Corporate tax in Uzbekistan

Summary

Corporate Profits Tax Rate (%) 7.5 (a)
Capital Gains Tax Rate (%) 7.5 (a)
Permanent Establishment Tax Rate (%) 7.5 (a)
Branch Profits Tax Rate (Additional Tax) (%) 10 (b)
Withholding Tax (%) (c)
Dividends 10 (d)
Interest 10 (d)
Royalties, Service Fees and Capital Gains 20 (e)
Net Operating Losses (Years)
Carryback 0
Carryforward 5 (f)

a) This is the general corporate profits tax rate. See Section B for other rates.

b) This tax is imposed on the net profits of permanent establishments after deduction of the profits tax.

c) The withholding taxes are generally considered to be final taxes.

d) The withholding tax is imposed on payments to Uzbek companies and in­dividuals and to foreign companies without a permanent establishment in Uzbekistan.

e) The withholding tax is imposed on payments to foreign companies without a permanent establishment in Uzbekistan.

f) See Section C.

Taxes on corporate income and gains

Corporate profits tax. Most enterprises in Uzbekistan, including Uzbek companies with foreign participation, are subject to the general profits tax regime. Small businesses and retail and whole­sale trading companies are subject to different regimes. Foreign companies that are deemed by the tax authorities to have a per­manent establishment (PE) in Uzbekistan are taxable on profits derived from business activities of the PE in Uzbekistan (the tax­able profits of a PE should not be less than 10% of deductions). The definition of a PE in Uzbek legislation is somewhat similar to the definition of a PE in the model treaty of the Organisation for Eco nomic Co-operation and Development (OECD), with cer­tain exceptions. However, the legislation regarding the taxation and treatment of PEs in Uzbekistan is undeveloped.

Rates of corporate tax. The regular corporate profits tax rate is 7.5%. This rate also applies to Uzbek enterprises with foreign participation and to PEs of foreign companies. For commercial banks, the profits tax rate is 15%. A progressive scale of profits tax rates applies to mobile phone operators.

PEs are also subject to a 10% tax on their net profits after deduc­tion of the corporate profits tax.

Foreign legal entities without a PE in Uzbekistan are subject to with holding tax on income derived from their activities in Uzbek­istan. The following are the withholding tax rates.

Nature of payment Rate (%)
Dividends and interest 10
International communication and freight fees 6
Insurance premiums 10
Royalties, capital gains, rent and service
fees not connected with an Uzbek PE
20

Capital gains. Capital gains are generally included in taxable prof­its and are subject to tax at the regular corporate tax rate. Capital losses are generally deductible only if they are incurred on fixed assets used in production for at least three years. Capital gains derived by nonresidents from disposals of shares in Uzbek resi­dent legal entities or real estate located in Uzbekistan are subject to withholding tax at the general rate of 20%.

Administration. The tax year is the calendar year.

Tax declarations must be filed quarterly by the 25th day of the month following the reporting quarter and annually by 15 Febru­ary of the year following the tax year. Companies must file finan­cial statements together with the tax declarations. Companies with foreign participation and PEs of foreign companies must file the annual declaration by 25 March.

The final tax liability must be paid by the deadline for filing the tax declarations. Quarterly estimates of the tax payable must be made by the 10th day of the 1st month of the quarter. Tax install­ment payments based on the estimates are required to be made by the 10th day of each month. Companies generating profits of less than 200 minimum monthly wages per reporting quarter (approx­imately USD10,000) are subject to profits tax based on actual quarterly profits and are not required to pay installments of prof­its tax.

On written request, excess payments of tax must be refunded with­in a 30-day period or be offset against other tax liabilities. In prac­tice, it is difficult to obtain refunds of overpayments of tax.

Dividends. Dividends, including those paid to domestic enterpris­es, are subject to a withholding tax at a rate of 10%. Dividends receiv ed by a legal entity and reinvested into the charter capital of the payer of the dividends are exempt from tax (unless with­drawn or liquidated within a year after the exemption).

Foreign tax relief. Under the double tax treaties of Uzbekistan, a foreign tax credit is available for foreign tax paid on income earn­ed abroad (subject to certain documentary requirements).

