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General legal newsletter for September 2020

In September 2020, some legal acts on real estate, land, and environmental control were approved. The Uzbek government also took a number of decisions on the implementation of nation-wide projects in energy, telecommunications, water supply and sanitation services, and the waste management. It follows from these acts that the government wants to expand the use of PPP mechanisms across the economy.

It seems that in September, the results of the President Mirziyoyev’s visit to Japan in December 2019 were also summed up. Legal acts on some of the projects above provide that they will be implemented with the support of the Japan International Cooperation Agency. Moreover, the Convention for the Avoidance of Double Taxation with Japan was approved by Uzbekistan and replaced the earlier Convention between Japan and the Soviet Union.

1. IMPROVEMENT OF THE STATE CADASTRAL SYSTEM

In September 2020, significant changes were introduced in the cadastral system (i.e. the system of accounting and control over lands and real estate objects):

the State Cadaster Committee was reorganized into the Cadaster Agency under the State Tax Committee of the Republic of Uzbekistan. The Committee’s role, functions, and powers with regard to agricultural land plots were transferred to the Ministry of Agriculture;
the “National Geoinformation System” started to be launched: all transactions related to land will now be recorded in the system; it is envisaged that by 1 January 2021, it will be accessible online and will include comprehensive information (characteristics, boundaries, owners, etc.) about all lands in the country; it is to note that the launching of the system will not entail changes in the procedures for obtaining state services related to land and real estate – individuals and legal entities will still have to apply to one-stop-shop centers providing state services.
5 administrative regulations сontaining step-by-step instructions in respect of the state registration of rights to real estate objects via the State Service Centers (online or in person) were approved. They include instructions on (i) obtaining cadaster passports (that will no longer contain information on title holders), (ii) the registration of mortgage agreements, (iii) the registration of real estate lease agreements, (iv) the registration of easement rights, (v) obtaining extracts regarding a number of property objects registered in the name of a certain entity/individual.

Resolution of the Cabinet of Ministers No. 535 of 2 September 2020
Presidential Decree No. UP-6061 of 7 September 2020
Presidential Decree PP-4819 of 7 September 2020

2. LEASE OF AGRICULTURAL LANDS

A number of amendments were introduced into the Land Code:

Provisions on cases when agricultural and forest lands may be leased and subleased were added in newly introduced articles 24¹, 24² и 24³. In accordance with them,

agricultural and forest lands may be leased under PPP and investment projects in the agricultural sector for the period of at least 3 years, but not more than for 49 years based on the following rules:

irrigated and rainfed lands that have been withdrawn from the agricultural use may be leased to citizens of Uzbekistan and agricultural enterprises;
unused forest lands may be leased to individuals and legal entities;
pastures, fallow lands, and lands with perennial plantings may be leased to citizens of Uzbekistan, agricultural enterprises, as well as investors-residents of Uzbekistan;

agricultural lands may be subleased to individuals and legal entities (without the right to transfer them to third parties) for growing agricultural products for the following term:

under PPP and investment projects - for the term determined in the relevant sub-lease agreement, but not exceeding the term of the relevant lease agreement;
in other cases – for up to 1 year.

Sublease agreements will be subject to the stage registration. More detailed rules for subleasing agricultural lands will soon be developed by the Cabinet of Ministers.

Law No. ZRU-639 of 29 September 2020

3. STATE ENVIROMENTAL EXPERTISE

The Regulation on the State Environmental Expertise (conducted in respect of planned and conducted economic activities) was revised. Some of major changes is clarification of procedures for public discussion of projects (activities) with a high and moderate degree of environmental risk and the introduction of an electronic system for the state expertise. The Classifier of Riskiness of Economic Activities was also slightly amended.

Based on the approved Regulation on Conducting Public Discussions of Projects Rendering Negative Impact on Environment, relevant public discussions must involve a project owner, interested persons, and mass media. Discussions are organized by local municipalities (khokimiyats), but costs of organizing such discussions have to generally be covered by a project owner.

Resolution of the Cabinet of Ministers No. 541 of 7 September

4. ELECTRONIC DATABASE FOR NON-RESIDENTS

By 1 January 2021, the government of Uzbekistan intends to create a single electronic database of non-residents carrying out their activities without the incorporation of a local legal entity, i.e. legal entities operating through a representative office, a branch office, or a permanent establishment and individuals engaged in the entrepreneurial activity. The database will be maintained by the State Tax Committee. The creation of the database is aimed to enhance inter-agency cooperation, eliminate unnecessary bureaucracy, ensure better tax control. It will be the responsibility of state authorities to enter all corresponding data into the database.

