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General legal newsletter for June 2022

In June 2022, some of the most notable legal developments in Uzbekistan were the adoption of a new Law on Advertisement, reforms related to the operation of the natural gas market, the establishment of a procedure for the support of investment projects with external infrastructure, softening of particular tax requirements, and measures to improve the efficiency of special economic zones. There were also important changes in the land legislation, including the adoption of the Law on the Procedures for the Withdrawal of Land for Public Needs with Compensation.

1. NEW LAW ON ADVERTISEMENT

A new edition of the Law on Advertisement has been adopted. It will enter into force on 9 September 2022. The new edition of the Law provides definitions of such concepts as “unethical advertising” and “promotional campaigns” as well as contains a number of other novelties. These, among others, include the following:

(a) it has been clarified that the Law does not apply to, among others, (i) informational and analytical materials (reviews of domestic and foreign markets, results of scientific research) that do not aim at promoting goods (services); (ii) information about a product, its manufacturer, importer or exporter placed on the product or its packaging; (iii) information on goods (services) posted on websites or social networks pages of manufacturers (service providers), where the provision of such information is intended to inform visitors about the assortment, rules of use, and other characteristics of sold goods (rendered services);

(b) it has been clarified that advertisement may fully or partially be subject to copyright and related rights;

(c) advertisement must generally be distributed in the Uzbek language, but there may be accompanying translation to other languages (some limitations apply);

(d) individuals and entities engaged in advertising may now form specialized associations;

(e) the following prohibitions have been introduced:

specifying prices in advertisement in foreign currency;
using forms, phrases, and images that are contrary to national and family values, common norms of morality;
advertising goods (services) in printed materials used in preschool, secondary, and professional education;
showing minors in dangerous situations;
discrediting parents and educators, undermining the confidence in them among minors;
advertising goods (services) prohibited for purchase or consumption by minors on television channels, television and radio programs intended for minors;
advertising medicines (i) with the engagement of famous people, medical professionals, or people whose appearance imitate the appearance of medical professionals (exemptions apply); (ii) with the use of videos, images, or visual representations demonstrating changes in the human body as a result of an illness, injury, or effects of a medicine;

(f) a term for which individuals and entities engaged in advertising must retain relevant materials has been increased from one year to three years;

(g) fines for relevant violations have been set. They vary from 30 to 100 times the baseline calculation value (approx. USD 800-2700). Where a legal entity is an infringer, fines are applied by the Consumers Protection Agency under the Antimonopoly Committee.

Law No. ZRU-776 of 7 June 2022

2. LAW ON WITHDRAWAL OF LAND FOR PUBLIC NEEDS

A Law on the Procedures for the Withdrawal of Land for Public Needs with Compensation has been adopted. It enters into force on 1 October 2022. Rules and procedures for withdrawing lands for public needs and payment of relevant compensations are set forth in details. The following purposes are identified as public needs:

the allocation of lands for the needs of defense and state security, establishing and operating protected natural areas, free economic zones and free trade zones;
performance of international agreements;
the exploration and development of mineral deposits (except for deposits of common minerals);
the construction (reconstruction) of central and local roads and railways, airports, airfields, air navigation facilities and aviation technical centers, railway facilities, bridges, subways, tunnels, engineering facilities and lines for power energy and telecommunications, airspace objects, trunk pipelines, engineering and communication networks, irrigation and melioration systems;
state-funded construction of objects under master plans of settlements;
the implementation of projects for the construction of buildings and facilities for education, healthcare, culture, medical and social care, included into state investment programs and financed by the state.

The Law does not apply to lands that belong to individuals and legal entities based on the right of full ownership and lands that belong to state bodies and establishments, state-owned enterprises, and self-government bodies of citizens based on the right of permanent use.

Law No. ZRU-781 of 29 June 2022

3. OTHER CHANGES IN LAND LEGISLATION

The President has signed a Law introducing changes into the land legislation. The following is, among others, provided by the Law:

regional municipalities no longer approve results of electronic auctions for lease of agricultural lands; agricultural lands are leased solely based on results of such auctions;
where rights to a land plot are transferred due to a transfer of proprietary rights to real estate occupying the land plot, an approving decision of the head of a municipality is no longer required;
lands for public-private partnership projects are allocated to a public partner, based on the right of permanent use and without holding an auction;
where land is envisaged to be leased to an enterprise with foreign investments, this is done by the Cabinet of Ministers for a period of up to 25 years, but not less than for the period specified in the application for the implementation of a relevant investment project (previously, the relevant term of lease could be up to 50 years);
where real estate passes to an enterprise with foreign investments, it acquires the right of lease in respect of the land occupied by this real estate (previously, the right of use).

