General legal newsletter for December 2020

In December 2020, the Uzbek government was focused on summing up the results of 2020 and planning for 2021. Hence, the Law on the State Budget for 2021 and a relevant Presidential Decree on its implementation were adopted as well as the State Investment Program for 2021 – 2023 was approved. There were also legal developments in such spheres as waste management, land allotment, state assets management, and the state registration of business entities. Additionally, a number of investment projects were approved in the sectors of power energy and road construction.

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 1.  STATE BUDGET FOR 2021

On 25 December 2021, the Law on the State Budget for 2021 was adopted. In accordance with the Law:

• profits of the consolidated state budget in 2021 will amount to UZS 178,712.4 bln (approx. USD 17.1 bln, here and below, based on the exchange rate of the Central Bank of Uzbekistan as of 11 January 2021: 1 USD = 10,449.4 UZS);
• expenses of the consolidated state budget in 2021 will amount to UZS 216,246.6 bln (approx. USD 20.69 bln);
• UZS 7,767.7 bln (approx. USD 0.74 bln) will be directed to paying off state debt;
• GDP will amount to UZS 688,936 bln (USD 65.93 bln); the predicted growth of GDP is 5,1%;
• the limit of the budget deficit for 2021 is 5.4% of GDP.

In accordance with the Presidential Decree “On the Implementation of the Law on the State Budget for 2021”, the following changes were, among others, introduced:

• starting from 1 February 2021, the baseline calculation value (the “BCV”) (as used for the calculation of state fees and fines) will be increased up to UZS 245,000 (approx. USD 23.4);
• starting from 1 February 2021, the minimum monthly wage will be increased up to UZS 747,300 (approx. USD 71.5);
• the zero rates of customs duties will be kept for certain products in 2021 (as per the List approved for 2020, except for sugar);
• a list of large taxpayers was approved (as required by the Uzbek tax legislation);
• the requirement to regularly re-evaluate main assets for business entities will be abolished starting from 1 January 2020;
• the Ministry of Finance will develop a new procedure for calculating, assessing, and ensuring compliance with state budget indicators with the assistance of experts of international institutions.

Law No. 657-ZRU of 25 December 2020
Presidential Decree No. PP-4938 of 30 December 2020

 2.  STATE INVESTMENT PROGRAM FOR 2021-2023

The President approved the State Investment Program for 2021-2023 providing for the attraction of centralized and non-centralized investments for the total amount of UZS 928.3 trillion (approx. USD 88.84 bln).

The following lists of projects were approved and attached to the relevant Presidential Decree:

• projects envisaging the creation of production facilities, which will be commissioned in 2021 (Annex 2);
• projects to be implemented in 2021 with the attraction of foreign loans under the state guarantee of Uzbekistan (Annex 4);
• projects to be implemented in 2021 with the attraction of foreign direct investments and loans (Annex 5);
• projects, for which pre-project and project documentation has to be developed, agreed, and approved in 2021 (Annex 6);
• potential investment projects that will be studied in 2021 (Annex 7).

The Decree also envisages that approaches to preparing State Investment Programs, preparing investment projects, and monitoring the implementation of investment projects will be improved with relevant proposals on the improvement being prepared by 1 August 2021 with the assistance of experts of international institutions. Further, criteria for evaluating the effectiveness of benefits and preferences provided by the state to support investment activities shall be developed by 1 June 2020.

Presidential Decree No. 4937 of 28 December 2020

 3.  PROCEDURE FOR THE STATE (RE-) REGISTRATION OF BUSINESS ENTITIES

The Regulation on the Procedure for the State Registration of Business Entities was amended and supplemented. The following novelties were introduced:

• the following grounds for the refusal of the state registrar to register a business entity were added:  

      - in case of the re-registration related to a change of the address of a business entity - the presence of a tax debt of more than 300 times the BCV, incomplete reflection of the volume of trade or import sales in tax returns, or late submission of tax returns;

        - in case of the re-registration related to a transfer of a share in a company to another person - the lack of consent of transferring shareholder.

• though not quite clearly written, it follows from the Decree that in the course of registering and re-registering a business entity, it will now be required to submit information about beneficiaries of the registered entity i.e. persons being ultimate owners of property of the registered entity or controlling an applicant for the registration as well as to inform the registrar on whether these persons are public officials;
• banks are allowed to remotely open bank accounts in the national and a foreign currency for entities being registered, provided such entities are being established by residents of Uzbekistan.