Particular details to be stored in the database are listed in the Annex 2 to the relevant Regulation. It is specified in the Annex what information will become publicly available.

Resolution of the Cabinet of Ministers No. 539 of 4 September 2020

5. DOUBLE TAXATION TREATY WITH JAPAN

The President approved the Convention for the Avoidance of Double Taxation with Japan replacing the analogous Convention between Japan and the USSR, having been in force in Uzbekistan. In accordance with the Convention, which will enter into force on 17 October 2020, double taxation of incomes received by Japanese or Uzbek companies and individuals in one of the contracting countries will be eliminated fully or partially depending on a tax.

This Convention will start to be applied based on the following rules:

in Japan:

- for taxes levied based on a tax period: to taxes for each tax period starting from 1 January 2021.
- for taxes not levied based on a tax period: to taxes levied from 1 January 2021

in Uzbekistan:

- for withholding taxes: to taxable income received from 1 January 2021
- for other taxes: to taxes levied for each tax period beginning on 1 January 2021.

Presidential Decree No. PP-4826 of 15 September 2020
Presidential Decree No. PP-4827 of 15 September 2020

6. RULES FOR PROJECTS IN THE WATER SUPPLY SECTOR

For improving the quality of investment projects in the water supply sector, the President adopted a Decree introducing a number of relevant changes.
Starting from 1 October 2020:

relevant projects will now be discussed, approved, and monitored by the regional Counsels of People's Deputies (Kengashes) (in addition to other involved state authorities);
JSC “Uzsuvtaminot” will be involved in examining feasibility studies, jointly with local municipalities, design organizations, and the State Committee for Geology and Mineral Resources;
tariffs for water supply and sewage services rendered by utility organizations in regions will have to be pre-approved by regional Kengashes upon obtaining opinions of the Antimonopoly Committee and the Ministry of Finance.

A list of districts and cities, water supply and sewerage systems of which will be transferred to business entities in 2021-2022 using PPP mechanisms is also attached to the Decree (as Annex 1). It is planned that 30 such projects will be implemented. Corresponding tender announcements are envisaged to be published on the websites of JSC “Uzsuvta’minot” and the PPP Development Agency by 1 June 2021. It is to note that it is set by the Decree that starting from 1 January 2021, private bidders/suppliers of water treatment equipment/technologies who offer continues service support and uninterrupted supply of spare parts for the equipment/technologies will get preferential treatment.

Presidential Decree No. UP-6074 of 25 September 2020

7. DEVELOPMENTS IN THE WASTE MANAGEMENT SECTOR

The President signed a Decree aimed at improving the management system for household and construction wastes. In accordance with the Decree, wider use of PPP mechanisms is envisaged among other things. It is set that public partners will:

assign territories where the services are required;
provide a private partner with a waste landfill for long-term use on the condition that the private partner will apply waste sorting and processing technologies as well as make/attract additional investments;
sell owned special vehicles and equipment to a private partner at a price determined by an appraisal organization, allowing payment in installments within 7 years.

Private partners are expected to take the following obligations (besides for those above):

to create the possibility for a public partner to monitor the movement of special vehicles and equipment as well as to monitor landfills in real time;
to ensure connection of its systems to a unified electronic system for collecting and keeping records of mandatory payments of individuals and legal entities for services for the collection and removal of solid household wastes.

The Road Map for the Implementation of PPP Projects in the Waste Management Sector for 2020-2021 was also approved by the Decree. According to the Road Map, it is scheduled to reveal concepts of corresponding projects in August 2021. Expected direct investments to be attracted for each project vary from USD 2.2 mln to USD 7.5 lmn.

Besides for the PPP-related measures, the Decree provides for other measures related to the waste management. Hence, among other things, starting from 1 January 2020:

tariffs for services for the collection and removal of solid household wastes in regions will have to be pre-approved by regional Kengashes upon obtaining opinions of the Antimonopoly Committee and the Ministry of Finance;
all waste generated during construction works will have to be sent for the re-use, recycling or disposal;

project development documentation for construction works will have to include assessment of volumes of construction waste, determine places for its collection, and provide for how waste management works will be performed.

Presidential Decree No. PP-4845 of 29 September 2020

8. INVESTMENT PROJECTS IN THE ENERGY SECTOR I

Based on the relevant Resolution of the Cabinet of Ministers, a project for the construction of a third combined-cycle gas plant (CCGT) with a capacity of 650 MW will be implemented at the Navoi thermal power plant within 5 years (2020-2024). One of the main features of the project is the use of modern energy-efficient technologies. A project sponsor to be selected on a tender basis.

