Uzbekistan Tax & Business Guide - Deloitte

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Basic facts
Population 26.2m Inflation 7.1% (2005)*
Main languages Uzbek, Russian, Tajik GDP per head US$412*
Currency Uzbekistani sum (UZS) GDP growth 6.1% (2005)*
Economic communities Commonwealth of Independent States
GDP sources 34.8% agriculture, 23.4% industry, 57.2% services
*Economist Intelligence Unit.
Political environment

Uzbekistan is a presidential republic. A new, bicameral parliament was elected in two stages in December 2004 and January 2005, replacing the previous unicameral legislature. Islam Karimov, who was re-elected president on January 9th 2000, is the head of state. The Cabinet of Ministers is appointed by the president with the approval of the Supreme Assembly.

The next elections are due in December 2007 (presidential) and 2009 (parliamentary).
Foreign trade and investment
Exports US$5.1bn (2005)* Imports US$3.8bn (2005)*
*Economist Intelligence Unit.

Leading export markets: Russia, China and Ukraine.

Major exports: Cotton, gold and energy products.

Various incentives for foreign investorsÛincluding tax holidays, duty-free import of capital goods and protection against expropriationÛare awarded on a case-by-case basis.
Business and financing
Business forms Joint stock company, limited liability company, partnership

Branches are not widely used by foreign companies to conduct business in Uzbekistan.

Foreign companies that establish a local entity in the form of a joint venture or wholly owned subsidiary must be registered with the Ministry of Justice and the Ministry of Labour.
Labour environment
Unemployment rate 0.7% (2005)* Minimum wage UZS 7,835 (monthly)
*Economist Intelligence Unit.

The minimum wage is UZS 7,835 per month.

Literacy is nearly universal, at 98%.

The Ministry of Labour sets the minimum wage in consultation with the Council of the Federation of Trade Unions.

Foreigners who wish to work in Uzbekistan must possess a valid visa and work permit, which can be obtained from the Ministry of Foreign Affairs and the Ministry of Labour, respectively.

Personal pension plans were established as from January 1st 2005; 1% of the gross salary must be transferred to established pension accounts at Halk Bank (the state-owned bank).
Taxation
Corporate tax
Main rate 12%

Resident companies are taxed on their worldwide income; non-resident companies are taxed only on income sourced in Uzbekistan. A company is resident if established or registered in Uzbekistan, or if the main enterprise is located in Uzbekistan.

Legal entities may opt to be subject to Unified Income Tax (if the legal entity is treated as a micro- or medium-sized enterprise under Uzbek law) at a rate of 12%. The flat tax rate is linked to revenue. The advantage of unified tax is that the legal entity is not required to pay other taxes such as infrastructure tax, property tax, land tax, VAT, Road Fund, etc.
Individual tax
Progressive rates to 29%

Residents are taxed on their worldwide income; non-residents are taxed only on income sourced in Uzbekistan. A person permanently residing in Uzbekistan or staying for 183 days in any 12-month period starting or ending in a particular fiscal year is considered a resident for tax purposes in that fiscal year. Individual income tax is charged at progressive rates from 13% to 29%.
Capital gains
Taxed as income

Capital gains are included in income.
Indirect tax
VAT standard rate 20%

The 20% standard rate of value-added tax (VAT) applies to most transactions. Exports and certain agricultural inputs such as fertilisers, fuel and lubricants are zero-rated. Exemptions include financial services, public utilities, municipal passenger transport and public education services. Legal entities operating under the unified tax are not required to charge/offset VAT charges.
Tax administration and compliance
Tax year Calendar year

Legal entities must file quarterly and annual tax returns and self-assess the tax due, which must be paid within five days after submitting the return. Employment income is taxed by withholding. Individuals with other sources of income must file a tax return by April 1st following the end of the tax year.
Additional tax information
Withholding taxes Dividends and Interest 10%, Royalties 20%. The withholding tax rates may be reduced under the provisions of an applicable tax treaty.
Tax treaties Uzbekistan has concluded more than 40 tax treaties.
Dividends Dividends received by legal entities and individuals from domestic companies are subject to a 15% final withholding tax.
Revenue protection There are transfer-pricing provisions but no CFC rules.
Groups There is no provision for group taxation.
Incentives Exports; manufacturing in certain regions of the country; certain industry-based incentives; investment amount, etc.
Other taxes Customs and excise duties, Ecology tax, Infrastructure tax, Land tax, Property tax, Subsurface use tax, Unified social tax, Water use tax.