Resolution of the Cabinet of Ministers No. 763 of 2 December 2020

 4.  UZBEKISTAN JOINTS KYOTO CONVENTION ON SIMPLIFICATION OF CUSTOM PROCEDURES 

The Law on the Accession of Uzbekistan to the Revised Kyoto Convention (RKC) on the Simplification and Harmonization of Customs Procedures was adopted as Uzbekistan’s another step towards joining the World Trade Organization. Uzbekistan has accepted all the provisions of the Convention with the exception of Chapter 3 (carriage of goods coastwise) of Specific Annex “E“.

The RKC provides for the simplification, harmonization, and modernization of customs procedures in contracting countries. It enlists principles that should be applied in designing the relevant regulatory regime and recommends modern customs formalities and procedures along with harmonized customs documents.

Law No. ZRU-654 of 21 December 2020

 5.  STATE ASSETS MANAGEMENT: UNUSED REAL STATE 

The Cabinet of Ministers adopted a Regulation on the operation of the recently established Center for Organizing Effective Use of Vacant Facilities under the State Assets Management Agency of the Republic of Uzbekistan.

Among others, the main tasks of the Center include:

• identifying and accounting of vacant non-residential buildings and structures, unused production areas of all categories, irrespectively of the relevant form of ownership (i.e. private or state-owned);
• organizing maintenance and effective use of empty state real property, including its lease;
• accounting and monitoring of leased state real property objects and funds received from their lease;
• monitoring effective use of state real property assigned to state institutions (enterprises);
• seizure of an excessive part of state real property transferred to state institutions (enterprises);
• taking decisions on the demolition of state real property recognized unusable, based on a relevant opinion of the Inspection for Control in the Construction Industry;
• providing comprehensive practical assistance in leasing vacant private property at the request of its private owners.

Resolution of the Cabinet of Ministers No. 793 of 17 December 2020

 6.  DEVELOPMENTS IN THE LAND LEGISLATION 

A Law introducing changes to the land legislation was adopted. Some of the most notable changes include:

• now, land plots are seized for state or public needs based on decisions of territorial Kengashes (Councils) of People’s Deputies;
• the Cabinet of Minister’s competence with regard to the termination of land rights is no longer extended to full ownership rights to land plots (e.g. in respect of privatized land plots);
• now, in, among others, the cases below, land rights may be terminated only based on the relevant court decision:

• misuse of a land plot;
• irrational use of a land plot, (for agricultural lands - substandard crop yields for 3 years (according to relevant cadastral assessment));
• the use of a land plot in a way that leads to a decrease in soil fertility of the land plot/ its chemical and radioactive contamination, or the deterioration of the ecological environment;
• systematic non-payment of the land tax within the terms set by the tax legislation or rental fees within the terms set in a lease agreement;
• non-use of a land plot provided for agricultural needs for 1 year - for non-agricultural needs – for 2 years.

Law No. ZRU-656 of 23 December 2020

 7.  IMPROVEMENT OF THE JUDICIAL SYSTEM 

The President signed a Decree aimed at the elimination of corrupt practices among judges and the implementation of electronic means for enhancing transparency in judicial practice. Among others, the following measures are envisaged:

• staring from 1 February 2021, an electronic rating of judges will be introduced that will be formed based on specific criteria, yet to be elaborated;

• a Plan of Measures to strengthen the independence of the judiciary, to ensure the immunity of judges and to prevent corruption in the judicial system is attached to the Decree;

Presidential Decree No. UP-6127 of 7 December 2020

 8.  MINING OF PRECIOUS METALS 

The Law "On subsoils" was amended with the maximum size of subsoil land plots provided for the artisanal mining of precious metals being increased from 1 to 5 hectares. As before, such land plots also include alluvial gold deposits and are provided for mining without the use of explosives and/or the creation of underground channels.