Determination of trading income

General. Taxable profits are equal to the annual net profits dis­closed in the company’s Uzbek financial statements, as adjusted by the tax law. Financial statements must be prepared on an accru­al basis and be supported by documentation. The following are the most significant items that are not deductible for tax purposes:

  • Nonbusiness expenses
  • Entertainment, business travel and voluntary insurance expenses in excess of (low) statutory limits
  • Interest on overdue and deferred loans (in excess of normal loan interest rate)
  • Losses resulting from misappropriations of funds or assets
  • Audit expenses, if an annual audit was conducted more than once for the same period
  • Certain benefits to employees
  • Charitable donations
  • Litigation expenses
  • Penalties

Special deductions. Taxable profits may be reduced by certain spe cial deductions, including the following:

  • Amounts reinvested in main production in the form of new con­struction and reconstruction of buildings and facilities used for production needs and new technological equipment (less current depreciation) over a certain time period, subject to other condi­tions, up to 30% of taxable profits
  • Charitable donations of up to 2% of taxable profits

Provisions. Banks may deduct loan loss provisions within the lim­its established by the Central Bank of the Republic of Uzbekistan.

Tax depreciation. The following are the applicable depreciation rates in Uzbekistan.

Assets Rate (%)
Buildings and structures 5
Trains, ships, airplanes, pipelines, communication equipment and electric power lines and equipment 8
Production machinery and equipment 15
Cars, computers and office equipment 20
Perennial plants 10
All other assets 15

 

Intangible assets are amortized for tax purposes over the useful life of an asset, the life of the company or five years (if useful life cannot be determined), whichever is less.

Relief for losses. Tax losses can be carried forward for five years. However, the amount of losses carried forward that may be de – ducted each year is subject to a limit of 50% of taxable profits for the year. Losses incurred during a profits tax exemption period cannot be carried forward.

Groups of companies. The tax law does not allow the offsetting of profits and losses among members of a tax group.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate
Value-added tax (VAT), on the supply of all
goods and services, including imports, unless
they are zero-rated or exempt
20.00%
Excise tax; imposed on an extensive number of specified goods produced in Uzbekistan or imported into Uzbekistan; goods subject to tax include oil and gas products, alcohol,
tobacco, jewelry, silverware and cars
Various
Property tax; imposed on the annual average
depreciated value of tangible fixed assets
and certain other assets; land is exempt
5.00%
Infrastructure development tax; imposed on
net (after-tax) profits
8.00%
Subsurface use tax; imposed on the extraction
of natural resources; tax imposed on the sales
price of extracted natural resources and
components and on waste derived from the
extraction or processing of natural resources
Sales 2.6% to 30%
Waste 0.78% to 9%
Excess profits tax; imposed on the difference
between the actual net sales price and the
established threshold price for certain natural
resources and products
Various
Signing and commercial discovery bonuses
for subsurface users; payable to the state
budget through the tax authorities
Various
Road Use Fund contribution; imposed on
sales turnover, excluding VAT and excise
tax, and on purchases of motor vehicles
General rate on turnover 1.40%
Purchases of cars and other vehicles Various (minimum rate of 3% for new cars and other vehicles)
Water use tax; rates per cubic meter
Surface water UZS71.2
(approximately USD0.0253)
Underground water UZS90.4
(approximately USD0.0322)
Land tax; imposed at a fixed rate per
hectare, which varies depending on the
location, quality and purpose of the
land plot; rate in Zone 1 of Tashkent
UZS99,187,500
(approximately USD35,298)
Education and Healthcare Development
contribution; imposed on sales turnover,
excluding VAT and excise tax
0.50%
Social fund contributions
Pension Fund; paid by
Employers; imposed on sales, excluding VAT
and excise tax
1.60%
Employees (withheld from salaries of
local employees)
7.50%
Unified Social Payment; payable by employers
On the total payroll of small businesses 15.00%
On the total payroll of all other entities 25.00%
Contributions to individual accumulative pension accounts of citizens (maintained at Peoples Bank); payable by employers on salaries of local employees; amounts of the contributions are deducted from
the amounts of accrued individual income tax
1.00%

Foreign-exchange controls

The currency in Uzbekistan is the Uzbek som (UZS).

Uzbekistan imposes various foreign-exchange controls, including the following:

  • Restrictions on purchases of foreign currencies, which are sub­ject to the availability of foreign currencies in authorized banks
  • Mandatory sales of 50% of foreign-currency revenues of com­panies to their servicing banks (with some exceptions)
  • Mandatory exchange rates set weekly by the Central Bank of the Republic of Uzbekistan for accounting, reporting, tax and cus­toms duty calculations
  • Strict control over payments in foreign currencies to parties out­side Uzbekistan
  • Limitations on the circulation of foreign currencies in Uzbek­istan, and limitations on the domestic foreign currencies markets

Uzbek resident individuals may freely export up to the equiv alent of USD2,000 of foreign currency. Nonresident individuals may export any cash legally imported and supported by a customs declaration. These limits may be increased by amounts withdrawn from foreign-currency accounts in Uzbekistan if proper documen­tation is provided.

