Currency Regulation in Uzbekistan

I. General information on currency regulation.

The Law “On foreign currency regulation” No. 573 dated 22 October 2019 [https://lex.uz/ru/docs/4562846] (hereinafter – the Law “On currency regulation”) divides foreign currency operations into domestic and international (cross-border) operations. International operations are further divided into current international operations and capital movement operations.

Current international operations include:

• all payments due in connection with foreign trade, and other current activities, including services (works);
• payments in the form of interest and other income, including bank deposits, loans, leasing, and net income from other investments;
• payment during the period of repayment of the credit (loan) in an amount less than double the amount of the part of the debt received, calculated as the ratio of the debt to the number of periods of its repayment, specified in the contract;
• non-trade transfers.

Current international transactions and related exchange of foreign currency are carried out without restrictions.

Capital movement operations include:

• investment activities, including the replenishment of its branches abroad by residents with working capital;
• receiving and granting loans, leasing operations;
• buying and selling real estate;
• attracting funds from foreign countries as well as transferring funds abroad;
• acquisition or sale of the exclusive right to intellectual property in its entirety.

A. Settlements and payments on the territory of Uzbekistan.

All settlements and payments for goods in the territory of Uzbekistan must be made in the national currency. It is prohibited to bind prices for goods sold in the territory of Uzbekistan to foreign currencies and conventional units. However, in exceptional cases, the linking of prices for goods sold to foreign currency and conventional units on the territory of Uzbekistan is allowed. Namely, in cases of projects carried out with the participation of foreign investment, attracted under public-private partnership agreements and investment agreements with the Government of Uzbekistan, based on decisions of the President of Uzbekistan.

Transactions in foreign currency between residents can be carried out in cases of:

• transactions related to settlements in duty-free stores, as well as settlements in the sale of goods and services to passengers en route vehicles in international transportation;
• operations between commission agents and commissioners in the provision of services by commission agents related to the conclusion and execution of contracts with non-residents for the transfer of goods, works, services, transfer of information and results of intellectual activity and exclusive rights to them, including operations on the return of money amounts to the commissioners;
• transactions providing for settlements and transfers of funds in foreign currency from abroad from the sale of forwarding services to the account of forwarding companies based on concluded contracts;
• operations on payment and reimbursement of expenses of individuals related to legal trips outside the territory of Uzbekistan, as well as operations on repayment of unspent advance payment issued in connection with legal trips;
• transactions providing for settlements and transfers of funds to diplomatic missions, consular offices of Uzbekistan, as well as permanent missions of Uzbekistan to interstate or intergovernmental organizations;
• transfers on non-trade operations of funds by individuals-residents from accounts opened in banks of Uzbekistan in favor of other individuals-residents to their accounts opened in banks of Uzbekistan;
• transactions connected with settlements between transport organizations and individuals located outside the territory of Uzbekistan, as well as branches, representative offices and other subdivisions of legal entities under passenger transportation contracts;
• transactions between commission agents and commission agents when commission agents provide services connected with the conclusion and fulfillment of contracts, obligations on which are subject to fulfillment according to the results of clearing, in case if final buyer or seller is a non-resident
• transactions related to the use of currency valuables as collateral for the fulfillment of the obligation, as well as for their recovery
• transactions related to depositing and returning currency valuables to the authorized fund of legal entities;
• transactions related to the fulfillment of the banking services;
• transactions related to charity;
• operations related to obtaining currency valuables by right of succession.

Currency transactions between residents not stipulated above are prohibited.

Non-residents have the right to make transfers between themselves related to current international operations, from accounts in foreign banks to bank accounts in national banks and reversed.

B. Exchange of foreign currency for legal entities.

To exchange a foreign currency, a legal entity should fill out an application with the following information:

• name of the client;
• type of the currency and amount;
• the rate of purchase or sale.

When purchasing a foreign currency, the applicant is required to provide  additional information:

• purpose of buying foreign currency;
• documents certifying foreign exchange transactions.

Such an application can be filed either in person at the bank itself, or electronically via a remote service system.

In the following cases, banks are also entitled to request additional documents:

• when servicing loans and leases in foreign currency;
• when buying foreign currency to repatriate profits, dividends and other income of foreign investors.

The bank considers the application within one working day after the day of acceptance. If the application is approved, the purchased foreign currency shall be transferred to the client’s name on a special account opened by the bank. Funds credited to special currency accounts can be spent only for the purposes specified in the application.

However, if the purchased currency funds will not be used within 7 working days from the date of crediting, they must be sold again to the commercial bank on the 8^th working day. Foreign currency previously withdrawn and unused, as well as returned for other reasons, must also be resold to commercial banks within 3 working days or re-transferred for the purposes specified in the order. In such a case, the resale of foreign currency may not be carried out at the exchange rate of the currency exchange on the day of sale.