Law No. ZRU-653 of 3 December 2020

 9.  LICENSING FOR THE CULTIVATION AND USE OF CANNABIS 

• the licensing authority is the Ministry of Agriculture;
• only legal entities are eligible to apply for the license;
• a single license for several activities may be obtained;
• some of the relevant licensing requirements for applicants include (i) the recruitment of at least 3 specialists in a relevant licensed activity; (ii) the availability of necessary equipment and technical means; (iii) the availability of suitable real estate; (iv) compliance with safety rules; (v) the installation of a round-clock surveillance system; (vi) the implementation of some modern technologies and techniques; (viii) the availability of the license for conducting chemical analysis of drugs, psychotropic substances, and precursors (ix) maintenance of the level of tetrahydrocannabinol in cannabis plants at 2%; (x) in case of the cultivation, the export at least 50% of cultivated crops; (xi) ensuring of that all employees meet the following criteria: (a) are not registered with dispensaries due to a chronic mental illness/drug addiction/alcoholism, (b) do not have outstanding criminal records, (c) are 21 or older;
• In addition to an application fee of approx USD15, a state fee is payable for a license – an annual fee of 3,000 times the baseline calculation value (the “BCV”) (approx. USD 70,400) for the license for the cultivation activities and a one-time fee of 200 times the BCV (approx. USD 4,700) for the license for the import, storing, processing, sale, purchase, and transportation activities.

 10.  PPP PROJECTS IN THE WASTE MANAGEMENT SECTOR  

The Uzbek government continues to take steps to attract the private sector to the waste management sector. A newly adopted Presidential Decree established a framework for the initiation of PPP solid waste management projects in Tashkent with the participation of SUE “Maxsustrans”. 

The following parameters for potential projects were approved by the Decree:

• the public partner under the projects is the Khokimyat of Tashkent;
• public and private partners may initiate a PPP project;
• relevant PPP objects may include the territory where SUE “Maxsustrans” provides sanitary cleaning services, waste landfills, and its property, including special vehicles and equipment:

     - special vehicles and equipment are sold to a private partner in installments within a term of up to 10 years;
     - real estate property is transferred to a private partner for temporary use for a term of the relevant PPP agreement;

• conditions of a PPP agreement shall necessarily provide for (i) the creation by a private partner of an enterprise for the disposal and processing of solid household waste generated in the city of Tashkent with the use of modern technologies; (ii) gradual introduction of the practice of burial of solid household wastes left over after recycling; (iii) the order of repayment of relevant ADB financing attracted under the state guarantee.

As a part of the preparation for the implementation of the projects, a number of restructuring were implemented in the sector:

1. SUE “Maxsustrans was transferred from the State Committee on Ecology and Environmental Protection to the Khokimiyat of Tashkent;
2. SE “Waste Recycling and Utilization” was transferred from the above State Committee to SUE “Maxsustrans”.

In the context of developments in the waste management sector, the National Information System “Transparent Construction” is going to be improved to deal with construction waste. Among other things, it is provided in the Decree that (i) information on the full cycle of processing wastes generated as a result of construction works shall be regularly entered in the System; (ii) areas for storing construction wastes within construction sites shall be determined; (iii) comprehensive monitoring shall be established over the storage, transportation, recycling, and utilization of wastes generated at construction sites.

Presidential Decree No. PP-4925 of 15 December 2020

 11.  INVESTMENT PROJECT IN CONVENTIONAL POWER ENERGY 

The Cabinet of Ministers has initiated another project within the framework of the investment project “The Construction of the Tashkent Cogeneration Thermal Power Plant”, implemented with the assistance of the Japan International Cooperation Agency (JICA). The initiated project envisages the construction of two gas turbine units with a capacity of 32 MW at the Tashkent Cogeneration Thermal Power Plant. According to the revealed cost-performance parameters of the project, its total cost is USD 109,24 mln. State-owned JSC “Toshkent IEM” is determined as an entity responsible for the implementation of the project.

Resolution of the Cabinet of Ministers No. 784 of 15 December 2020

 12.  INVESTMENT PROJECT IN WIND ENERGY 

The President adopted a Decree providing for the implementation of a wind power project by the company “Abu Dhabi Future Energy Company PJSC — Masdar” (UAE) in the Navoi region of Uzbekistan. More than USD 600 mln will be attracted to implementing the project. Upon the completion, wind farm facilities will be constructed, whose energy shall be sold to the state-owned company JSC “National Electricity Grids of Uzbekistan” - the single purchaser of power energy in Uzbekistan’s energy market.

Presidential Decree No. PP-4933 of 22 December 2020

 13.  ROAD RECONSTRUCTION PROJECT  

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Sincerely,
Kosta Legal Law Firm