Uzbekistan, Republic of

The Tax Code introduced that, generally, tax incentives can be provided by the Tax Code only.

However, benefits for certain taxes, except VAT, excise tax, and tax for subsoil use, can be provided by the President of Uzbekistan, but only in the form of reduction of the established tax rate and not by more than for 50% and not for the period of more than three years.

Tax incentives in free economic zones

The free economic zones of Navoi, Urgut, Gijduvan, Kokand, Termez, Namangan, Sirdaryo, Bukhoro-agro, Khazarasp, and Andijan; 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; the free touristic zone of Charvak; and the special industrial hub of mechanical and electrical engineering in the region of Andijan are exempt from:

• land tax, property tax (for legal entities), and water usage tax
• customs payments (except for VAT and customs processing fee) for construction materials not produced in Uzbekistan and imported for implementation of projects as per the investment agreement for the period of construction
• customs payments (except customs processing fee) at importation of technological equipment not produced in Uzbekistan, as per approved list, and
• customs payments (except customs processing fee) at importation of raw materials, and materials and components used in production of goods intended for export.

By virtue of the Law of the Republic of Uzbekistan of 12 July 2022, amendments have been introduced to the Tax Code of Uzbekistan. Specifically, participants of special economic zones are exempt from payment of CIT for specific periods depending on the amount of their investment:

Participants of special economic zones are also entitled to deferred payment of VAT on import of goods for a period of up to 120 days.

Tax incentives in certain zones 

Effective from 14 September 2021, certain territories of the Fergana region have been selected as territories with a special tax regime: Sokh district, Chungar mahalla of Rishtan district, as well as Shakhimardan mahalla, Yordan, and st. Tashtepa - two mahallas of Khosilot of Fergana region. The tax rates for CIT, PIT, ST, and turnover tax is set at 1% in these territories.

In addition, a coefficient of 0.1 is applied to the tax rates for property tax, land tax, and tax for the use of water resources in relation to immovable property and land plots located in separate territories, as well as water resources used in these territories.

Tax incentives for foreign direct investments

As per the Tax Code, enterprises attracting direct foreign investments may be exempt from payment of property tax, land tax, and water usage tax, subject to certain criteria, including share of foreign participation, type of activity (as per the pre-approved list), location of the enterprise, etc.

Entities attracting foreign direct investments are granted tax exemptions for specific periods, which vary depending on investment amount.

The above tax incentives are granted if the following conditions are met (without limitation):

• Enterprises shall be specialised in production of goods or provision of services/works in certain industries as per approved list.
• The enterprises are located in any city or rural area settlement of Uzbekistan, except for Tashkent region and Tashkent city (exception is provided to companies providing travel services and waste management services).
• Republic of Uzbekistan does not provide sovereign guarantees for such foreign investment.
• Share of foreign capital of enterprises should not be less than 33%.
• Investment should be made in hard currency or new/modern technological equipment.
• At least 50% of the respective tax savings should be reinvested for further development of enterprises.

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:

• Income tax (except for interest received from funds placed in commercial banks), property tax, land tax, and water usage tax for the period of exploration work.
• Customs payments (except for VAT and customs clearance fees) when importing equipment, material, and technical resources and services necessary for the exploration and related work.

Exemption of VAT when importing equipment, material, and technical resources and services necessary for the exploration and related works was abolished from 1 October 2020.

Resident corporations supplying materials and rendering services to foreign companies carrying out oil and gas exploration are not exempt from VAT as of 1 October 2020.

Moreover, the seven-year CIT holiday envisaged for oil and gas production joint ventures was also abolished from 1 October 2020.

Incentives for the electrical and agricultural engineering industry

Companies in the electrical industry are granted tax benefits for the period from 1 January 2024 to 1 January 2027 in the form of a 50% reduction in income tax and property tax rates. These benefits can be used by entities where the amount of revenue from the sale of electrical products at the end of the reporting period is at least 80% of the total revenue.