II. Opening bank accounts outside Uzbekistan by residents.

Resident individuals have the right to open accounts and deposits in foreign currency in banks of Uzbekistan and abroad. On the other hand, legal entities are allowed to open and use accounts outside the territory of Uzbekistan only in the presence of decisions of the President of the Government of Uzbekistan or international treaties of Uzbekistan, which provide for the opening and purpose of user accounts in the national or foreign currency in banks abroad. After opening accounts outside the territory of Uzbekistan, legal entities shall notify the tax authorities at the place of registration, as well as the Central Bank about opening accounts and changes in account details, as well as about the balances and turnovers on these accounts quarterly, not later than one month after the end of the reporting quarter in the manner prescribed by the Central Bank.

The procedure involving opening overseas accounts by resident legal entities requires applicants to provide the following documents to Central Bank:

• an application;
• copies of decisions of the President of the Government of Uzbekistan or international treaties of Uzbekistan, which provide for the opening and purpose of user accounts in the national or foreign currency in banks abroad.

Herewith, under Article 20 of the Law “On currency regulation”, banks of the Republic of Uzbekistan are entitled to have correspondent or other types of accounts in the banks inside of Uzbekistan and the foreign banks and to carry out operations on purchase and sale of foreign currency, including currency derivatives, directly connected between each other, with their clients, as well as through currency exchanges and on global markets.  

A. Restrictions for opening bank accounts for non-resident legal entities.

Residents have the right to transfer foreign currency without restrictions from their accounts in national or foreign banks to their accounts in banks of the Republic of Uzbekistan.

However, to open and use bank accounts by non-resident legal entities in Uzbekistan, the mandatory requirement is to conduct activities on the territory of Uzbekistan. This can be done by opening a permanent establishment. Non-resident legal entities can also acquire bank accounts when they participate in open electronic trading of commodity exchanges or conduct the purchase/sale of shares of companies at organized tenders.

B. Bank accounts opened in banks of Uzbekistan in national and foreign currency.

To open demand deposit accounts in national currency, legal entities will be required to provide the following documents to the bank:

• an application to open an account;
• two papers of the signed form provided in Annex 3 of the Resolution;
• identity card of a signer.

The same procedure applies to representative offices and branches of legal entities, while also requires additional application of legal entity (with TIN provided) and a document confirming the authority granted to the representative office or branch.

To open a temporary account in foreign or national currency for the initial contributions of the founders, the authorized representative shall send an application to the bank. After state registration, the legal entity opens a main account to which the funds in the temporary account are credited.

The list of documents to open a deposit account for a non-resident legal entity consists of:

• an application to open an account;
• copy of the TIN certificate;
• two papers of the signed form provided in Annex 4 of the Resolution;
• document certifying the identity of the person authorized to sign monetary documents;
• constituent documents of non-resident legal entities.

Additionally, brokers will be required to provide a copy of the brokerage services agreement between a non-resident legal entity participating in open electronic trading of the commodity exchange and the exchange broker or between foreign investors, non-resident legal entities and investment intermediaries selling/buying shares at the organizational auction.

For the resident and non-resident individuals to open a deposit account, they have to provide an application to open an account and an ID card. An application must be submitted by individuals in person. As an exception, resident individuals can open other bank accounts with the same bank through the bank's remote service systems.

An account on the basis of the credit agreement should be created no later than the next business day in accordance with the order of the accountant of the bank.

Finally, for establishing a correspondent account, the commercial bank should provide:

• an application to open an account;
• copy of the certificate of taxpayer identification number;
• copy of the license issued by the Central Bank of the Republic of Uzbekistan for banking operations;
• specimen signatures and a stamp sheet.

For the same procedure, non-resident banks should provide:

• application for account opening, indicating the full name of the non-resident bank and its registered address in the country of registration;
• specimen signatures, stamp sheet and a legalized copy of the license issued by the country's Central Bank.
• information on the application of international standards in the field of combating money laundering, financing of terrorism and proliferation of mass destruction weapons.

III. Funds raised from abroad.

The Law “On external borrowings” No. 263-I dated 29 August 1996 [https://lex.uz/docs/40308] mandates some ways of raising funds from abroad:

• the attraction of funds by the state or legal entities and individuals who are residents of Uzbekistan in the form of loans, import of goods or services;
• the attraction of funds of non-residents to deposits by financial institutions of Uzbekistan;
• leasing operations;
• issuance of bonds, bills of exchange and other securities by the Cabinet of Ministers of Uzbekistan and residents and their placement in foreign markets;
• use of other types and forms.

