apply (such as foreign legal entities with a permanent establish ment in Uzbekistan or rendering B2C digital services) may deregister in the same way as a general taxable person or when they cease to have taxable turnover (whichever is applicable).
Changes to VAT registration details. When there is a change in the name of a taxable person, reregistration for VAT purposes is made automatically by the tax authorities based on the changes in the database of Center of State Services (where re-registration of the business name is applied for by the business) with subsequent notification to the taxable person.
Where there is a change in other details of a taxable person (e.g., address, bank details, etc.), the taxable person is required to file special forms to the tax authorities (generally online) informing them about the respective changes.
The procedure of notification can be done online via the personal portal of the taxable person (https://my.soliq.uz), by attaching and submitting the changing registration data of a taxable person. Alternatively, the forms can also be submitted manually, on paper.
A change of location (postal address) must be reported within 10 days from the date of the change; other changes generally must be reported within 30 days from the date of the change.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero rate.
The VAT rates are:
• Standard rate: 15%
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods or services unless a specific measure provides for the zero rate or an exemption.
Examples of goods and services taxable at 0%
• Exports of goods
• International transportation services
• Utility services provided to private consumers
The term “exempt” refers to supplies of goods and services that are not liable to VAT and do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• Financial services (e.g., certain types of banking and insurance services)
• Sale of pharmaceuticals (e.g., drugs and medicines)
• Educational services
• Veterinary services
• Passenger transportation services provided by the government (i.e., the public transport system)
Option to tax for exempt supplies. The option to tax exempt supplies is not available in Uzbekistan.
E. Time of supply
The time when VAT becomes due is called the “time of supply” or “tax point.”
The basic time of supply for goods is the earlier of when the goods are shipped, the invoice is issued or the ownership title is transferred to the purchaser.
The basic time of supply for services is the earlier of the issuance of the invoice or other docu ment confirming the delivery of the service. There is no payment or performance tax point for services. When services are rendered on a free-of-charge basis (i.e., no payment), the tax point is determined as per the general rule – earlier of the issuance of a VAT invoice or other document.
Deposits and prepayments. There are no special time of supply rules in Uzbekistan for deposits and prepayments (that are deductible from the total consideration for the supply). As such, the general time of supply rules apply (as outlined above).
However, deposits and prepayments that are not deducted from the total consideration for the supply are generally not within the scope of VAT, and as such, no time of supply rules apply for such payments.
Continuous supplies of services. The time of supply rule in Uzbekistan for the supply of continuous supplies of goods and services (e.g., sale of electricity, heating, water, gas, utilities, com munication services, goods transported through pipes and other continuous supplies) is the last day of the month in which supplies are provided.
Goods sent on approval for sale or return. There are no special time of supply rules in Uzbekistan for supplies of goods sent on approval for sale. As such, the general time of supply rules apply (as outlined above).
The time of supply rule in Uzbekistan for the supply of goods that are returned is the time the VAT is corrected in the invoice issued by supplier.
Reverse-charge services. There are no special time of supply rules in Uzbekistan for supplies of reverse-charge services. As such, the general time of supply rules apply (as outlined above).
Leased assets. The time of supply rule in Uzbekistan for the supply of leased assets (i.e., transferring assets on financial leasing) is the date of transfer of the assets to the lessee as per the act of acceptance signed by the lessor and lessee.
Imported goods. The time of supply rule in Uzbekistan for the supply of imported goods is the date of formalization of the import cargo custom declaration.
F. Recovery of VAT by taxable persons
Input tax is VAT charged on goods and services acquired by an entity for business purposes. A taxable person generally recovers input tax by deducting it from output tax (VAT charged on supplies made). Input tax consists of VAT charged on goods and services purchased in Uzbekistan, VAT paid on imports of goods and reverse-charge VAT paid.
VAT payable to the budget is generally determined as output tax charged less allowed input tax paid on purchases.
The time limit for a taxable person to reclaim input tax in Uzbekistan is the reporting month for which the invoice is dated.
Nondeductible input tax. Input tax incurred on purchases used to make supplies of exempt goods and services and on nonbusiness costs cannot be offset against output tax.
Examples of items for which input tax is nondeductible
• Input tax incurred in connection with the purchase of goods, services and fixed assets used to make exempt supplies
• Input tax incurred by nontaxable persons
• Input tax incurred from the purchase of representation and nonbusiness expenses
• Input tax incurred from the purchase of cars, motorcycles, helicopters, ships, airplanes and fuel for those vehicles, as well as alcohol and tobacco products, unless the purchase of those goods is related to the taxable person’s business activity
Examples of items for which input tax is deductible (if related to a taxable business use)
• Input tax incurred on purchased goods, services and fixed assets used to make taxable supplies (including zero-rated supplies) and in connection to which a proper electronic VAT invoice or another equivalent document is received
• Import VAT paid on goods and reverse-charge VAT paid on services supplied by non-established businesses
Partial exemption. Input tax directly related to the making of exempt supplies is, as a rule, not recoverable. If a taxable person makes both exempt and taxable supplies, it may not recover input tax in full. The amount of input tax that a partially exempt business may recover is calculated using the general pro rata method or the direct allocation method. The method that is used is based on the tax accounting policy of the taxable person.
