Tax alert – Mazars Central Asia

The following is an overview of the key changes with respect to taxation principles, transfer pricing, VAT, income tax, personal income tax, property tax and temporary exemptions that come into effect from 2024 and introduced by the following law of the Republic of Uzbekistan:

1)    The Law of the Republic of Uzbekistan dated 28.12.2023 N ZRU-891 "On making amendments and additions to some legislative acts of the Republic of Uzbekistan in connection with the adoption of the main directions of tax and budget policy for 2024" (Adopted by the Legislative Chamber on 15.12.2023, approved by the Senate on 20.12.2023)

 I.    GENERAL

1. Retention period for documents

From 2024, the mandatory retention period for tax returns and other supporting documents required for tax calculation is reduced from 5 to 3 years.  Similarly, from 5 to 3 years is reduced from 5 to 3 years in terms of the term regarding the obligation to retain documents confirming benefits or deductions after the year of termination of the application of benefits / deductions.

2. Statute of limitation

The statute of limitation for tax liabilities has been reduced from 5 to 3 years. The limitation period for bringing a person to account for a tax offence is similarly reduced.

3. Payment of additional assessments

From 2024, additional assessments based on the results of a desk tax audit may be paid in instalments over a period of 6 months. Previously, this possibility of instalment payment of additional tax assessments was available only for additional tax assessments based on the results of a tax audit.

4. The period for submitting an application

The period for submitting an application for the credit or refund of an amount of overpaid or recovered tax is reduced from 5 to 3 years.

5. Changes in desk tax audit

From 2024, the following tax control measures are prohibited during a desk tax audit, with the exception of a desk tax audit conducted for the purpose of refunding (refunding) a VAT amount:

• entering the territory of a taxpayer;
• inspection of the taxpayer's territory and premises;
• requesting documents from the taxpayer and summoning the taxpayer;
• seizure of documents and items of the taxpayer.

6. Requests by a tax authority within the framework of tax control

Within the framework of tax control, the right of a tax authority to request accounting documents, explanations to submitted tax returns and accounting documents, as well as other information related to the calculation and payment of taxes and levies is excluded from Article 138 of the TC RUZ. In addition, it is excluded that the requested documents and explanations must be submitted to the tax authority within five days from the date of receipt of the relevant request.

II. TRANSFER PRICING

7. Period of tax control

From 2024, controlled transactions entered into within a period not exceeding 3 calendar years preceding the year in which the decision to conduct an audit is made may be reviewed as part of transfer pricing tax control. Previously, a tax authority had the right to review transactions entered into during the preceding 5 years.

8. Decision on tax audit

From 2024, a decision to conduct transfer pricing tax control may be made no later than 3 years after the date of receipt of a Notice of Controlled Transactions or a notification of a tax authority (in the absence of controlled transactions in the Notice). Previously, a tax authority had the right to issue a decision not later than 4 years after receipt of the Notification.

9. Term for audit on revised statements

From 2024, when submitting revised statements in respect of which the amount of tax is reduced, a decision to conduct an audit of a controlled transaction in respect of which an adjustment has been made may be issued not later than 3 years after the date of submission of the revised statements. Previously, a tax authority had the right to issue a decision not later than 4 years after the submission of revised statements.

III.    VALUE ADDED TAX (VAT)

10. Expansion of VAT-payers list

Individuals registered as entrepreneurs in accordance with the legislation of a foreign state and engaged in entrepreneurial activity, selling goods (services) in the territory of the Republic of Uzbekistan, if the place of sale of such goods (services) is recognised as the Republic of Uzbekistan, have been added to the list of taxpayers.

11. Exclusion from the list of exempt sales transactions

Sales turnovers involving the sale of supplies exempt from VAT are excluded from the list of VAT-exempt supplies:

• medical services (excluding cosmetological services). Medical services for the purposes of this paragraph include, in particular:
  • medical care and sanitation services;
  • diagnostic, preventive and treatment services;
  • dental services, including dental prosthetics;
• veterinary services. Veterinary services for the purposes of this paragraph include, inter alia:
  • veterinary services, animal diagnostic and treatment services;
  • protection of the population against diseases common to animals and humans;
  • protection of the territory of the Republic of Uzbekistan against the introduction of contagious animal diseases;
  • ensuring veterinary and veterinary-sanitary safety of goods controlled by the State Veterinary Service;
• medicines, veterinary medicines, medical and veterinary products.

12. Exclusion from the list of exempt import transactions

Import of goods into Uzbekistan is excluded from the list of import operations exempt from VAT:

• medicinal products, veterinary medicinal products, medical and veterinary products, medical and veterinary products and raw materials imported according to the list determined by the legislation for the production of medicinal products, veterinary medicinal products, medical and veterinary products. This norm does not apply to imported finished medicines, veterinary medicines, medical and veterinary products, which are also produced in the Republic of Uzbekistan, according to the list approved by the Cabinet of Ministers of the Republic of Uzbekistan.

13. Exclusion from the list of operations taxable at a 0% rate

From the list of operations subject to 0% VAT is excluded turnover on the sale of services provided to the population in the areas of water supply, sewerage, sanitary cleaning and heat supply, including the purchase of such services by homeowners' associations on behalf of the population, as well as by units of the Ministry of Defence of the Republic of Uzbekistan and the National Guard of the Republic of Uzbekistan for the population living in houses of the departmental housing stock.

IV. CORPORATE INCOME TAX (CIT)

14. Mandatory advance payments

Mandatory advance payments apply to companies with income exceeding UZS 10 billion in the previous tax period. Previously, this threshold was UZS 5 billion.

V.    PERSONAL INCOME TAX (PIT)

15. Taxation of self-employed

Self-employed persons are taxed in accordance with the procedure established for individual entrepreneurs from the day when their income exceeds 100 million soums during the tax period. At the same time, self-employed persons pay social tax in accordance with the procedure established by the Tax Code of RUz.

16. Non-taxable income

The list of income not subject to taxation is added by the following income:

• in public offerings, funds of employees of companies, not exceeding their monthly wages and equivalent payments, directed to the purchase of shares under the employee stock ownership plan of these companies;
• part of the wages and other income of taxpayers directed to an individual investment account for the purchase of securities issued on the local stock market, under the following conditions:
• in the aggregate up to one hundred times the minimum wage during the tax period;
• on payment of instalments in a non-increasing order and subject to the condition of non-repayment of lump sum instalments within twelve months from the date of commencement of the contract. In the event of breach of the terms of this clause or early termination of the agreement and full or partial repayment of funds, the returned funds shall be subject to withholding tax.

VI. PROPERTY TAX

17. Delivery of payment notice  

The methods of delivery of a payment notice have been added:

• SMS notification to a mobile phone number issued in the name of the taxpayer and
• By message to a special mobile application of the tax authorities,
• Other method.

VII. TEMPORARY EXEMPTIONS

18. Extension of terms

The term of the following exemptions has been extended until 31 December 2028 (previously the exemptions were valid until 31 December 2024):

• income of individuals - residents and non-residents of the Republic of Uzbekistan in the form of dividends on shares owned by them (shareholders) are exempt from personal income tax;
• on income of legal entities - non-residents of the Republic of Uzbekistan in the form of dividends on shares belonging to them (shareholders) is subject to the income tax rate of 5 per cent;
• income of individuals and legal entities - residents and non-residents of the Republic of Uzbekistan in the form of interest on bonds of economic companies are exempt from personal income tax and income tax.

Mazars Alert contains a selection of the latest important regulatory changes; it is intended to provide information only and therefore should not be construed as professional advice or consultation. Should you require any information related to the above, please contact us.   

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