General legal newsletter for December 2021

Some of the most important legal developments in Uzbekistan in December 2021 were the adoption of the Law “On the State Budget for 2022”, the introduction of changes into the Tax Code, and the setting of a program for the development of hydropower. The Cabinet of Ministers also took measures for the introduction of such new legal mechanisms as tariff quotas and futures trading at the commodity exchanges.

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 1.  APPROVAL OF THE STATE BUDGET FOR 2022

On 30 December 2021, the Law “On the State Budget for 2022” was adopted. The following is, among others, provided in the Law:

• GDP of Uzbekistan in 2022 is projected to amount to UZS 839.9 trn (approx. USD 77.5 bln);
• the total revenue of the consolidated state budget will amount to UZS 254.6 trn (USD 23.5 bln), while the total expenditures – UZS 280.1 trn (USD 25.8 bln);  
• it is provided that the amount of the state debt, as attracted on behalf of Uzbekistan and under the guarantee of Uzbekistan, must not exceed 60% of projected annual GDP;
• for 2022, the maximum total amount of external borrowings attracted on behalf of Uzbekistan and under the guarantee of Uzbekistan under newly signed annual agreements must not exceed USD 4.5 bln;
• state enterprises and entities where the state share exceeds 50% must direct at least 50% of their net profit for 2021 to the state budget.

Presidential Resolution No. PP-73 has also been issued to facilitate the fulfilment of tasks set in the Law.

Law No. ZRU-742 of 30 December 2021
Presidential Resolution No. PP-73 of 30 December 2021

 2.  CHANGES IN THE TAX CODE  

A Law introducing changes to the Tax Code has been adopted. The following novelties are, among others, envisaged by the Law (many of the changes reflect relevant decisions of the President made earlier):

• a special rental tax on the extraction of minerals has been introduced. Payers of the tax are generally legal entities engaged in the extraction of precious, non-ferrous, and radioactive metals; rare and rare earth elements; and hydrocarbons. An object of the tax is the rental profit  received by a taxpayer from the sale of extracted minerals. A basic tax rate is 25%;
• the rules for paying the subsoils use tax have been amended;
• according to amended Article 347 of the Tax Code, net profit that remained at the disposal of a non-resident operating through a permanent establishment after payment of the income tax is considered dividend income and is subject to the dividend tax at the rate of 10%;
• financial sanctions for the failure to submit tax reports on time set in the Tax Code have been abolished (now the sanctions envisaged by the Code on Administrative Liability will only apply);
• a basic tax rate of the immovable property tax has been reduced from 2% to 1.5% (for objects whose construction has not been completed on time – from 4% to 3.5%);
• new rates of the excise tax have been set for alcohol and tobacco products;
• payers of the turnover tax must now submit relevant tax reports monthly.

Law No. ZRU-741 of 29 December 2021

 3.  HYDROPOWER DEVELOPMENT PROGRAM 

The President has signed a Resolution on additional measures for the development of renewable energy. It is, among others, envisaged by the Resolution:

• the total capacity of country’s hydroelectric power stations is planned to be increased up to 3,416 MW by 2030 through the reconstruction of existing power stations and the construction of new ones;
• PPP mechanisms are planned to be applied widely for implementing hydroelectric power projects;
• a list of potential investment projects for the construction and modernization of hydroelectric power stations for the total amount of USD 2.8 bln has been approved (a list of the projects included in the State Investment Program and planned to be implemented in 2022-2026 is provided in Annex to this Newsletter);
• private investors are allowed to supply electric energy produced by solar, wind, and biogas power installations whose capacity do not exceed 1 MW and power energy produced by hydropower installations whose capacity do not exceed 5 MW to individuals and legal entities directly, without uploading it to the Single Power Grid, on a contractual basis at agreed prices;
• the Ministry of Energy and some other state bodies are instructed to develop and submit to the Cabinet of Ministers a plan for engaging private investors for the construction 200 micro hydroelectric power plants.

Presidential Resolution No. 44 of 10 December 2021

 4.  TARIFF QUOTAS FOR IMPORTED GOODS 

The Cabinet of Ministers has approved a Resolution introducing a new regulatory instrument of “tariff quotas”. According to the Resolution, entering in force on 22 March 2022, “tariff quotas” are a measure envisaging setting of a monthly, quarterly or other quantity limits for specific imported goods with reduced rates of customs duties applying to such limited quantities. Where relevant quantity limits are exceeded in a relevant time period, standard rates of customs duties apply. Tariff quotas are set by the Cabinet of Ministers (for now, no tariff quotas have been set). Where a business entity wishes to use a set tariff quota, it should apply to the Ministry for Foreign Investment and Trade.

Resolution of the Cabinet of Ministers No. 728 of 2 December 2021

 5.  FUTURES CONTRACTS AT COMMODITY EXCHANGES 

The Cabinet of Ministers has issued a Resolution introducing futures trading at commodity exchanges. The Resolution, among others, provides for the following:

• starting from 1 January 2022, futures trading will be launched at the Uzbek National Commodity Exchange;
• the Regulation on Holding Futures Trades has been approved; it sets requirements for members of stock exchanges and their traders to participate in relevant trades and establishes rules for the trading, including rules for clearing and securing performance of futures contracts;
• the Antimonopoly Committee has been authorized to regulate trading in derivatives, including futures, at commodity exchanges;
• a Regulation setting rules for the provision of logistics services to dominant entities and state-owned enterprises that trade at commodity exchanges has been approved.

Resolution of Cabinet of Ministers No.777 of 27 December 2021

 

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Kosta Legal Law Firm