Uzbekistan, Republic of
New legislation provides the opportunity to form a consolidated group of taxpayers, which may comprise of two or more Uzbek legal entities. The taxpayers should meet the ‘ownership’ criteria, i.e. participation share of one legal entity in the charter capital of other legal entity(ies) should comprise at least 90%. However, legal entities should not be undergoing liquidation or bankruptcy processes, and their net assets should be higher than the charter capital.
Moreover, all legal entities forming a consolidated group of taxpayers shall satisfy other criteria related to turnover, taxes paid, and assets value. The advantages of applying this regime may include, without limitation, ability of filing one set of reports for the group and offsetting profits of one group company against losses of another group company.
The legislation of consolidated groups of taxpayers is enforced from 1 January 2022.
The Tax Code introduces elaborate transfer pricing provisions, including definition of related parties, controlled transactions, pricing methods, documentation and reporting requirements, pricing agreements, etc. There are five methods of transfer pricing, similar to those used in the international transfer pricing practise (i.e. based on the Organisation for Economic Co-operation and Development [OECD] Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations) to analyse the arm’s-length nature of the controlled transactions.
Taxpayers qualified as ‘large taxpayers’ are eligible to apply to tax authorities for an ‘advance pricing agreement’ (APA). APAs may be valid for the period of up to three years and may be extended for an additional two years upon taxpayer’s request.
Transfer pricing rules have been enforced as of 1 January 2022.
The Tax Code introduced regulations on deductibility of taxpayer's interest expense on controllable debt from a foreign participant. Controllable liability is defined as liability owed to a:
- foreign legal entity or individual that is not considered as Uzbek tax resident with a direct/indirect ownership of 25% of shares in the charter capital of the taxpayer
- other related entity of this foreign participant, or
- other persons for which the above-mentioned persons act as guarantors or otherwise undertake responsibility to ensure the repayment of this taxpayer's debt.
The deductibility limitations apply if the amount of debt exceeds the amount of equity by 3 times (13 times for banks and leasing companies). There is a specific mechanism for determining the deductibility limits.
Controlled foreign companies (CFCs)
Generally, CFC rules are applicable to individuals and legal entities, Uzbekistan tax residents, owning or controlling foreign legal entities and/or structures. The main purpose of the new CFC rules is to tax undistributed profits of foreign companies and structures like trusts, foundations, etc.
Rules of CFCs are enforced from 1 January 2022.