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General legal newsletter for November 2020

Some of the most notable legal developments of November 2020 in Uzbekistan are the adoption of a strategy for the development of the construction industry and the expansion of the mandatory digital labeling. Being keen to develop full-fledged trade relations with Afghanistan, the Uzbek government also took a number of steps towards enhancing the cooperation – the President adopted a Decree laying down a strategy for developing the relations as well as decided on the establishment of the free trade zone “International Trade Center “Termez” in the south of Uzbekistan.

1. STRATEGY FOR MODERNIZING THE CONSTRUCTION INDUSTRY

The President adopted the Decree for Approving the Strategy for Modernization, Accelerated and Innovative Development of the Construction Industry for 2021-2025. The Decree provides for, among others, the following:

(a) Starting from 1 January 2021, master plans of cities, towns, and villages will be subject to public discussions prior to their approval. Citizens, citizens’ self-governance organizations, and non-government non-profit organizations will be able to participate in public expertise of master plans and to propose changes or alternative master plans.

(b) Staring from 1 March 2021:

the construction/re-construction of buildings and structures (including individual residential houses) having more than 2 floors, being higher than 12 meters from the ground, or having the total area of more than 500 m², (i) may not be performed until relevant design documentation has gone through the state expertise and the state supervision over the works has been set by a territorial inspection for control in the construction sphere under the Ministry of Construction; (ii) may not be performed by individuals or legal entities on their own, without engaging a construction organization (unless they are construction organizations themselves);
it is prohibited to (i) increase the number of stores in an existing or a constructed building without submitting relevant design documentation for the state expertise; (ii) construct multi-store residential buildings on land plots located within settlements’ functional territories not suitable for such types of constructions;
a positive expert opinion on design documentation is considered valid only if the relevant expert organization has duly recorded it in the Unified Register of Expert Opinions of the National Information System “Transparent Construction” (except for opinions on design documentation containing state secrets).

(c) EPC-contractors, including foreign ones, may now implement all projects not financed from centralized sources or through loans guaranteed by the Government in the “fast track” mode i.e. by the simultaneous performance of engineering, procurement, and construction works (provided a relevant permit for the project has been issued by the Ministry of Construction). Previously, only projects included in State Development Programs were allowed to be implemented this way.

The Strategy approved by the Decree and the relevant Road Map for the implementation of the Strategy also envisage the following:

development of a Single Standard for the Development and the Use of Urban-Planning Documentation;
development of a Single Administrative Construction Regulation covering all administrative processes in construction, starting from the obtaining of initial permits and the development of project documentation and ending with the commissioning of constructed objects;
improvement of regulations on public procurement of construction and project design services (including the development of temporal regulations on relevant electronic public procurement procedures);
harmonization of national technical standards for construction with relevant international normative documents;
development of technical regulations for improving the safety and energy efficiency of buildings and structures;
the implementation of mechanisms for energy audits;
the implementation of insurance mechanisms in the design - survey and construction activities based on international best practices;
the accession of Uzbekistan to the Safety and Health in Construction Convention No. 167 of the International Labor Organization;
cardinal improvement of licensing and approval procedures for entities engaged in urban construction;
the introduction of the National Classifiers of Construction Materials;
transformation of state-owned project design and survey institutions.

Presidential Decree UP-6119 of 27 November 2020

2. INFORMATION SYSTEMS FOR THE CONSTRUCTION SECTOR

Following the adoption of the Presidential Resolution No. PP-4464 on the wider use of information and communication technologies in the construction industry, the Cabinet of Ministers adopted a Resolution regulating the operation of (i) the National Information System "Transparent Construction” and (ii) the Geographical Information System “Urban Planning Cadaster of the Republic of Uzbekistan”. The Ministry of Construction is responsible for the effective functioning of these systems.

The “Transparent Construction” System will include 4 platforms: (a) the Development of Architectural Planning Assignments, (b) the Examination of Design and Estimate Documentation, (c) the State Supervision over Construction, (d) the Monitoring of Projects under Investment Programs. The platforms (b) and (c) are already functioning, while the remaining platforms are yet to be developed. The system was created for, among others:

enabling the effective provision of state services related to construction in electronic form;
maintaining a database with information on conducted construction, reconstruction, and overhaul works;
collecting comprehensive data on all contractors;
maintaining a database with information on all contracts between developers and project design organizations as well as between developers and projects examination institutions;
establishing effective monitoring of construction works.

