General legal newsletter for December 2022

Some of the most notable legal developments in Uzbekistan in December 2022 were the adoption of the Law “On the State Budget for 2023” and the introduction of amendments in the Tax and Customs Codes, reflecting changes in the financial policy in 2023; a large-scale administrative reform, reshaping the system of state governance; measure to facilitate the country’s transition to a green economy; and the adoption of the Investment Program for 2023-2025.

 1.  STATE BUDGET FOR 2023

On 30 December 2022, the Law “On the State Budget for 2023” was adopted. It, among others, provides for the following:

• Uzbekistan’s GDP in 2023 is projected to amount to UZS 1,068 trn (approx. USD 94.8 bln); the GDP growth rate is expected to be 5.3%, whereas the consumer price index, as compared to December of 2022, will rise by 9.5%;
• the total revenue of the consolidated state budget is projected to amount to UZS 310.7 trn (approx. USD 28 bln), while the total expenditures – UZS 343.2 trn (approx. USD 30 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 the projected annual GDP. For 2023, the maximum total value of new agreements to attract external borrowings on behalf of Uzbekistan and under the guarantee of Uzbekistan must not exceed USD 4.5 bln;
• state unitary enterprises and legal entities where the state share exceeds 50% (including enterprises being a part of such entities) must direct 50% of their net profit for 2022 to the state budget (100% for gold mining enterprises).

Law No. ZRU-813 of 30 December 2022

 2.  CHANGES TO TAX AND CUSTOMS LEGISLATION

Given planned changes in the financial and tax policy in 2023, some changes have been introduced to the Tax and Customs Codes, including the following:

(a) basic land tax rates for non-agricultural lands and water use tax rates have been increased by an average of 10%;

(b) starting from 1 January 2023:

• the general VAT rate was decreased from 15% to 12%;
• the term of a tax authorities’ desk audit on the justifiability of amounts of VAT claimed to be refunded was reduced from 60 to 30 days;

(c) starting from 1 February 2023, the excise tax rates for petroleum products as well as manufactured alcohol and tobacco products will generally be increased by 10%;

(d) starting from 1 June 2023, state bodies may be recognized as payers of VAT based on relevant resolutions of the Cabinet of Ministers;

(e) starting from 1 April 2023, customs duty exemptions for equipment imported for own production needs by enterprises with foreign investments where a share of a foreign investor exceeds 33% will be abolished. 

Law No. ZRU-812 of 30 December 2022

 3.  STATE ADMINISTRATIVE REFORM

The President has signed a Decree and a Resolution providing for the implementation of large-scale administrative reform. The following changes have been in place since 1 January 2023:

• rules for the functioning and the structure of the Cabinet of Ministers have been reconsidered to enhance its operation as a collegial administrative body and to ensure greater autonomy of ministries;
• instead of 8 Deputy Prime Ministers and 3 Advisors to the Prime Minister, only 4 Deputy Prime Ministers remain;
• the following administrative institutions are distinguished: ministries, committees, agencies, and inspections;
• 30 state institutions have been reorganized with the number of ministries being reduced from 24 to 21. Some of the relevant changes include the following: (i) the Ministry for Economic Development and the Ministry of Finance have merged; (ii) the Ministry of Construction and the Ministry of Housing and Communal Services have merged; (iii) the Ministry of Investment and Foreign Trade has been restructured into the Ministry of Investments, Industry, and Trade; (iv) the State Committee for Ecology and Environmental Protection has been reorganized into the Ministry of Natural Resources; the State Committee for Geology and Mineral Resources – into the Ministry of Mining and Geology; the Antimonopoly Committee – into the Committee for the Development of Competition and Protection of Consumer Rights.
• 12 state institutions have been liquidated with their functions being transferred to other institutions, including the PPP Development Agency (functions have been transferred to the Ministry of Economy and Finance); the Insurance Market Development Agency (the Ministry of Economy and Finance); the Consumer Rights Protection Agency (the Committee for the Development of Competition and Protection of Consumer Rights);
• the practices of granting administrative powers to commercial associations and appointing their heads by decisions of the Cabinet of Ministers are abolished;
• on an experimental basis, departmental orders and decisions of state institutions are adopted and published through the electronic system “E-Qaror”.

