Uzbekistan
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Uzbekistan
Business Tax Advisory
Doniyorbek Zulunov
Dilovar Mavlonov
A. At a glance
+998 (78) 140-6482
+7 (727) 258-5960
Mobile: +998 (90) 189-3611
Mobile: +7 (777) 355-0130
Email: doniyorbek.zulunov@kz.ey.com
+998 (78) 140-6482
Mobile: +998 (90) 788-3675
Email: dilovar.mavlonov@uz.ey.com
Corporate Profits Tax Rate (%) 15 (a)
Capital Gains Tax Rate (%) 15 (a)
Permanent Establishment Tax Rate (%) 15 (a) Withholding Tax (%) (b)
Dividends 5/10 (c)
Interest 5/10 (c)
Royalties, Service Fees and Capital Gains 20 (d) Net Operating Losses (Years)
Carryback 0
Carryforward Unlimited (e)
(a) This is the general corporate profits tax rate. See Section B for other rates. (b) The withholding taxes are generally considered to be final taxes. (c) The 5% rate applies to dividends paid to Uzbek tax resident companies as well as to dividends and interest paid to resident individuals. The 10% rate applies to dividends and interest paid to foreign (nonresident) companies and individuals. Interest paid to Uzbek tax resident companies is not subject to withholding tax. Instead, the recipient of the interest is subject to corporate profits tax on the interest. (d) The withholding tax is imposed on payments to foreign companies without a permanent establishment in Uzbekistan. (e) See Section C.
B. Taxes on corporate income and gains
Corporate profits tax. Most enterprises in Uzbekistan, including Uzbek companies with foreign participation, are subject to the general profits tax regime. Enterprises with annual turnover of less than UZS1 billion (approximately USD87,056) may choose a simplified taxation regime and pay a Revenue Tax (at various rates). Foreign companies that are deemed by the tax authorities to have a permanent establishment (PE) in Uzbekistan are taxable on profits derived from business activities of the PE in Uzbekistan. The definition of a PE in Uzbek legislation is somewhat similar to the definition of a PE in the model treaty of the Organisation for Economic Co-operation and Development (OECD), with certain exceptions. However, the legislation regarding the taxation and
treatment of PEs in Uzbekistan is undeveloped. If a foreign com pany renders auxiliary and preparatory activities in Uzbekistan for the benefit of other entities leading to creation of a PE of a foreign company and if no remuneration is charged for these services, the taxable base of such a PE equals 20% of deductions.
Rates of corporate tax. The regular corporate profits tax rate is 15%. This rate also applies to Uzbek enterprises with foreign participation and to PEs of foreign companies. For commercial banks, mobile telecommunication operators, manufacturers of polyethylene granules, markets and shopping malls, the profits tax rate is 20%. For taxpayers included in the National Register of e-commerce that carry out electronic trade of goods or ser vices, the corporate profits tax rate is 7.5%. For taxpayers carrying out activities in the social sphere, producers of certain agricultural goods, profits from the sale of goods and services for export and certain other taxpayers, the corporate profits tax rate is 0% (if certain conditions are met).
Since 1 January 2018, PEs were no longer subject to an addi tional tax on their net profits after deduction of the corporate profits tax. However, from 1 January 2022, see “Dividend tax” for PEs.
Foreign legal entities without a PE in Uzbekistan are subject to withholding tax on income derived from their activities in Uzbekistan. The following are the withholding tax rates for pay ments to nonresidents.
Nature of payment Rate (%)
Dividends and interest 10
International communication and freight fees 6 Insurance premiums 10 Royalties, capital gains, rent and service fees not connected with an Uzbek PE 20
The withholding tax rate for certain types of income is 0%. Withholding tax is also imposed on payments of dividends to Uzbek tax resident companies as well as on payments of divi dends and interest to individuals at a rate of 5%.
Capital gains. Capital gains are generally included in taxable prof its and are subject to tax at the regular corporate tax rate. Capital gains derived by nonresidents from disposals of shares in Uzbek resident legal entities or real estate located in Uzbekistan are subject to withholding tax at the general rate of 20%.
Administration. The tax year is the calendar year.
Tax declarations must be filed quarterly not later than the 20th day of the month following the reporting quarter and annually not later than 1 March of the year following the tax year.
