Uzbekistan, Republic of
The current tax legislation offers tax incentives for enterprises in oil and gas exploration/development projects and companies rendering certain services.
The free economic zones of Navoi, Urgut, Gijduvan, Kokand, Termez, Namangan, Sirdaryo, Bukhoro-agro, and Khazarasp; the pharmaceutical free economic zones of Nukus-pharm, Zaamin-pharm, Kosonsoy-pharm, Sirdaryo-pharm, Boysun-pharm, Bustanlik-pharm, Andijon-pharm, and Parkent-pharm; the special industrial zones of Angren and Djizzak; the fish production zone of Balik ishlab chikaruvchi; and the free touristic zone of Charvak operate under a unified tax and customs regime in Uzbekistan.
In accordance with the unified tax and customs regime for free economic zones operating in Uzbekistan, participants of free economic zones are exempt from:
- land tax, CIT, property tax (for legal entities), UTP for micro-firms and small enterprises, as well as mandatory contributions to the road fund and educational and medical institutions fund (for reconstruction, capital repair, and equipment), and
- customs payments (except for fees for customs clearance) for equipment, raw materials, and components imported for own production needs, as well as construction materials not produced in Uzbekistan and imported for implementation of projects as per the list approved by the Cabinet of Ministers of Uzbekistan.
The duration of the above incentives differs depending on the size of investment, as described below.
- From USD 300,000 to USD 3 million: Exemption is valid for three years.
- From USD 3 million to 5 million: Exemption is valid for five years.
- From USD 5 million to USD 10 million: Exemption is valid for seven years.
- More than USD 10 million: Exemption is valid for ten years; in the following five years, the income tax and unified tax rates are set at 50% of then effective tax rates.
The following incentives are provided to participants of operating free economic zones:
- Exemption from customs payments (except customs clearance fees) on imported raw material and components for products required for production of exported goods for the whole period of free economic zones functioning.
- Payments in foreign currency within the free economic zones.
- Payments in foreign currency to Uzbek suppliers for goods, works (services), as well as use of preferable conditions and means of payment for exported and imported goods.
Furthermore, a number of small industrial zones were established in Uzbekistan. Participants shall be exempt from payment of property tax and CIT, as well as UTP for a two-year period starting from registration of a participant. However, recently all exemptions provided to the participants of small industrial zones have been cancelled but are valid for enterprises that are already registered as participants of the economic zone till 1 January 2020.
Participants are also provided the following benefits:
- In accordance with the established procedure, register ownership of buildings and structures (or their parts), built at the expense of their own funds.
- To privatise the buildings and structures transferred to them (or their parts), subject to full implementation of investment and other social obligations, but not earlier than five years from the date of acquisition of the status of a participant in a small industrial zone.
- To privatise buildings and structures (or their parts) in which reconstruction or major repairs were carried out at the expense of their own funds, but not earlier than three years from the date of acquisition of the status of a participant in a small industrial zone.
Incentives for oil and gas exploration and extraction companies
Foreign companies carrying out oil and gas exploration works, as well as their foreign contractors/subcontractors engaged in such works, are exempt from payment of all forms of taxes and contributions to non-budget funds during the exploration period. Additionally, import by these companies of equipment, material, and technical resources and services necessary for the exploration and related works is exempt from customs duties.
Resident corporations supplying materials and rendering services to foreign companies carrying out oil and gas exploration are exempt from VAT.
Furthermore, if foreign companies carrying out oil and gas exploration form joint venture companies for extraction of oil and gas at respective fields, such companies are granted a seven-year CIT holiday starting from the date of commencement of extraction.
Incentives for carrying out export activities
If the share of export sales in total revenue from sale of goods (works, services) exceeds 15% (excluding export of certain raw materials, such as natural gas, oil, precious metals, etc.), the taxable base for CIT and UTP calculation purposes is reduced, respectively, for the amount of taxable income related to export sales or for turnover from such export sales.
Exemptions from customs duties
There are certain exemptions from payment of customs duties offered by the legislation for the following, without limitation:
- Vehicles used for the international transportation of goods, luggage, and passengers.
- National currency of the Republic of Uzbekistan, foreign currency (excluding those for numismatic purposes), as well as securities.
- Goods imported as humanitarian aid.
- Goods imported for charitable purposes, including technical assistance.
- Goods under transit regime.
- Goods imported by legal entities at the expense of loans granted by international and foreign governmental financial organisations under international agreements, and at the expense of grants.
- Property imported for production needs by foreign investors and enterprises with foreign investment with foreign participation of not less than 33% within two years after state registration.
- Property imported for personal needs of foreign investors, citizens, or stateless persons residing in Uzbekistan in accordance with labour contracts concluded with foreign investors.
- Goods imported into the customs territory by foreign legal entities that made direct investments in the economy of the Republic of Uzbekistan for a total amount equivalent to or more than USD 50 million, provided that the imported goods are products of their own production.
- Goods intended for works under the production sharing agreement and imported under the project documentation by a foreign investor or other persons engaged in the performance of the production sharing agreement, as well as goods exported by the investor under the production sharing agreement.
- Technological equipment imported according to the list approved in accordance with legislation, as well as components and spare parts, provided that their supply is stipulated by the terms of the contract (agreement). In case of sale or gratuitous transfer of imported technological equipment for export within three years from importation, this exemption is revoked along with restoration of obligations to pay customs duties for the entire exemption period.
Foreign tax credit
In accordance with international tax treaties of the Republic of Uzbekistan, legal entities/residents of Uzbekistan can obtain tax relief in respect of CIT paid outside of Uzbekistan. Depending on the provisions of a particular DTT, a credit or exemption may be claimed. In order to claim tax relief, legal entities should provide a copy of the tax payment order, confirmation from a competent tax authority, or any other document confirming payment of the tax outside of Uzbekistan.