The Urban Planning Cadaster System was, in turn, developed for making urban planning information, including master plans, publicly available and conversing relevant cadaster registers into electronic format.

Resolution of the Cabinet of Ministers No. 732 of 19 November 2020

3. MANDATORY DIGITAL LABELLING

As the pilot project for the track-and-trace digital labelling of tobacco and alcoholic products initiated in accordance with the Resolution of the Cabinet of Ministers No. 944 of 23 November 2019 was successfully completed, the mandatory digital labelling will now be introduced for these and some other products. The relevant Resolution of the Cabinet of Ministers No. 737, approving the List of Goods Subject to the Mandatory Digital Labeling by Means of Identification in 2021-2022, provides that the digital labelling becomes mandatory for:

tobacco products – starting from 1 January 2021;
alcohol products (except for brewage products) – starting from 1 January 2021;
brewage products - starting from 1 April 2021;
medicaments and medical products, water and soft drinks, and home appliance – within 6 months upon the completion of targeted pilot testing.

It will be an obligation of manufacturers and importers to perform the labelling. Retailers and wholesalers of labelled products will have to ensure connection to the national information system for monitoring labelling and tracing labelled products “Asl belgisi”. The State Tax Committee and the Ministry for Developing Information and Communication Technologies must launch this system by 1 December 2020. Private LLC “CRPT TURON”, acting based on a public-private partnership agreement with the State Tax Committee, will manage the system and ensure its technical maintenance.

The State Tax Committee will develop rules for the labelling of the above products and submit drafts to the Cabinet of Ministers (for tobacco and alcohol products – by 10 December 2020; for the other products – by 30 December 2021).

Starting from 1 March 2021, the import of unlabeled alcohol and tobacco products into the territory of Uzbekistan will be prohibited. After one year from the introduction of the mandatory labelling for a particular product, the ban on selling it unlabeled becomes effective.

The Resolution of the Cabinet of Ministers No. 737 also approves the Road Map for effective introduction of the mandatory labelling, which envisages, among others, defining the liability for infringing requirements for the mandatory digital labelling and setting requirements for installing measurement equipment by producers of alcohol and alcohol products.

Resolution of the Cabinet of Ministers No. 737 of 20 November 2020

4. STRENGTHENING OF UZBEKISTAN-AFGHANISTAN COOPERATION

The President signed a Decree for enhancing cooperation with Afghanistan. Annex 3 of the Decree provides for the following trade and economic measures that will be taken for, among other things, increasing the volume of trade between the countries up to USD 2 bln:

Measures to create a favourable trade environment

concluding a preferential trade agreement by April 2021 and, subsequently, negotiating the conclusion of a free trade agreement;
concluding a road transportation agreement, providing for relevant rules for the entry of carriers of one country into the territory of another and rules for their exemption from transit fees;
concluding a rail transportation agreement, providing for, among other things, a discount of up to 50% on the freight rate for the transportation of goods by the Afghan railways;

Measures to increase trade turnover

taking measures on increasing the export of particular goods from Uzbekistan to Afghanistan, including the export of cement, iron, liquefied gas, flour, wheat, poultry, tobacco products, jewellery, furniture, children clothes, etc.;

Measures to improve infrastructure

accelerating the implementation of “The Construction of Power Lines "Surkhan-Puli-Khumri" Project with the assistance of the Asian Development Bank;
negotiating a project for the construction of the railway “Mazari-Sharif-Kabul”, allowing Uzbekistan to get access to seaports of Pakistan;
attracting Uzbek engineering and construction organizations for the construction of civil and industrial infrastructure facilities in Afghanistan based on direct agreements (without public procurement procedures).

Presidential Decree No. PP-4892 of 12 November 2020

5. FREE TRADE ZONE IN TERMEZ

A Presidential Decree was adopted that provides for the establishment of the free trade zone “International Trade Center Termez” (“FTZ”). The following regime will apply within the FTZ:

customs, tax, banking, certification, veterinary examination, phytosanitary examination, and foreign currency exchange services will be rendered based on the “one-stop-shop” principle;
citizens of Afghanistan and stateless persons will be able to enter the FTZ for 10 days without obtaining the entry visa after passing the passport control;
foreign goods are placed under the customs regime "free customs zone"; it is allowed to retail them;
the sale of goods and services to foreign citizens and stateless persons within the FTZ as well as the bringing out of goods to the territory of Afghanistan by entrepreneurs conducting activities in the FTZ are considered as an export.