Until 1 January 2027, the rates of the CIT and property tax for enterprises of the electrical industry are reduced by 50%.

Incentives for carrying out export activities

The CIT rate applicable to income from export sales is set at 0%. From 1 January 2023, the requirement to have 15% of the aggregate income from export operations to apply 0% CIT on export income has been abolished. Furthermore, for exporters, an accelerated seven-days VAT refund process is introduced.

From 1 April 2021, 50% of the expenses of domestic exporters related to the opening and maintenance of trading houses, office rent, retail and warehouse premises, and advertising campaigns will be compensated at the expense of the Export Promotion Agency under the Ministry of Investment and Foreign Trade.

From 1 June 2021, participants in foreign economic activity engaged in the import of goods for more than three years, who have fulfilled their obligations under customs payments, but due to their financial situation are not able to pay in due time, are granted the right to pay customs payments in instalments. At the same time, the amount of taxes or customs payments paid in instalments should not exceed 50% of the total amount of taxes paid in the last three years.

Incentives for the textile industry

From 1 February 2022 to 1 January 2025, textile and knitwear enterprise exporters (earning at least 80% of revenue from foreign supplies) receive the following tax benefits:

• ST rate: 1%.
• Deferral of debt repayment on property tax of up to three years, with subsequent payment in instalments.

Textile enterprises should now pay VAT at importation of cotton, artificial and synthetic fibres, wool, raw materials, etc. At the same time, exemption from other customs payments (excise tax and customs duty) at importation of the above goods remains effective and extended to all textile enterprises (previously, limited to the members of 'Uztextilprom' association).

Incentives for leather and fur production

For the period between 1 January 2023 and 1 January 2026, taxpayers engaged in the procurement, storage, and processing of leather, fur, and wool raw materials, automated slaughter of livestock, and production of wool products, astrakhan and artificial leather, leather goods, and shoes are exempt from turnover tax, CIT, and property tax. For utilisation of the incentive, the annual revenue from the above-mentioned activities should comprise 60% or 80% (depending on activity) of the total annual revenue. Subject to separate conditions, land tax exemption and reduced ST rate may apply.

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.
• Items of material and technical supply and equipment, fuel, food, and other property exported outside the customs territory to support the activities of the vessels of the Republic of Uzbekistan and vessels rented (chartered) by legal entities and individuals of the Republic of Uzbekistan engaged in marine fishing, as well as their products, imported into the customs territory.
• Goods subject to revenue of the state.
• 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 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.
• Equipment for the system of operational investigative measures purchased by telecommunications operators and a special certification body for technical means of operational search measures systems, subject to a written confirmation by an authorised state body.
• 50% of the established customs duty rate on special sports uniforms, shoes, sports inventory, equipment, and furniture imported from abroad by state and non-state sports and educational organisations for their own needs, not produced in the Republic of Uzbekistan, according to the list formed in accordance with the established procedure by the Ministry of Youth Policy and Sports of the Republic of Uzbekistan on the basis of proposals of the National Olympic Committee of Uzbekistan, the National Paralympic Committee of Uzbekistan, and federations (associations) for Olympic and Paralympic sports.
• Waste generated during the processing of goods placed under the customs regime of release for free circulation (import).

Starting from 1 October 2021, legal entities are exempt from customs duties on import of natural gas to Uzbekistan.

Starting from 1 January 2022, legal entities carrying out geological exploration works, as well as their contractors and subcontractors, are exempt from:

• periodic customs payments on temporary importation of special exploration equipment for the period of prospecting, exploration, and development of deposits, and
• customs duty on importation of equipment, material, and technical resources, as well as special equipment not produced in Uzbekistan and required for carrying out prospecting, exploration, and development works (as per an approved list).

Exemption from customs payments provided earlier by the Presidential Decree to foreign entities engaged in exploration works is extended to local entities involved in exploration works.

Certain types of commodities are to enjoy zero rate customs duty until 1 January 2025. The list includes certain types of plants, raw materials for textile industry, tyres, etc.

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.