Incentives for investors in Uzbekistan

To conduct business in the Republic of Uzbekistan, an investor needs to create a business entity. Business entities with the participation of foreign capital may be created in any organizational and legal form that is not prohibited by the legislation of the Republic of Uzbekistan.

In particular, they can be created in the form of a business partnership (full and limited partnership), limited liability and additional liability company, joint-stock company, subsidiary, unitary enterprise, and other forms not prohibited by law.

The company with foreign investment (CFI) can be created in the following ways:

• Setting up a new company
• Acquisition of participation shares in the existing company without foreign investment
• The acquisition by the foreign investor of the entire enterprise, including during the privatization process.

Most often, business entities with foreign investment are either foreign enterprise (FE) or as a joint venture (JV) in the form of a limited liability company.

Since 2017 the applicants are enabled to reserve the names of their company through the Unified State Register of Entrepreneurships (fo.birdarcha.uz). By using this system, one may register their business online at a distance or by confrontation with the Public Service Centers (PSC). Provided that all the necessary documentation has been prepared beforehand, a full registration process takes no more than 30 minutes.

After registration of a new business entity, Electronic Digital Signature (EDS) is issued for the fulfillment of tax obligations in a distance and the use of public services through the Unified Portal of Interactive Public Services (UPIPS).

Next, we have collected the most important tax and customs exemptions for a CFI under Uzbek legislation:

Tax exemptions.

1. If the subsequent legislation of the Republic of Uzbekistan worsens the conditions of investment, a foreign investor (shareholder) of a newly created CFI may apply the legislation in force on the date of investment within 10 years from the date of investment. Such exemptions can be applied in two cases: 

• When investing in the amount of at least 5 million US dollars, as indicated in paragraph 2 of the Decree of the President of the Republic of Uzbekistan dated April 10, 2012, No. UP-4434        
• Under Article 19 of the Law of the Republic of Uzbekistan dated December 25, 2019, No. ЗРУ-598

If the investor wishes to apply the above guarantee, he/she must notify in writing:

• the State Tax Committee of the Republic of Uzbekistan in case of the increase of income tax rate received in the form of dividends paid to a foreign investor;
• PSC in case of administration and quantitative restrictions on the amount of investment and other additional requirements on the size of investments;
• the Ministry of Foreign Affairs and the Ministry of the Interior in case of introduction of additional procedures for issuing and extending visas of foreign investors;
• the Ministry of Investment and Foreign Trade of the Republic of Uzbekistan, in case of existence of an investment agreement that provides a foreign investor with guarantees and support measures additional to those established by law, according to the investment conditions specified in the investment agreement;
• serving banks in case of implementation of additional requirements that complicate the repatriation procedure or reduce the amount of income (profit) of a foreign investor transferred abroad, except as provided by law.

2. In case of a change in tax policies, the FCIs with an investment equal to at least 5 million US dollars within 10 years from the moment of their state registration may apply the rules and regulations for payment of following taxes that were valid on the date of their state registration.:

• corporate income tax
• value-added tax (turnover on the sale of goods, works, services),
• property tax
• social tax,
• a single tax.

3. Also, in newly created FCIs may apply for five years the tax rates and other obligatory payments (except for resource and customs payments), which were valid on the date of their state registration.
4. FCIs producing goods (rendering of services) in the sectors of the economy according to the List shall be exempt from payment of:

• corporate income tax;
• property tax;
• single tax.

The validity of these benefits depends on the amount of investment and varies from 3 to 7 years and can be applied if the following conditions are met:

• the company should be located in any city and rural settlements of Uzbekistan, except Tashkent and the Tashkent region. This territorial restriction does not apply to enterprises working at the tourism and waste management sectors of business;
• foreign investors making direct investments without acquiring state guarantees;
• the share of CFI participants in the authorized capital of an enterprise should be at least 15 percent;
• the investment should be made in freely convertible currency or new modern technological equipment;
• sending at least 50 percent of the income received as a result of the provision of these benefits during the period of their application to reinvestment into the development of the enterprise.

5. The following are exempted from payment of value-added tax (VAT):

• import of technological equipment, analogs of which are not produced in the Republic of Uzbekistan, imported into the territory of the Republic of Uzbekistan according to the approved List ;
• the property imported as investment obligations under an agreement concluded between an investor and an authorized state body for managing state property.

Customs exemptions.

The following are exempted from customs payments:

• assets of CFIs imported for their production purposes for two years from the moment of their state registration;
• properties, imported into the territory of Uzbekistan for the personal needs of the investors residing in the Republic of Uzbekistan under the employment contracts concluded with them;
• goods of CFI that made direct investments in the economy of the Republic of Uzbekistan for a total amount of more than fifty million US dollars provided that the imported goods are products of their production;
• goods used for works under a production sharing agreement and imported into the customs territory per the project documentation by a foreign investor or other persons participating in the work under a production sharing agreement, as well as products exported from the customs territory by the investor belonging to him under production sharing agreement;
• technological equipment imported into the Republic of Uzbekistan, according to the List approved by the legislation, as well as components and spare parts, provided that they are included in the terms of the contract for the supply of technological equipment. In case of sale or gratuitous transfer of imported technological equipment for export within three years from the moment of its importation, this exemption is canceled with the restoration of obligations to pay customs duty for the entire period of application of the exemption.

Additionally, the supply agreement on the importing goods may include that the property is imported as a contribution to the authorized capital of CFIs. Supply agreement may also include terms for the subsequent signing of the agreement on offsetting the arrears: for the equipment supplied as contributions to the authorized capital.

CFIs, carrying out prospecting and exploration work, as well as foreign contracting and sub-contracting organizations employed by them, are exempted from payment of:

• all types of taxes and mandatory contributions to state trust funds for the period of exploration;
• customs payments (except for customs clearance fees) when importing equipment, material, and technical resources and services necessary for prospecting, exploration, and other related work.

CFIs, along with tax and customs exemptions and incentives, may rely on the application of all types of tax and customs exemptions provided for business entities of the Republic of Uzbekistan, in particular, in the production of export-oriented and import-substituting products, production of consumer goods of high demand, the export of goods (works, services), transfer of property as investment obligations, etc.