The Fund for Reconstruction and Development will provide a USD 20 mln loan to the municipality of the Surkhandaryo region for the development of engineering - communication and transportation facilities in the FTZ. Customs incentives and VAT deferral for some imported construction materials are granted to general contractors engaged in the construction of facilities in the FTZ.

Presidential Decree No. UP-6109 of 12 November 2020

6. NEW FEES FOR CUSTOM SERVICES

The Cabinet of Ministers approved new rates of customs fees for the provision of customs services. A number of existed fees were abolished or modified and fixed fees are now charged for a greater number of services. The new rates will start to be applied from 1 January 2021.

Resolution of the Cabinet of Ministers No. 700 of 9 November 2020

7. CHANGES IN THE TAX LEGISLATION

A number of changes were introduced in the tax legislation. Hence, among other things, clarifications were introduced in respect of the taxation of interest received by residents and the determination of the total income of individuals. A tax incentive introduced in the Law on the Use of Renewable Energy Sources whereby “manufacturers of renewable energy installations are exempt from paying all types of taxes for a period of 5 years from the date of their state registration” was also abolished.

Law No. ZRU-646 of 9 November 2020

8. PERFORMANCE OF PARTICULAR NOTARIAL ACTIONS

The Cabinet of Ministers adopted 5 new administrative regulations regulating how particular notarial actions are performed. The regulations cover notarial actions in respect of the following:

agreements on transferring real estate objects;
agreements on transferring motor vehicles;
agreements on p ledge/mortgage of property;
power of attorneys;
inheritance certificates.

Resolution of the Cabinet of Ministers No. 726 of 18 November 2020

9. CREATION OF A VENTURE CAPITAL FUND

The Cabinet of Ministers adopted a Resolution on establishing the National Venture Fund “UzVC”. Partnering with other entities, including foreign ones, the Fund will finance venture projects of individuals and legal entities and will support the creation of necessary infrastructure for startups (e.g. co-working spaces, incubators and accelerators, advisory centres).

The initial charter capital of the Fund of UZS 15 bln (approx. USD 1.4 mln) will be formed from the state budget funds. The State Assets Management Agency will act as the owner of the Fund on behalf of the state. It is planned that by 1 April 2021, a private management company will be selected on a competitive basis for managing the Fund.

Resolution of the Cabinet of Ministers No. 684 of 3 November 2020

10. TAX AND CUSTOMS DUTIES EXEMPTIONS ON IMPORTED EQUIPMENT

The Cabinet of Ministers adopted a Resolution on the procedure for making changes and additions to the List of the Imported Technological Equipment, Analogues of which are not Produced in Uzbekistan, on which VAT and Customs Duties Exemptions are Granted (the “List”).

As per the Regulation, in order to arrange the inclusion/exclusion of imported technological equipment/machinery into the List, an interested person/entity should apply to the State Unitary Enterprise “Center for Comprehensive Examination of Projects and Import Contracts under the Ministry of Economic Development and Poverty Reduction of the Republic of Uzbekistan” (the “Center”). The Center will conduct the expertise on whether analogous of the equipment is produced in Uzbekistan within 1 month upon receiving the application. Results of the expertise are submitted to the Ministry of Economic Development and Poverty Reduction, which conducts consultations with other state bodies, as named in the Regulation, and, if there are no objections, submits a relevant proposal on the inclusion/exclusion to the Cabinet of Ministers, authorized to amend the List.

The Resolution also specifies that exemptions on VAT and customs duties apply to new technological equipment not produced in Uzbekistan (i.e. equipment produced no earlier than 3 years before the date of customs clearance) as well as to components and spare parts for it if their supply is agreed upon in the contract on the import of the equipment.

Resolution of the Cabinet of Ministers No. 750 of 27 November 2020

11. SELECTION OF PREQUALIFIED BIDDERS FOR POWER ENERGY PROJECTS

On 3 December 2020, the Ministry of Energy published lists of prequalified bidders for implementing some large projects in power energy: the Sherabad Solar PV PPP Project and the Sirdarya CCGT 1250-1500 MW Project.

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