Review of the changes in the taxes and other budget payments

The Law of the Republic of Uzbekistan No. LRU-1014 dated 24 December 2024 “On amendments and additions to certain legislative acts of the Republic of Uzbekistan in connection with the adoption of the main directions of tax and budget policy for 2025” was adopted, which makes significant changes to tax and budgetary legislation in order to implement the main directions of tax and budgetary policy for 2025 [https://lex.uz/ru/docs/7279959], introducing significant amendments to tax and budget legislation in order to implement the main directions of tax and budget policy for 2025. Leges Advokat Team has prepared a legal review of this law.

1. Updates in tax policy: VAT and

excise tax

• Vacant non-agricultural land plots:

• Turnover on the sale of government property, including vacant non-agricultural land on the basis of ownership, is exempt from value added tax (VAT). This means that VAT is not levied on the sale, that is, on the transfer of such land plots on a reimbursable basis, exchange or gift.

• Passenger transport services at unified tariffs:

• Passenger transportation services at unified tariffs, except for taxis (including route taxis), will become subject to VAT taxation. This change will lead to the mandatory accounting and payment of VAT when such services are provided.

• Exemption of mobile communication services from excise tax:
• Mobile communication services are no longer subject to excise tax. Previously, these services were considered taxable under the excise tax, along with the activities of foreign legal entities operating in the Republic of Uzbekistan through permanent establishments, producing or importing excisable goods.

2. Changes in land tax

• Cancellation of the double land tax for agricultural land in cities and towns:

• The procedure for calculating the land tax at double the rate for agricultural land located within the administrative boundaries of cities and towns is abolished. This reduction in the tax burden contributes to improving conditions for the agricultural sector.

3. Changes in personal income taxes

• Taxes for foreign teachers:

• Foreign teachers and specialists working in non-state pre-school and general secondary educational institutions are exempt from paying personal income tax until January 1, 2030.

4. Changes in taxes on foreign trade and customs operations

• Customs documents and simplification of procedures:

• Cargo customs declarations are now considered the basis for exporting goods from the customs territory of the Republic of Uzbekistan.
• Shipping documents bearing a mark of the customs authority at the border crossing point will now be confirmation of crossing the customs border by vehicles loaded with goods.
• Taxpayers are relieved of the obligation to submit shipping documents with a customs mark to the tax authorities. Instead, such data is transmitted by customs authorities to the tax authorities through real-time electronic exchange.

5. Tax incentives and stimulating measures in the field of innovation and technology

• Exemption from income tax for publishing activities:

• For the period from 1 January 2025 to 1 January 2029, entities whose income from publishing and printing activities accounts for at least 90% of their total income are exempt from income tax, except for income from interest.

• Exemption from tax on profit for IT service exports:

• For the period from 1 February 2025 to 1 January 2030, non-resident legal entities whose information technology export services exceed US$10 million are exempt from tax on profit on income derived from providing services to residents of the Software and Information Technology Park.

• Tax incentives for residents of the Technology Park:

• For the period from 1 January 2028 to 1 January 2040, residents of the Technology Park are exempt from all taxes except VAT.

6. Tax exemptions and incentive measures in the area of social policy and sustainable development

• Social tax for employees of individual entrepreneurs (IEs):

• The social tax rate for individuals working for individual entrepreneurs is being reduced. Previously, the rate was set at 50% of the basic calculation value, regardless of the number of working days. Now this tax will be calculated according to a new, more flexible formula.

• Exemption from social tax for employers:

• Business entities that hire foreign teachers and specialists are exempt from paying social tax on the labor costs for these employees until January 1, 2030.

• Incentives for entrepreneurs hiring students:

• Business entities that employ students from schools, colleges, and technical schools (under 30 years old) for vocational training, pay social tax at a rate of 1% on the income paid to them as wages.
• Students from schools, colleges, and technical schools undergoing vocational training, on the income they receive from business entities as wages, pay personal income tax at a rate of 1%.

• Exemption from taxes for youth organizing mobile trade:

• Until January 1, 2028, young people who organize mobile trade objects (facilities) along highways are exempt from paying taxes on income derived from the sale of goods for the first six months.

• Social privileges for low-income families:

• From January 1, 2025, to January 1, 2028, business entities that employ members of low-income families with a salary of at least 1.5 minimum wage rates will pay social tax at a rate of 1%.

7. Incentives for renewable energy sources

• Privileges for producers of electricity from renewable energy sources:

• Profit derived from the sale of electricity to the public grid using renewable energy systems with a capacity of up to 100 kW is now exempt from tax on profit and is taxed at a rate of 0%.

• Renewable energy sources:

• Installations with a capacity of up to 100 kW are exempt from property tax (for legal entities) for up to three years from the date of commissioning. However, if solar panels are installed with an energy storage system with a capacity of at least 25% of the panel's capacity, the exemption is granted for 10 years.
• Installations with a capacity of 100 kW or more are exempt from property tax for up to 10 years from the date of commissioning.

8. Cancellation of some tax incentives and increase in tax rates

• Cancellation of tax on profit and turnover tax incentives for exporters:

• Tax incentives for tax on profit and turnover tax, which were previously provided to support income from the sale of goods (services) for export, have been cancelled. Now, taxpayers engaged in export activities are required to pay tax on profit and turnover tax at the regular rates, without additional incentives.

• Increase in profit tax rate for electronic commerce:

• Taxpayers engaged in electronic commerce of goods, works, or services are now required to pay tax on profit at a rate of 10% instead of the previous 7.5%. This change affects all online marketplaces operating in Uzbekistan.

• Increase in the minimum tax base for the registration of immovable property:

• The minimum tax base for registering buildings and structures with the authorities responsible for state registration of property rights has been increased:
  • For the city of Tashkent, the minimum base is 3.3 million UZS (previously it was 3 million).
  • For the city of Nukus and regional centres, the minimum base is 2.2 million UZS (previously it was 2 million).
  • For other cities and rural areas, the minimum base is 1.3 million UZS (previously it was 1.2 million).

• Land tax for agricultural land:

• The base tax rates for non-agricultural land have been increased, now ranging from 39.6 million sums per hectare in the Khorezm region to 298.1 million sums in the Tashkent city zone.

• Tobacco and alcoholic products: