In October 2021, some of the most notable legal developments in Uzbekistan were changes in the legislation on geological exploration and the use of subsoils, additional measures to support the import of goods not produced in Uzbekistan, measures to support exporters, and the adoption of the Presidential Resolution on digitalizing insurance services. It was also provided in Presidential Resolution No. PP-5268 that the government would assist businesses with mitigation of their foreign currency exchange risks by, among others, requesting local banks to convert some of the loans they extended to businesses in a foreign currency into loans in the national currency.
1. GEOLOGICAL EXPLORATION AND USE OF SUBSOILS
The President has signed a Decree “On Stimulation of Geological Exploration and Improvement of the Order of Subsoil Users’ Taxation”. The following is, among others, envisaged by the Decree:
- legal entities performing geological exploration works, as well as contractors and subcontractors attracted by them, get VAT reimbursements within 30 calendar days upon submitting a relevant application and are exempted from, among others, customs duties on the import of relevant equipment not produced in Uzbekistan and included in a special list;
- starting from 1 October 2021:
- a “zero” rate of the excise tax will apply to exported natural gas;
- legal entities importing natural gas are exempted from relevant customs duties.
- starting from 1 January 2022,
- a special procedure will be introduced for tendering the right to use a subsoil plot for geological exploration or mining of hydrocarbons, precious, non-ferrous, rare, or radioactive metals, or other types of ore minerals. The relevant sale price will be considered as a premium for the right to use subsoils;
- the land tax will no longer be applied to legal entities using land plots for geological exploration and prospecting;
- an annual license fee will be introduced for the use of subsoil plots for geological exploration; it is calculated based on the area of a plot and types of extracted minerals;
- the payment of commercial discovery bonuses for the right to extract minerals and signature bonuses for the right to conduct exploration and prospecting works will be cancelled;
- the Ministry of Finance and other state bodies are instructed to develop draft amendments to the Tax Code envisaging the following starting from 1 January 2022:
- a reduction of the subsoils use tax for particular minerals: for gas and oil – down to 10%; for gold and copper – to 7%, etc.;
- the introduction of a tax on the rental income for subsoil users engaged in the extraction of oil, natural gas, gas condensate, precious, non-ferrous, rare, and radioactive metals at new fields with consideration of capital expenditures of such subsoils users;
- the exemption of legal entities from the property tax on new oil and gas wells during the first 2 years of such wells operation and the reduction of the property tax rate by 50% for the following 3 years.
Presidential Decree No. UP-6319 of 6 October 2021
2. PAYMENT OF TAXES AND CUSTOMS DUTIES IN INSTALLMENTS
Changes related to payment of taxes and customs duties in installments have been introduced to the Tax and Customs Codes. Hence, among others:
- according to amended Article 99 of the Tax Code, the tax authorities have the right to allow taxpayers to pay taxes specified in Article 17 of the Tax Code (including VAT, the profit tax, the excise tax, the property tax, etc.) as well as the turnover tax in installments without such taxpayers’ pledging property, providing a surety or a bank guarantee (except for in cases of the income tax for individuals, the social tax, the profit tax withheld by a source of payment, and VAT paid by a tax agent).
- according to new Section 31 of Article 100 of the Tax Code, a deferral or the right to pay a tax in installments may be, among others, provided to a person/entity that has been operating for more than 3 years and has been paying taxes on time, but whose current financial situation does not allow to repay some tax arrears on time;
- according to amended Article 329 of the Customs Code, the permission to make customs payments in instalments may be given to, among others, persons/entities engaged in foreign trade who have been importing goods for more than 3 years and have been making customs payments on time, but whose current financial situation does not allow them to make customs payments on time.
Law No. ZRU-722 of 14 October 2021
3. CUSTOMS BENEFITS FOR IMPORTED GOODS
The President has signed a Decree on the provision of customs benefits in respect of particular imported goods. The Decree, among others, provides for the following:
- the prolongation of customs benefits provided with respect to certain categories of products till 1 January 2024. Relevant products, among others, include new medical equipment; new ambulances for non-governmental medical organizations; equipment, machinery, and materials for constructing and equipping hotels and other accommodation facilities; warehouse equipment, loading and unloading equipment;
- the full exemption of particular products from customs payments for the period from 1 October 2021 till 1 January 2024. Relevant products, among others, include special equipment for educational establishments (as included into a relevant list), new dental and cosmetic equipment imported by legal entities; non-prohibited slot machines;
- till 1 January 2024, a zero-rate utilization charge is payable on wheeled vehicles being not older than 4 years and meeting the environmental standards Euro-5 or higher.