For the purposes of the project, the Japan International Cooperation Agency (JICA) provides a loan in Japanese yen equivalent to USD 1,2 bln. JSC “Navoi Thermal Power Plants” is determined as an entity responsible for implementing the project and will enter into a direct agreement with ”Tokyo Electric Power Services Co., Ltd.” (Japan), which will provide consulting services for the organization and holding of tenders.

The project falls under the category of projects to which some tax incentives introduced by the Presidential Decree No. PP-3857 are applicable until 1 July 2021.

Resolution of the Cabinet of Ministers No. 549 of 9 September 2020

9. INVESTMENT PROJECTS IN THE ENERGY SECTOR II

Within the framework of the investment project "The Development of the Potential of the Electric Power Sector (Phase 2)”, the Japan International Cooperation Agency (JICA) provides a loan of about USD 345,5 mln to the Uzbek government for carrying out the maintenance of gas and gas turbine equipment at operating thermal power stations, ensuring their stable and reliable operation, and carrying out planned inspections. The project will be implemented in 2020-2026. The following steps are envisaged under the project:

state-owned JSC “Navoi Thermal Power Plants” and UE “Turakurgan Thermal Power Plants” will enter into direct agreements on technic and consulting services with the Japanese companies “Mitsubishi Hitachi Power Systems Ltd.” and “Mitsubishi Corporation”;
state-owned JSC “Tashkent TTC” will enter into direct agreements on technic and consulting services with “Mitsubishi Hitachi Power Systems Ltd.” and “ITOCHU Corporation”.

All imported equipment/materials for steam and gas installations and gas turbines under this project will not subject to the mandatory certification requirements. Some tax benefits envisaged by the Presidential Decree No. PP-3857 apply to the project.

Resolution of the Cabinet of Ministers No. 555 of 15 September 2020

10. INVESTMENT PROJECT IN TELECOMMUNICATIONS

The Cabinet of Ministers adopted a Resolution approving the implementation of several investment projects aimed at the development of the country’s telecommunications infrastructure with the assistance of Japan Bank for International Cooperation (JIBC) and the Japanese bank “Sumitomo Mitsui Banking Corporation”. The Japanese institutions will provide loans to state-owned JSC “Uzbektelecom”, which is an entity responsible for the implementation of the projects. The projects include:

the establishment of data storage and processing centers with a total capacity of at least 100 petabytes to provide modern telecommunication services to the population and businesses - USD 108,9 mln;
expansion of international packet switching centers of JSC “Uzbektelecom” for expanding the combined bandwidth of the external Internet channels up to 3000 Gbit/s - USD 52,5 mln;
expansion of the data transmission network of JSC “Uzbektelecom”, including the delivery, installation, testing, and launch of equipment based on IP/MPLS and DWDM technologies for increasing the transmission speed up to 400 Gbit/s - USD 32,3 mln.

Corresponding technical-economic feasibility studies are attached to the Resolution for each investment project.

Resolution of the Cabinet of Ministers No. 547 of 9 September 2020

11. LIQUIDATION OF STATE-OWNED HOLDING COMPANY "UZBEKOZIQOVQATHOLDING"

As part of government’s de-statization endeavors, it was decided that state-owned JSC “Uzbekoziqovqatholding”, being a major holding company in the food industry, would be liquidated. Shares of 36 entities owned by the holding company, as listed in the Annex to the relevant Resolution, were transferred to the Agency for State Assets Management, except for shares in 2 banks - Uzagroeksportbank and Agrobank, which were transferred to the Ministry of Finance.

The Agency for State Assets Management was instructed to begin preparations for selling the transferred shares to the private sector. It is planned to hold and complete relevant public trades by March 2021.

Presidential Decree No. PP-4821 of 9 September 2020
Resolution of the Cabinet of Ministers No. 581 of 23 September 2020

12. PRICE CONTROLS FOR ALCOHOLIC PRODUCTS

The minimum wholesale and retail prices for alcoholic beverages were increased by 1.1 times. As specified in the relevant table with the minimum prices, the following minimum prices are effective from 1 October 2020 (per 1 liter):

wine – UZS 9,400 (the wholesale price) and UZS 11,200 (the retail price);
cognac (brandy) – UZS 33,000 and UZS 39,000;
vodka and other alcoholic beverages (except for beer) – UZS 24,000 and UZS 28,500.

Resolution No. 3188-1 of 29 September 2020

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Kosta Legal Law Firm

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