The final tax liability must be paid by the deadline for filing the tax declarations. Companies that generated revenue of more than UZS5 billion (approximately USD461,354 for the preceding calendar year pay monthly advance payments not later than the 23rd day of each month of the reporting period.
On written request, excess payments of tax must be refunded within a 15-day period or be offset against other tax liabilities
within a 10-day period. In practice, it may be difficult to obtain refunds of overpayments of tax.
Dividends and interest. A 5% withholding tax is imposed on pay ments of dividends to Uzbek tax resident companies as well as on payments of dividends and interest to resident individuals. Starting from 1 January 2020, interest paid to Uzbek tax resident companies is not subject to withholding tax. Instead, the recipient of the interest is subject to corporate profits tax on the interest. A 10% withholding tax is imposed on payments of dividends and interest to foreign (nonresident) companies and individuals.
Effective from 1 April 2022 to 31 December 2024, it is antici pated the following tax benefits will be introduced for securities holders:
• For resident and nonresident individuals, dividend income on shares is expected to be exempt from tax.
• For legal entities that are nonresidents of Uzbekistan, dividend income on shares is expected to be subject to a 5% tax similar to the tax on legal entities that are residents of Uzbekistan.
• For resident and nonresident individuals and legal entities, accrued interest income on bonds of enterprises is expected to be exempt from tax.
For the full implementation of the above-mentioned benefits, the state bodies are mandated to draft and introduce a draft law that provides for amendments and changes to the tax legislation.
“Dividend tax” for PEs of nonresidents. Net profit remaining at the disposal of a nonresident operating through a PE in Uzbekistan after payment of tax is considered to be a dividend and subject to a 10% tax.
Foreign tax relief. Under the double tax treaties of Uzbekistan, a foreign tax credit is available for foreign tax paid on income earned abroad (subject to certain documentary requirements).
C. Determination of trading income
General. Taxable profits are equal to the annual net profits dis closed in the company’s Uzbek financial statements, as adjusted by the tax law. Financial statements generally must be prepared on an accrual basis using local generally accepted accounting principles (GAAP) and be supported by documentation. Large taxpay ers and certain other categories of companies may conduct bookkeeping and prepare financial statements in accordance with International Financial Reporting Standards (in which case the taxpayer may also be required to make further additional adjust ments for tax purposes).
The following are the most significant items that are not deduct ible for tax purposes:
• Nonbusiness expenses
• Entertainment expenses
• Interest on overdue and deferred loans (in excess of normal loan interest rate) as well as interest on “controlled” liability in excess of norms (see Thin-capitalization rules in Section E)
• Losses resulting from misappropriations of funds or assets
• Certain benefits to employees
• Charitable donations
• Taxes paid on behalf of other taxpayers or assessed as a result of tax audits
• Expenses on the creation or increase of reserves or provisions for bad and doubtful debts (except those stipulated for certain activities, such as activities of banks)
Special deductions. Taxable profits may be reduced by certain special investment deductions in the following amounts:
• 20% of the cost of new technological equipment, expenses for modernization and technological re-equipping of production and certain other expenses
• 10% of expenses for the expansion of production in the form of new constructions, reconstruction of buildings and construc tions used for production purposes
Provisions. Banks may deduct loan loss provisions within the limits established by the Central Bank of the Republic of Uzbekistan.
Tax depreciation. The following are the applicable depreciation rates in Uzbekistan.
Assets Rate (%)
Buildings 5 Structures 10
Trains, ships and airplanes 10
Pipelines, communication equipment, and electric power lines and equipment 15 Production machinery and equipment 20 Cars, computers and office equipment 40 All other assets 15
Intangible assets are amortized for tax purposes over the useful life of an asset or five years (if the useful life cannot be deter mined).
Relief for losses. Tax losses can be carried forward. Losses result ing from distinct types of activities (for example, general entrepreneurship activities, investment activities and partnership activities) can be carried forward to offset profits resulting from the respective type of activities only. The amount of losses result ing from general entrepreneurship activities that may be deducted each year is no longer subject to limitations (before 1 January 2022, a tax loss could be carried forward for 10 years and was subject to a limit of 60% of the taxable base for the year). The taxable base may be reduced by the amount of losses in accor dance with the above rules only at the end of the year.
Groups of companies. A consolidated group of taxpayers is a vol untary association of taxpayers based on a relevant agreement for assessing and paying corporate income tax considering the total financial result of the economic activities of these taxpayers.