For the direct allocation method, all input tax incurred that relates directly to taxable turnover can be offset in full. Then the input tax incurred for overheads is recoverable based on the distributed ratio of turnover (total taxable turnover over total nontaxable turnover).
For the proportionate method, the taxable person calculates the ratio of total taxable and nontax able turnovers. That ratio is then applied to all input tax incurred.
Approval from the tax authorities is not required to use the chosen partial exemption method in Uzbekistan. A taxable person must, however, indicate the method used in its tax accounting policy. Special methods are not allowed in Uzbekistan.
Capital goods. Input tax incurred on capital goods (i.e., fixed assets) can be offset against output tax. This is, however, provided capital goods are used to make taxable supplies, the purchase price and the respective amount of VAT has been paid (they were not received free of charge), and a full VAT invoice is received.
Refunds. Excess of qualifying input tax to be offset against the amount of output tax for the reporting period is accounted toward future output tax (to following tax periods) or can be refunded to the taxable person. The refund option is available with effect from 1 July 2020. Before this date, excess input tax over output VAT could only be refunded for amounts related to zero-rated supplies, such as exports.
To request a refund, the taxable person must notify the tax authorities when filing a respective tax return, requesting the refund to the tax authorities. Then an in-house (desktop) tax audit is carried out on the refund amount requested. If based on the results of the in-house (desktop) tax audit, the tax authority decides to fully or partially refund the tax amount claimed for refund, the indicated tax amount is returned to the taxable person no later than 60 days from the date of filing the tax refund application.
A “desktop tax audit” is a limited tax audit conducted remotely (i.e., without a physical visit to the premises of the taxable person) by the tax authorities to check the correctness and fullness of payment of a particular tax with regard to a specific issue/question, based on the tax returns, information, documents available to the tax authorities and obtained by the request from the taxable person.
Pre-registration costs. Input tax incurred on pre-registration costs in Uzbekistan is generally not recoverable.
However, in relation to input tax on inventory (purchased in the 12 months prior to VAT registra tion) and fixed assets accounted in the balance sheet as of the date of registration for VAT, the taxable person is eligible for offset in certain cases. This is provided that all other criteria for offset are also met (e.g., presence of full VAT invoice).
Bad debts. A taxable person can adjust the amount of output tax in relation to the write off of bad debts (as defined by the Tax Code in certain cases) within a limited time period of not later than one year after the event occurred. A bad debt is defined as a debt that cannot be settled due to cessation of liability as per a decision of court, bankruptcy, liquidation, death of the debtor or due to expiration of the statute of limitations. A bad debt is eligible for write off and subsequent offset/ deduction only based on statutory documents confirming the occurrence of the above events.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Uzbekistan.
G. Recovery of VAT by non-established businesses
Input tax incurred by non-established businesses in Uzbekistan is not recoverable. This is, how ever, subject to certain potential exceptions (i.e., for diplomatic missions, consular offices of foreign states and organizations equated to them, accredited in Uzbekistan, etc.).
H. Invoicing
VAT invoices. There is a specific VAT invoice format in Uzbekistan, which is considered as a strictly accountable document based on which VAT is assessed. There are general invoicing rules, which must be used. Invoices should be issued upon completion of the services or upon transfer of the goods. Invoices must be retained for input tax to be offset. If the services are rendered on an ongoing basis, the invoice should be issued at the end of the month.
Credit notes. If there are changes in the terms of the supply (e.g., change in the volume of supply, a price change or if there is a return of the goods) the supplier may issue a correcting (adjusting) a VAT invoice that serves as the basis for the VAT adjustment (i.e., a credit note).
Electronic invoicing. Electronic invoicing is mandatory in Uzbekistan. With effect from 1 January 2020, electronic invoicing using the tax authorities’ special system is mandatory. There are no mandatory software providers for electronic invoicing, while taxable persons may use different platform operators for such purposes. Data from the electronic VAT invoicing platform is absorbed automatically as data for output and input tax to draft VAT returns.
Simplified VAT invoices. Simplified VAT invoicing is not allowed in Uzbekistan. As such, full VAT invoices are required.
Self-billing. Self-billing is not allowed in Uzbekistan.
Proof of exports. Proof of exports to support zero-rated VAT (exemption with credit) are the com mercial and transportation documents related to export sales, e.g., export customs declaration. Export customs declarations should have the mark of the customs authorities where the goods have been exported from.
Foreign currency invoices. Hard copy invoices issued to foreign customers can also be issued in USD or EUR, depending on the commercial terms of the agreement. However, electronic VAT invoices specifically issued for tax purposes to reflect supplies to foreign customers can only be issued in the domestic currency, which is the Uzbekistan so’m (UZS). If supplies are made
within Uzbekistan, the invoices must be issued only in UZS. The Central Bank exchange rates must be used for the conversion, which are published on a weekly basis.