The Ministry of Justice and other state bodies are also instructed to develop an open register of central and regional executive authorities' functions until 1 March 2023 to ensure no duplication of roles. 

Presidential Decree No. UP-269 of 21 December 2022
Presidential Resolution No. PP-447 of 21 December 2022

 4.  INVESTMENT PROGRAM FOR 2023-2025

The President has signed a Resolution on approval of the Investment Program for 2023-2025. The following is, among others, approved:

• target parameters for the utilization of investments and loans in each industry and region in 2023 - 2025 (Annex 2);
• a consolidated targeted program for the utilization of investments and loans in 2023 (Annex 3);
• a list of large production facilities put into operation in 2023 (Annex 4);
• a list of strategic investment projects implemented in 2023 (Annex 5);
• a list of investment projects implemented with the attraction of foreign loans on behalf of the Republic of Uzbekistan or under the guarantee of the Republic of Uzbekistan in 2023 (Annex 6);
• a list of investment projects implemented with the attraction of foreign direct investment and loans in 2023 (Annex 7);
• a list of investment projects for which the development, coordination and approval of pre-project and project documentation is required in 2023 (Annex 8);
• a list of promising investment projects the possibility of implementation of which will be studied in 2023 (Annex 9);
• a list of new investment projects for which the attraction of public external debt in 2023 is required (Annex 10).

Presidential Resolution No. PP-459 of 28 December 2022

 5.  TRANSITION TO GREEN ECONOMY

The President has signed a Resolution introducing measures to facilitate Uzbekistan’s transition to a green economy by 2030. The Resolution, among others, envisages the following:

• it is, among others, planned that till 2030, (i) greenhouse gas emissions per unit of GDP will be reduced by 35% from the 2010 level; (ii) the production capacity of renewable energy sources will be increased up to 15 GW and their share in the total volume of electricity generation will exceed 30%; (iii) energy efficiency in manufacturing industries will be increased by at least 20%;
• starting from 1 June 2023, a system of “green certificates” will be introduced based on the requirements for limiting the impact of production processes on the environment;
• starting from 1 January 2024, (i) a climate change measurement, reporting, and verification (MRV) system covering all greenhouse gases will be introduced; (ii) investment projects for the construction of solar and wind power plants with a capacity exceeding 1 MW will have to provide for an energy storage system with a capacity of at least 25% of the installed capacity of these power plants;
• all investment projects will be pre-assessed for the possibility of reducing a relevant amount of emitted greenhouse gases;
• state regulation of greenhouse gas emissions will be enhanced in 2022-2026. Relevant measures will include the accounting of greenhouse gas emissions and the introduction of a relevant state cadaster (register); the setting of targets for reducing greenhouse gas emissions in each economic sector; state support for activities to reduce greenhouse gas emissions;
• the Ministry for Economic Development (now, the Ministry of Economy and Finance) and some other state bodies are instructed to prepare a draft Law “On Limiting the Emission of Greenhouse Gases” by 1 May 2023;
• the State Committee for Ecology (now, the Ministry of Natural Resources) and a number of other state bodies are instructed to prepare a draft legal act for the implementation of the “polluter pays” principle and increase of pollution charges;
• the Cabinet of Ministers is instructed to prepare a plan of concrete measures for the development of renewable energy and hydrogen energy within 2 months from the date of the Resolution;
• the Program, Concept, and Action Plan for the transition to a green economy by 2030 as well as target parameters for saving fuel and energy resources in economic sectors in 2022-2026 have been approved.

Presidential Resolution No. PP-436 of 2 December 2022

 6.  RECOGNITION OF IFRS

The Ministry of Finance has issued an Order on the recognition of International Financial Reporting Standards (IFRS). More than 60 IFRS and explanations to them have been translated into the Uzbek language and can be applied in Uzbekistan. The relevant IFRS provide rules for the maintaining of accounting and financial reporting in specific areas of activity.

Order of the Minister of Finance No. 3400 of 9 December 2022

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Kosta Legal Law Firm