A consolidated group of taxpayers may be created by legal enti ties (subject to certain criteria, for example, total revenue of legal entities that are members of the consolidated group of taxpayers from the sale of goods and services, as well as other income according to the financial statements for the calendar year, is at least UZS500 billion [approximately USD43,527,958], provided that the entity directly and/or indirectly participates in the charter
[authorized] capital of other legal entities and the share of such participation in each legal entity is at least 90%). These conditions must be met during the entire term of the agreement on the creation of a consolidated group of taxpayers.
D. Other significant taxes
The following table summarizes other significant taxes.
Nature of tax Rate
Value-added tax (VAT), on the supply of all goods and services, including imports, unless they are zero-rated or exempt 15% Excise tax; imposed on an extensive number of specified goods produced in Uzbekistan or imported into Uzbekistan; goods subject to tax include oil and gas products, alcohol, tobacco, jewelry, silverware, polyethylene and mobile telecommunication services Various Property tax; imposed on the annual average depreciated value of immovable property and certain other assets; land is exempt 1.5% Subsurface use tax; imposed on the extraction of natural resources; tax imposed on the sales price of extracted natural resources and components and on waste derived from the extraction or processing of natural resources Sales
2.6% to 30% Waste 0.78% to 9%
Special rental tax on mineral extraction; imposed on the rental income received by the taxpayer from the sale of mined metal or hydrocarbon raw materials (the rate may be higher in certain cases) 25% Signing and commercial discovery bonuses for subsurface users; payable to the state budget through the tax authorities Various Vehicle utilization fees; imposed on imported and manufactured (assembled) vehicles in Uzbekistan; various rates depending on the model, engine, capacity and other items 30 to 1,410 times the base specified value, which is UZS270,000 (approximately USD23.5)
Water use tax; general rates per cubic meter Surface water UZS240 (approximately USD0.021)
Underground water UZS290 (approximately USD0.025)
Land tax; imposed at a fixed rate per hectare, which varies depending on the location, quality and purpose of the land plot; rate in Zone 1 of Tashkent
UZS220 million (approximately USD19,152)
Nature of tax Rate
Social Tax; payable by employers
On the total payroll of state-funded organizations 25%
On the total payroll of all other entities 12%
Contributions to individual accumulative pension accounts of citizens (maintained at Peoples Bank); payable by employers on salaries of local employees; amounts of the contributions are deducted from the amounts of accrued individual income tax 0.1%
E. Miscellaneous matters
Foreign-exchange controls. The currency in Uzbekistan is the Uzbek soum (UZS).
Uzbekistan imposes various foreign-exchange controls, including the following:
• Mandatory exchange rates set by the Central Bank of the Republic of Uzbekistan for accounting, reporting, tax and cus toms duty calculations
• Strict control over payments in foreign currencies to parties outside Uzbekistan
• Limitations on the circulation of foreign currencies in Uzbekistan, and limitations on the domestic foreign currencies markets
Thin-capitalization rules. If the controlled liability of the taxpayer (that is, loans provided by a foreign individual or entity holding at least a 20% share of the taxpayer or by an affiliated party of such individual or entity) exceeds by 3-fold the equity of the taxpayer (for banks and leasing organizations, 13-fold), thincapitalization rules should be applied and interest expenses above calculated thresholds are considered as nondeductible.
Controlled foreign companies. A controlled foreign company (CFC) is a foreign legal entity (not qualified as a tax resident of Uzbekistan) or a foreign structure without a status of a legal entity whose controlling persons are legal entities qualified as Uzbek tax residents.
For a CFC with a status of a legal entity, the controlling persons are legal entities that meet the following conditions:
• Its share in a foreign company exceeds 50% in 2022 (25% from 2023).
• Its share in a foreign company exceeds 10% if the shares of all other shareholders recognized as tax residents of Uzbekistan exceed 50%.
• It exercises control over a foreign company (regardless of the participation share).
For a CFC without a status of legal entity, the controlling person is its founder.
If a tax-resident company is recognized as the controlling person of a CFC, it must include retained earnings of such CFC in its taxable income and pay the relevant tax.
In addition, tax-resident companies must notify the tax authori ties about the following:
• Their participation in foreign legal entities
The establishment of foreign structures without a status of a legal entity
CFCs for which they are controlling persons
F. Treaty withholding tax rates
The following table lists the withholding rates under Uzbekistan’s tax treaties.