Under clause 6¹ of the Regulation “On the Procedure for Conducting Certain Currency Transactions” approved by the Resolution of the Board of the Central Bank of the Republic of Uzbekistan No. 2536 dated 17 December 2013 [https://lex.uz/docs/2296324] (hereinafter – the “Regulation”) the following operations can be carried subject to the approval of the President of Uzbekistan, the Cabinet of Ministers or norms set out in the international treaty of the Republic of Uzbekistan:

• foreign investment activity carried out by Uzbek residents in the sum exceeding $10.000, i.e. transfer of sums abroad from local accounts for the formation of the charter capital of foreign enterprises (or share participation), as well as for replenishment of their foreign branches;
• advancing loans (the form of goods/services) and leasing by residents to non-residents of Uzbekistan;
• transfer of funds of residents from local accounts to accounts (deposits) abroad, as well as the purchase of the real estate.

Contracts on the attraction of foreign funds not guaranteed by Uzbekistan are subject to registration in the Central Bank of Uzbekistan for accounting of external debt.

The attraction of foreign direct investment to Uzbekistan and its repatriation, as well as the realization of rights acquired in connection with them, are carried out without restrictions.

To conduct a transaction with capital movement, the resident provides its servicing bank:

1. an application in accordance with Annex 1 of the Regulation.
2. copies of the document providing for the foreign currency transaction. The text of the document must be in the Uzbek or Russian language. In case the document is drawn up in another language, it must be legalized or have an apostille in the established order, with a notary certified translation into Uzbek or Russian language.

The borrower must:

• fulfill the obligations arising from the contracts concluded by it;
• submit to the Central Bank of Uzbekistan reports on contracts on attracting funds from abroad and operations on them, as well as to the Ministry of Finance of Uzbekistan on guaranteed loans;
• notify the Central Bank of Uzbekistan about full repayment of debt for each separate external debt.

A. Monitoring of foreign currency operations

According to paragraph 1 of the Regulations on the procedure for monitoring the validity of foreign exchange transactions by legal entities and individuals, approved by the Resolution of the State Tax Committee of the Republic of Uzbekistan, the State Customs Committee of the Republic of Uzbekistan, the Board of the Central Bank of the Republic of Uzbekistan No. 2467 dated 12.06.2013 [https://lex.uz/docs/2186012] local commercial banks are required to submit information on foreign currency  transactions conducted by clients to the tax authorities and the parent commercial bank in case of:

• the payments made to the accounts in the offshore zones;
• the payments made by residents to non-resident counterparties of a fine for non-fulfillment of obligations under export-import contracts;
• the payments made under import contracts for the performance of work/services, royalties, as well as the transfer of dividends to foreign founders or the repatriation of profits;
• the payments made to non-residents for the sale of their shares in the authorized capital of local legal entities and real estate located on the territory of the Republic of Uzbekistan;
• the payments made by a resident under a loan agreement in favor of a non-resident (except for credits (loans) issued by international financial institutions and foreign banks);
• foreign transfers made by residents (in this case individuals) to the accounts of individuals, if the amount of the transfer during one calendar year exceeds the equivalent of UZS 100.000.000;
• receipt of funds from abroad to the accounts of an individual - a resident of the Republic of Uzbekistan from a foreign legal entity.

To carry out the mandatory monitoring of foreign trade operations local traders are required to put the trade contracts on record at the Unified electronic information system of foreign trade operations (the “Unified System”). The Regulation “On the procedure for monitoring and controlling the implementation of foreign trade operations” approved by the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan No. 283 dated 14 May 2020 [https://lex.uz/docs/4812424] sets minimum requirements for the trade contracts’ provisions and established the procedure for putting the trade contracts on the record through the Unified System. No transfers from local accounts of the traders can be conducted by the servicing banks until such trade contracts are registered with the Unified System.

B. Penalties for late repatriation of assets.

The Law “On currency regulation” mandates that residents, who failed to ensure the repatriation of assets on foreign trade operations for more than forty-five days after the expiration of one hundred and eighty days from the date of payment or export to a non-resident, shall pay a fine to the state budget:

• in the equivalent of 5 percent of the amount of non-repatriated assets - if the repatriation of assets is delayed up to 360 from the date of payment or export to a non-resident;
• additionally, in the equivalent of 10 percent of the amount of non-repatriated assets - in case of a delay from 365 - 545 days from the date of payment or export to a non-resident;
• additionally, in the equivalent of 35 percent of the amount of non-repatriated assets – in case of a delay for more than 545 days from the date of payment or export to a non-resident.

The said penalties shall not be applied to the traders in the case established in the same Article 11¹ of the Law “On currency regulation”.