Supplies to nontaxable persons. In certain cases, such as retail B2C sales, taxable persons are required to issue unilateral electronic VAT invoices (i.e., an invoice issued by the taxable person in the system that does not have to be accepted by the counterparty of supply), to record such cases for VAT reporting purposes.
Records. All accounting records and supporting documents, invoices, contracts and transporta tion documents, etc., must be kept by taxable persons.
Generally, all business transactions conducted by Uzbek legal entities should be supported by documents (i.e., agreements, VAT invoices, acts of acceptances, etc.).
There is no provision in the Uzbek tax law outlining where records should be held. In practice, records are usually held in Uzbekistan. If held outside of Uzbekistan, records must be readily available to the tax authorities upon their request. There may be certain restrictions in accordance with the legislation on personal data.
Record retention period. Records must be retained for at least five years.
Electronic archiving. Electronic archiving is not allowed yet in Uzbekistan. However as elec tronic invoicing is mandatory from 1 January 2020, new rules may be issued by the tax authority for electronic archiving. At the time of preparing this chapter, no rules on the implementation of electronic archiving have yet been issued. As such, physical records must be kept for now.
I. Returns and payment
Periodic returns. The filing of VAT returns is on a (calendar) monthly basis in Uzbekistan. Filing is due before 20th day of the month following the reporting period.
Tax reports (including returns and calculations) must be compiled and submitted by the taxable person to the local tax authority with which the entity is registered.
Periodic payments. Taxable persons must make VAT payments before 20th day of the month fol lowing the reporting period. Taxable persons must make VAT payments in UZS via wire transfer from their bank accounts to special treasury accounts of the budget. Non-established business registered for VAT in Uzbekistan can pay VAT in any foreign currency from a foreign bank account.
Electronic filing. Electronic filing is mandatory in Uzbekistan, apart from in special cases. VAT returns must be filed electronically, via the tax authority’s website (https://my.soliq.uz). To file
VAT returns electronically, the taxable person must have an electronic signature from the tax authority’s website to submit files online. However, if there is no possibility to submit VAT returns electronically, paper filing is still allowed (in special cases).
To file all applicable tax returns and tax reports electronically using the tax authorities’ online system, the taxable person should obtain an electronic digital key (also called “electronic digital signature” or “e-key”).
Payments on account. Payments on account are not required in Uzbekistan.
Special schemes. No special schemes are available in Uzbekistan.
Annual returns. Annual returns are not required in Uzbekistan.
Supplementary filings. VAT invoice register. A VAT invoice register must be submitted with the VAT return by the same deadline (see the Periodic returns subsection above). The VAT invoice register must include details of all VAT invoices issued and received in the VAT reporting period.
Correcting errors in previous returns. To correct errors in previously filed returns, a taxable per son is required to file an additional VAT return correcting such errors, including any omissions in the original returns. Additional VAT returns are normally submitted online, in the same manner as a normal VAT return (as outlined under the Electronic filing subsection above).
Digital tax administration. Electronic invoicing reporting. As outlined above (under the subsec tion Electronic invoicing), electronic invoicing is mandatory in Uzbekistan. With effect from 1 January 2020, electronic invoicing using the tax authorities’ special system is mandatory. There are no mandatory software providers for electronic invoicing, while taxable persons may use different platform operators for such purposes. Data from the electronic VAT invoicing platform is used automatically as the data for output and input tax to automatically create draft VAT returns.
J. Penalties
Penalties for late registration. The penalty for late registration of VAT is 5% of the revenue sub ject to VAT, the penalty applies from the date when the VAT registration was due, until the actual date of registration. The penalty cannot be less than UZS5 million (approx. USD480).
Penalties for late payment and filings. For nonpayment or late payment of VAT or for incomplete payment, a penalty is due of 20% of the amount underpaid or paid late.
For late or non-filing of the VAT return, the official representatives of the taxable person may be liable under the code of administrative liability.
Late payment interest is calculated 1/300th of the Central Bank’s interest rate of the amount due, for each day of delay.
Penalties for errors. If an error leads to an understatement of VAT, late payment interest is due.
If an error leads to an overstatement of VAT, no penalties are due. An updated VAT return is required to be submitted to the tax authorities.
Failure to notify the tax authorities, or late notification regarding changes to a taxable person’s VAT registration details, could result in administrative penalties. For further details, see the sub section above Changes to VAT registration details
Penalties for fraud. A range of penalties may be applicable in the case of VAT fraud, but there is no specific fine for fraud.
For the concealed understatement of the tax base, a penalty is due of 20% of the concealed understated amount (i.e., a deliberate evasion). In addition, criminal sanctions and administrative fines may be imposed if the amount in question is significant.
Personal liability for company officers. Company officers may be held personally liable for errors and omissions in VAT declarations and reporting in Uzbekistan. Penalties may be charged for failure to meet administrative responsibilities, intentional evasion of taxation, criminal penalties and sanctions.
Statute of limitations. The statute of limitations in Uzbekistan is five years from the end of the tax period under examination.