General legal newsletter for January 2022

One of the most notable legal developments in Uzbekistan in January 2022 was the adoption of the ambitious Strategy for the Development of New Uzbekistan in 2022-2026, outlining a variety of economic, social, and political plans for developing the country. The government also took important steps to improve the functioning of capital markets, the pharmaceutical industry, and the service industry.

 1.  STRATEGY FOR DEVELOPMENT OF NEW UZBEKISTAN 

The President has signed the Decree “On the Strategy of the Development of New Uzbekistan in 2022-2026”. The following plans have, among others, been outlined in the Decree:

• measures will be taken to reduce the annual inflation rate down to 9% in 2022 and down to 5% in 2023 with the level of the fiscal deficit being maintained at up to 3%; it is aimed that these indicators will not be exceeded in subsequent years;
• a system for the effective management of the state debt will be introduced; the amount of attracted funds will not exceed USD 4.5 bln per year;
• in 2023, the general VAT rate will be reduced down to 12%; for business in banking and finance and telecommunications – down to 15%;
• the process of transformation (commercialization) of state-owned banks will be completed and the share of private banks in the total banking assets will reach 60% by 2026;
• state monopolies in 25 spheres, including certification, the storage of petroleum products, provision of additional services in the area of rail transportation, will be abolished with relevant state enterprises being privatized;
• markets for gas and energy resources will further be liberalized;
• by 2026, measures will be taken for increasing the energy efficiency of the economy by 20% and reducing the emission of harmful gases by 20% through the use of green technologies;
• by 2026, the total power energy generation capacity will reach 100 bln KWh;
• 80 thsd kilometers of main and distribution power grids, 20 thsd transformers points, and 200 substations will be constructed or modernized;
• the share of processed natural gas will increase from 8% to 20% through the development of the chemical and gas-chemical industries; the total volume of the production of chemical products will be increased up to USD 2 bln;
• sewerage systems in 32 large cities and 155 regional centers will be modernized;
• 464 ha of land will be allotted by the state through open tenders for the development of agriculture;
• digitalization of public services will continue; 20% of the services will be outsourced to the private sector;
• projects in the tourism industry for USD 300 mln will be implemented; major infrastructure improvements are envisaged in Samarkand, in particular.

Presidential Decree No. UP-60 of 28 January 2022

 2.  DEVELOPMENT OF CAPITAL MARKETS 

The President has issued a Resolution on the development and support of Uzbekistan’s capital markets. The following is, among others, envisaged by the Resolution:

- from 1 April 2022 till 31 December 2024:

• individuals are exempted from the income tax on dividends on shares of JSCs;
• the rate of the income tax on dividend income from shares of JSCs for non-residents is reduced from 10% to 5%;
• individuals and legal entities are exempted from the income tax on interest payments on bonds;

- starting from 1 April 2022, JSCs will be allowed (based on relevant advice of their underwriters) to place their shares on foreign stock exchanges provided such shares are preliminary or simultaneously placed on the Uzbek National Stock Exchange (RFB “Toshkent”);
- starting from 1 July 2022, when securities are sold through organized over-the-counter trading platforms, sellers (other than issuers) shall pay a charge of 0.3% of the transaction amount instead of the income tax on relevant profit;
- IPO and SPO will be held for a number of large state-owned JSCs at the Uzbek National Stock Exchange, including JSC “UzAuto Motors”, JSC “UzAuto Motors Powertrain”, JSC “Dori-Darmon”, JSC “Uzbekistan Post”, JSC “Alskom” (Annex 1 to the Resolution).

Presidential Resolution No. PP-90 of 17 January 2022

 3.  SUPPORT FOR THE SERVICE INDUSTRY

The President has signed a Resolution providing for measures for developing the service industry, which, among others, include the following:

• from 1 April 2022 till 1 January 2025, the rate of the social tax of 1% will apply to businesses operating in the following spheres (where certain thresholds are met): retail and foodservice; hospitality; passenger and freight transportation; repair and maintenance of vehicles; computer services; repair of household appliances; agro and veterinary services; services provided in entertainment centers;
• from 1 April 2022 till 1 January 2025, the following tax rates will apply to businesses providing food, hospitality trading, entertainment, touristic, and travel services and registered in touristic zones listed in the Resolution: the turnover tax – 1%; the land and immovable property taxes on objects located in the relevant zones – 1% of amounts accrued;
• from 1 April 2022 till 1 January 2027, trading complexes with an area of more than 5 thsd sq m and hotels are allowed to pay the land and immovable property taxes at a rate decreased by 90%;
• starting from 1 January 2022, the rate of the excise tax on mobile services for mobile operators will be set at 10%;
• in 2022 – 2023, land plots with basic infrastructure will be put up for auction for constructing touristic objects, trading complexes, educational and healthcare facilities; service facilities along international roads;
• a number of ICT goods imported in Uzbekistan, as listed in the Resolution, have been exempted from customs duties.
• a Road Map for the development of the service industry in 2022 has been approved.

Presidential Resolution No. PP-104 of 27 January 2022

 4.  DEVELOPMENT OF THE PHARMACEUTICAL INDUSTRY

• the restriction on conducting clinical trials of drugs on healthy volunteers;
• the restriction for manufacturers on the production of medicines with different names, but with the same composition;

• new medicines producing enterprises, organizations wholesaling or retailing medicines must be established in compliance with the GMP (Good Manufacturing Practice), GDP (Good Distribution Practice), and GPP (Good Pharmacy Practice) standards;
• new pharmaceutical products of Uzbek manufacturers will be registered for an unlimited term; upon the expiation, previously issued registration certificates with a limited term of validity will be exchanged for unlimited term certificates within 15 calendar days without additional documents being requested;
• a mechanism for the guaranteed purchase of medicines, the production of which has been localized in Uzbekistan, will be introduced.

• the Forecasted Parameters for the Development of the Pharmaceutical Industry in 2022-2026;
• the Program for Implementing Investment Projects in the Pharmaceutical Industry in Regions of Uzbekistan in 2022-2024;
• the List of Investment Projects in the Pharmaceutical Industry, for which of Pre-Project and Project Documentation Should be Developed and Approved in 2022-2026.

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Have a good day!

Sincerely,
Kosta Legal Law Firm