Dividends (k) Interest (k) Royalties
Payee resident in % % %
Austria 5/15 (a) 10 5
Azerbaijan 10 10 10
Bahrain 8 8 8
Belarus 15 10 15
Belgium 5/15 (a) 10 5
Bulgaria 10 10 10
Canada 5/15 (a) 10 5/10 (e)
China Mainland 10 10 10
Czech Republic 5/10 (b) 5 10
Egypt 5/10 (b) 10 12
Estonia 5/10 (b) 5 10
Finland 5/15 (a) 5 0/5/10 (f)
France 5/10 (a) 0/5 (d) 0
Georgia 5/15 (b) 10 10
Germany 5/15 (b) 5 3/5 (g)
Greece 8 10 8
Hungary 10 10 10 India 10 10 10 Indonesia 10 10 10
Iran 8 10 5
Ireland 5/10 (a) 5 5
Israel 10 10 5/10 (h)
Italy 10 5 5
Japan 5/10 (b) 5 0/5 (i)
Jordan 7/10 (b) 10 20
Kazakhstan 10 10 10 Korea (South) 5/15 (b) 5 2/5 (j)
Kuwait 5/10 (b) 8 20
Kyrgyzstan 5 5 15
Latvia 10 10 10
Lithuania 10 10 10 Luxembourg 5/15 (b) 10 5
Malaysia 10 10 10
Moldova 5/15 (a) 10 15
Netherlands (l) 5/15 (b) 10 10 Oman 7 7 10
Pakistan 10 10 15
Poland 5/15 (c) 10 10
Romania 10 10 10
Russian Federation 10 10 0
Saudi Arabia 7 7 10 Singapore 5 5 8
Slovak Republic 10 10 10
Slovenia 8 8 10
Spain 5/10 (b) 5 5
Switzerland 5/15 (c) 0/5 (d) 5
Dividends (k) Interest (k) Royalties Payee resident in % % %
Tajikistan
5/10 (b) 10 10
Thailand 10 10/15 15
Turkey 10 10 10
Turkmenistan 10 10 10
Ukraine 10 10 10
United Arab Emirates 5/15 (b) 10 10
United Kingdom 5/10 (a) 5 5 Vietnam 15 10 15
Non-treaty jurisdictions 10 10 20
(a) The lower rate applies if the beneficial owner of the dividends is a company that owns at least 10% of the payer of the dividends.
(b) The lower rate applies if the beneficial owner of the dividends is a company that owns at least 25% of the payer of the dividends.
(c) The lower rate applies if the beneficial owner of the dividends is a company that owns at least 20% of the payer of the dividends.
(d) The 0% rate applies to interest with respect to the following:
• Loans made, guaranteed or insured by the government of the other con tracting state or an instrumentality or agency thereof
• Sales on credit of industrial, commercial or scientific equipment
• Sales on credit of merchandise between enterprises
• Bank loans
(e) The 5% rate applies to royalties paid for certain cultural works (with excep tions) as well as for the use of, or the right to use, computer software or patents or for information concerning industrial, commercial or scientific experience (know-how), with exceptions.
(f) The 0% rate applies to royalties for the use of, or the right to use, computer software, patents, designs or models, or plans. The 5% rate applies to royalties paid for the use of, or the right to use, secret formulas or processes, or for information concerning industrial, commercial or scientific experience (knowhow). The 10% rate applies to royalties paid for trademarks or certain cultural works.
(g) The 3% rate applies to royalties paid for the use of, or the right to use, copy rights of scientific works, patents, trademarks, designs or models, plans, or secret formulas or processes, as well as for the disclosure of industrial, com mercial, or scientific knowledge. The 5% rate applies to royalties paid for certain cultural works.
(h) The 5% rate applies to royalties paid for certain cultural works (with excep tions).
(i) The 0% rate applies to royalties paid for the use of, or the right to use, copy rights of literary, artistic or scientific works, including motion picture films.
(j) The 2% rate applies to royalties for the use of, or the right to use, industrial, commercial, or scientific equipment.
(k) The domestic withholding tax rate for dividends and interest in Uzbekistan is 10%. Consequently, the withholding tax rate of 15% for dividends and inter est under treaties does not apply to payments made by Uzbek companies.
(l) Under the protocol to the double tax treaty with the Netherlands, withholding tax rates may be reduced to zero if certain conditions are met.