Presidential Decree No. UP-6318 of 30 September 2021
4. CUSTOMS DUTIES ON IMPORTED RAW MATERIALS
The President has signed a Resolution providing for the setting of a zero-rate customs duty on the import of 82 categories of raw materials, including asbestos, coloring matter of a plant or animal origin, textile paints, ready-made adhesives, artificial fur, cotton and linen fabrics, fabrics made of synthetic and artificial multifilament yarns.
Presidential Resolution No. PP-5262 of 20 October 2021
5. REIMBURSEMENT OF TRANSPORTATION EXPENSES OF EXPORTERS
The Cabinet of Ministers has approved a Regulation on reimbursing expenses of businesses for transporting exported products by road, air, or rail. According to the Regulation, up to 50% of the relevant expenses may be reimbursed to an exporter by the State Agency for the Export Promotion under the Ministry of Investments and Foreign Trade, provided the following criteria are met:
- exported products are some of those provided in the list set by the Presidential Resolution No. PP-4707 of 7 May 2020 and have been produced in Uzbekistan;
- the exporter must be registered in Uzbekistan;
- products are exported to countries not bordering Uzbekistan (except for Afghanistan and other countries, when allowed by law);
- exported products have been placed under the customs regime “export” (except for products worth less than USD 5,000 exported by mail);
- it is the exporter who bears transportation costs under a relevant export contract, in accordance with Incoterms.
Relevant applications for the reimbursement are to be submitted to the Export Promotion Agency (directly, by mail, or electronically).
Resolution of the Cabinet of Ministers No. 618 of 4 October 2021
6. MITIGATION OF FOREIGN CURRENCY EXCHANGE RISKS
The President has signed a Resolution on measures for reducing foreign currency exchange risks of Uzbek businesses and assisting them with the performance of loan obligations in a foreign currency. The Resolution, among others, provides for the following:
- commercial banks must convert loans for up to USD 1 mln extended to businesses in a foreign currency into the national currency;
- where the above loans are converted, the State for Supporting Entrepreneurial Activities will reimburse interest rate expenses to some businesses (a number of reservations apply);
- starting from 1 November 2021, loans in a foreign currency raised from international financial institutions and foreign government financial organizations on behalf of the Republic of Uzbekistan for the purpose of financing entrepreneurial projects will have to be re-credited to financial organizations participating in the projects for a period of not less than 10 years or for a term of such loans attraction.
Presidential Resolution No. PP-5268 of 27 October 2021
7. PRE-QUALIFICATION IN PUBLIC PROCUREMENT
The State Assets Management Agency and the Ministry of Finance have approved a Sample Regulation for Conducting the Pre-Qualification Procedure in Public Procurement. Both corporate purchasers (i.e. generally, state-owned enterprises and their affiliates) and budget purchasers (i.e. state agencies and establishments) may use the Regulation. The pre-qualification procedure established in this Regulation shall apply where such procurement methods as a selection of the best offer or a tender are used. Where a potential supplier passes the pre-qualification procedure, he may participate in relevant procurement procedures for up to 1 year.
Resolution of the State Assets Management Agency and the Ministry of Finance No. 3324 of 9 October 2021
8. PROVISION OF INSURANCE SERVICES
The Presidential Resolution “On the Measures for Digitalizing the Insurance Market and Developing the Sphere of Life Insurance” has been adopted. Some of the measures provided by the Resolution include the following:
- starting from 1 July 2022, it will be allowed to provide all categories of insurance services online. All insurance policies will have to be registered with the Single Automated Information System, maintained by the Agency for the Development of the Insurance Market under the Ministry of Finance and the Insurance Payments Guarantee Fund;
- starting from 1 January 2023, the practice of issuing paper insurance policies shall be abandoned;
- from 1 January 2022 to 1 January 2025, for entities engaged in the provision of life insurance services, a rate of the profit tax will be reduced by 50%;
- a Road Map for developing the sphere of life and personal insurance services in 2021-2023 has been approved.
Presidential Resolution No. PP-5265 of 23 October 2021
Have a good day!
Kosta Legal Law Firm