Uzbekistan, Republic of

Corporate - Income determination

Last reviewed - 28 April 2020

Inventory valuation

Uzbek legislation permits the application of the weighted average cost method (AVECO) and the first in first out (FIFO) method for the valuation of inventory for tax purposes.

Capital gains

Capital gains arising from the disposal of tangible and intangible assets are calculated as the difference between the selling price and the net book value of an asset. The capital gain is included in taxable profits (unless specifically exempt), and the capital losses are deductible (only if the disposed asset had been used for business purposes for three or more years). This is applicable to Uzbek legal entities and PEs of foreign legal entities.

Capital gains of non-resident companies are subject to WHT at 20% as 'other' income. The obligation to withhold and pay the tax on income of a non-resident of the Republic of Uzbekistan is levied on the buyer of the property, a tax agent.

In the absence of the documents supporting the acquisition price, WHT on capital gains from the sale of property shall be assessed based on the sales price.

Dividend income

Dividends paid by a domestic subsidiary to: (i) a non-resident are subject to 10% WHT and (ii) a resident are subject to 5% WHT at the source. The net dividends received by its domestic parent company are then excluded from the parent’s CIT base. Such net dividends received by a foreign parent company are taxed in accordance with the respective country’s internal legislation or double tax treaty (DTT) provisions (if Uzbekistan has a DTT with this country).

Income of non-residents subject to WHT (including income in the form of dividends, interest, and royalties) is to be paid without withholding of WHT at source or with application of a reduced WHT rate as provided by a tax treaty, provided that there is a tax certificate confirming that non-residents are registered for tax purposes in the state with which Uzbekistan has the effective tax treaty (with certain exemptions).

For Uzbek legal entities paying out dividends, a new mechanism of tax credit was introduced to avoid cascade taxation of dividends. 

See the Withholding taxes section for a list of countries with which Uzbekistan has an applicable tax treaty.

Interest income

Interest income paid to non-residents is subject to WHT at the source at the rate of 10%. Such net interest income received by foreign companies is taxed in accordance with the respective country’s internal legislation or DTT provisions (if Uzbekistan has a DTT with this country). Similar to other types of income of non-residents subject to WHT (including income in the form of dividends and royalties), interest income is to be paid without withholding of WHT at source or with application of a reduced WHT rate by automatic application of a DTT, provided that there is a relevant residence certificate.

As per the new Tax Code, as of 1 January 2020, interest paid to residents (except payments to non-profit and budget organisations) is not subject to taxation at source and should be included in the income of the recipients and is subject to taxation in the manner specified by the Tax Code.

See the Withholding taxes section for a list of countries with which Uzbekistan has an applicable tax treaty.

Royalty income

Royalty income includes payments for:

  • copyrights to works of science, literature, and art, including copyrights to software and databases, drawings, design or model, plan, secret formula, technology or process, audio-visual works, and objects of adjacent rights, including performances and phonograms
  • patents, trademarks, or other similar types of rights, and
  • information regarding industrial, commercial, or scientific experience (know-how).

Royalty income of Uzbek legal entities and PEs of foreign legal entities is included in taxable profits.

Royalties paid to non-resident companies with no PE are subject to WHT at 20% as 'other' income. The obligation to withhold and pay the tax on income of a non-resident of the Republic of Uzbekistan is levied on the payer of the royalty, a tax agent.

Foreign income

Gross foreign income of a resident corporation (e.g. income from its foreign branch) should be included in its aggregate income on an accrual basis, regardless of remittance date. Expenses incurred abroad in relation to such foreign income can be deducted, subject to provisions of the Uzbek Tax Code. Foreign income tax paid on such income should be credited against the Uzbek CIT only if this branch is registered in a country with which Uzbekistan has a DTT. There are no deferrals for foreign income to be recognised for Uzbek tax purposes.