Treaty withholding tax rates

The following table lists the withholding rates under Uzbekistan’s tax treaties.

  Dividends (l) Interest (l) Royalties
Payee resident in % % %
Austria 5/15 (a) 10 5
Azerbaijan 10 10 10
Bahrain 8 8 8
Belarus 15 (l) 10 15
Belgium 5/15 (a) 10 5
Bulgaria 10 10 10
Canada 5/15 (a) 10 5/10 (e)
China 10 10 10
Czech Republic 5/10 (b) 5 10
Estonia 5/10 (b) 5 10
Finland 5/15 (a) 5 0/5/10 (f)
France 5/10 (a) 0/5 (d) 0

 

   
Georgia 5/15 (b) 10 10
Germany 5/15 (b) 5 3/5 (g)
Greece 8 10 8
Hungary 10 10 10
India 10 10 10
Indonesia 10 10 10
Iran 8 10 5
Ireland 5/10 (a) 5 5
Israel 10 10 5/10 (h)
Italy 10 5 5
Japan (k) 15 (l) 10 0/10 (i)
Jordan 7/10 (b) 10 20
Kazakhstan 10 10 10
Korea (South) 5/15 (b) 5 2/5 (j)
Kuwait 5/10 (b) 8 20
Kyrgyzstan 5 5 15
Latvia 10 10 10
Lithuania 10 10 10
Luxembourg 5/15 (b) 10 5
Malaysia 10 10 10
Moldova 5/15 (a) 10 15
Netherlands 5/15 (b) 10 10
Oman 7 7 10
Pakistan 10 10 15
Poland 5/15 (c) 10 10
Romania 10 10 10
Russian Federation 10 10 0
Saudi Arabia 7 7 10
Singapore 5 5 8
Slovak Republic 10 10 10
Slovenia 8 8 10
Spain 5/10 (b) 5 5
Switzerland 5/15 (c) 0/5 (d) 5
Thailand 10 10/15 (l) 15
Turkey 10 10 10
Turkmenistan 10 10 10
Ukraine 10 10 10
United Arab Emirates 5/15 (b) 10 10
United Kingdom 5/10 (a) 5 5
Vietnam 15 (l) 10 15
Non-treaty countries 10 10 20

 

a) The lower rate applies if the beneficial owner of the dividends is a company that owns at least 10% of the payer of the dividends.

b) The lower rate applies if the beneficial owner of the dividends is a company that owns at least 25% of the payer of the dividends.

c) The lower rate applies if the beneficial owner of the dividends is a company that owns at least 20% of the payer of the dividends.

d) The 0% rate applies to interest with respect to the following:

  • Loans made, guaranteed or insured by the government of the other con­tracting state or an instrumentality or agency thereof
  • Sales on credit of industrial, commercial or scientific equipment
  • Sales on credit of merchandise between enterprises
  • Bank loans

e) The 5% rate applies to royalties paid for certain cultural works (with excep­tions) as well as for the use of, or the right to use, computer software or patents or for information concerning industrial, commercial or scientific experience (know-how), with exceptions.

f) The 0% rate applies to royalties for the use of, or the right to use, computer software, patents, designs or models, or plans. The 5% rate applies to royalties paid for the use of, or the right to use, secret formulas or processes, or for information concerning industrial, commercial or scientific experience (know-how). The 10% rate applies to royalties paid for trademarks or certain cultural works.

g) The 3% rate applies to royalties paid for the use of, or the right to use, copy­rights of scientific works, patents, trademarks, designs or models, plans, or secret formulas or processes, as well as for the disclosure of industrial, com­mercial, or scientific knowledge. The 5% rate applies to royalties paid for certain cultural works.

h) The 5% rate applies to royalties paid for certain cultural works (with excep­tions).

i) The 0% rate applies to royalties paid for the use of, or the right to use, copy­rights of literary, artistic or scientific works, including motion picture films.

j) The 2% rate applies to royalties for the use of, or the right to use, industrial, commercial, or scientific equipment.

k) These are the withholding tax rates under the USSR-Japan treaty, which is honored by Uzbekistan.

l) The domestic withholding tax rate for dividends and interest in Uzbekistan is 10%. Consequently, the withholding tax rate of 15% for dividends and inter­est under treaties does not apply to payments made by Uzbek companies.