Law No. ZRU-775 of 7 June 2022

4. REFORM OF THE NATURAL GAS MARKET

The President has issued a Resolution on measures for reforming the gas market. The Resolution has established state-owned JSC “UzGasTrade”, to which functions related to the centralized sale and purchase of gas have been transferred from JSC “Uztransgaz”, which remains to be a single operator of the main gas transportation system. Specifically, starting from 1 August 2022, JSC “UzGasTrade”’s functions will include the following:

purchasing natural gas from producers in Uzbekistan as a single state operator at prices approved by the Interdepartmental Tariff Commission and from abroad in a centralized manner;
selling natural gas to JSC “Khududgaztaminot” (an operator of regional gas systems) and consumers connected to the main gas transportation system, based on direct contracts, and acting as a single exporter, except for cases provided for in decisions of the President.

Presidential Decree No. PP-280 of 15 June 2022

5. EXTERNAL INFRASTRUCTURE FOR INVESTMENT PROJECTS

Following a number of Presidential Decrees, including the Presidential Decree No. PP-5233 of 25 August 2021, the Cabinet of Ministers has approved a Regulation on the provision of state support for investment projects in the form of the construction of external engineering and communication networks (including water supply, sewage, electricity, gas, and particular telecommunications networks and automobile roads).

Based on the Regulation, investment projects meeting all the following criteria generally qualify for the support: (i) projects that have been included in state investment programs; (ii) whose amount exceeds UZS 200 bln (approx. USD 18.2 mln) or, for the Republic of Karakalpakstan and the Khorezm region, UZS 50 bln (approx. USD 4.5 mln); (iii) where investor’s own investments into a relevant project are at least 25% of the project amount; (iv) where a relevant feasibility study confirms that the making of relevant expenses by the investor itself is unfeasible. Decisions on the provision of the support are made by a specialized State Commission, being currently headed by the Minister of Finance, based on a relevant assessment of the Center for the Comprehensive Expertise of Projects and Import Contracts under the Ministry of Economy and a regional working group headed by representatives of a regional municipality.

Resolution of the Cabinet of Ministers No. 306 of 7 June 2022

6. SOFTENING OF TAX REQUIREMENTS

The President has issued a Decree softening particular tax requirements for business entities. The following, among others, applies starting from 1 July 2022:

the Decree abolishes the practice whereby higher rates of land tax and property tax and suspension of tax incentives are applied to dormant buildings; unused production areas, non-residential facilities, and objects under construction; and land plots occupied by the relevant property;
business entities, being recognized VAT payers mandatory, in a way set by the tax legislation, will be provided with a certificate of registration as a VAT payer automatically, without ascertaining the level of tax risk;
the validity of a certificate of registration as a VAT payer of taxpayers with a high level of tax risk may be suspended by the tax authorities only after a relevant notice is sent to a taxpayer 5 business days before the suspension and if the taxpayer fails to eliminate relevant deficiencies (some reservations apply).

Presidential Decree No. UP-162 of 28 June 2022

7. IMPROVEMENT OF THE EFFICIENCY OF SPECIAL ECONOMIC ZONES

The President has signed a Decree on measures for improving the efficiency of special economic zones, small industrial zones, industrial zones for young entrepreneurs, and special commercial zones. The following is, among others, envisaged by the Decree:

business plans and feasibility studies for investment projects planned to be implemented on the territory of a special economic zone no longer have to be pre-assessed by the Center for the Comprehensive Expertise of Projects and Import Contracts under the Ministry of Economy;
foreign trade, logistics, and manufacturing enterprises are permitted to carry out investment projects in the service sector on the territory of special economic zones and get the status of a participant of such zones;
starting from July 1, 2022:
- results of an auction for the right to lease a land plot on the territory of a special economic zone are valid even if only one bidder participates;
- the right to lease a land plot on the territory of a special economic zone may be pledged by a lessee to secure loans.

Presidential Decree No. UP-153 of 13 June 2022

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Sincerely,
Kosta Legal Law Firm

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