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General legal newsletter for September 2022
Some of the most notable legal developments in Uzbekistan in September 2022 were the adoption of the new Law on Electronic Commerce, measures to support the development of low-power renewable energy projects and business entities - exporters, improvement of the procedures for conducting state audits, reorganisation of the Direct Investment Fund, and approval of lists of medical products exempted from customs duties.
1. NEW LAW ON E-COMMERCE
On 29 September 2022, a new edition of the Law “On E-Commerce” has been adopted. It enters into force on 31 December 2022. The following is, among others, provided in the new edition of the Law:
- contracts in e-commerce may be concluded by accepting an electronic offer. Acceptance is provided in the form of an electronic document verified by an electronic digital signature; in the form of an electronic message containing consent, or by performing actions to satisfy the terms of a relevant offer;
- contracts in e-commerce must be stated in the Uzbek language; they may be accompanied by a translation into other languages;
- payments under relevant contracts can be made in cash; by transfers from bank accounts; with e-money;
- trading platform operators, payment service providers, and legal entities providing services for the delivery of goods (works, services) can now implement escrow services in their information systems or bank accounts i.e. funds paid by a purchaser are withheld by an escrow service provider until obligations under a relevant e-commerce contract are performed by a seller;
- the Ministry for the Development of Information Technologies and Communications is designated as a state regulator in the area of e-commerce.
Law No. ZRU-792 of 29 September 2022
2. DEVELOPMENT OF LOW-POWER RENEWABLE ENERGY PROJECTS
A Presidential Decree on implementing energy-saving technologies and developing low-power renewable energy projects has been adopted. The following is, among others, envisaged by the Decree:
- starting from 1 January 2023:
- where new or reconstructed educational, medical, cultural, sport, multi-apartment residential, and some other categories of facilities are designed and commissioned, at least 25% of their hot water consumption must be covered by installing solar water heaters (some reservations apply);
- it is prohibited to start construction works if the energy efficiency section of relevant design documentation does not provide for the installation of renewable energy devices;
- it is prohibited to commission new buildings and structures, in which the use of hot water is intended if the installation of solar water heaters is not envisaged (except for individual residential houses).
- reduced rates of income tax and property tax will apply to legal entities, whose main activity is the production of installations for solar, wind power plants, and small hydroelectric power plants for 3 years starting from the date of their state registration;
- a list of potential projects for the construction of micro-hydroelectric power plants with a capacity of up to 500KW has been approved (Annex 3 to the Decree);
- a scheme for attracting investors to finance and construct hydroelectric power plants with a capacity of up to 5MW has been approved (Annex 4 to the Decree); it is, among others, provided that investors/initiators for relevant projects are chosen based on results of electronic auctions.
Presidential Decree No. UP-220 of 9 September 2022
3. STATE SUPPORT FOR BUSINESS ENTITIES - EXPORTERS
Presidential Decree No. UP-228 has provided new measures for supporting business entities – exporters, including the following:
- the state program “Uzbekistan – a Country of Useful Products” is introduced. The program envisages that top exporters meeting particular criteria are selected by the Ministry of Investments and Foreign Trade through conducting an open competition. Selected exporters are, among others, entitled to an expedited refund of VAT in cases stipulated in the Decree and financial aid of the Export Support Fund (specific thresholds apply);
- starting from 1 November 2022, if the amount of funds in a foreign currency that has not been received under a single export contract of an exporter does not exceed 5 % of the value of all products shipped for export, it shall not be considered as overdue receivables and no fines shall be applied to the exporter;
- starting from 1 November 2022, incentives in the form of a reduction of the tax base for income tax and turnover tax shall apply to exporters regardless of the share of exports in their total revenue from the sale of goods (works, services).
Presidential Decree No. UP-228 of 30 September 2022
4. STATE AUDITS (INSPECTIONS) OF BUSINESS ENTITIES
The President has signed a Decree improving procedures for conducting state audits (inspections) of business entities. Some of the measures envisaged by the Decree include the following:
- it is established that state bodies conducting an audit (i) shall notify business entities on conducting an audit, based on results of the “risk analysis” system, no later than 10 business days in advance; (ii) shall not conduct an audit in respect of periods that have already been audited and demand documents already provided by a business entity;
- starting from 1 November 2022, all state audits in respect of business entities shall be registered in the electronic system “Unified State Control”; a state audit is deemed illegal if not registered;
- starting from 1 January 2023, inspection bodies are prohibited to exercise audit (inspection) functions, if such functions are not listed in a special state register of the above system;
- the Regulation on the Procedures for Conducting State Audits and Taking Preventive Measures in respect of Business Entities’ Activities has been adopted (see Annex to the Decree).
Presidential Decree No. PP-374 of 13 September 2022
5. REORGANIZATION OF DIRECT INVESTMENT FUND
The President has signed a Decree on improving the operation of the Uzbekistan Direct Investment Fund, which, among others, envisages the following:
- the Fund will be reorganized into a limited liability company with a charter capital of USD 100 mln, which will be gradually increased up to USD 1 bln;
- the Fund will carry out investment activities by acquiring participatory interests/shares in business entities (up to 49%), acquiring property, providing loans, and in other forms permitted by law;
- the maximum amount of the Fund’s investments into a project may not exceed 49% of the total amount of investments into the project;
- the Fund may invest in projects through holding companies established jointly with entrepreneurs in regions.
Presidential Decree No. UP-215 of 7 September 2022
6. LISTS OF MEDICAL PRODUCTS EXEMPTED FROM CUSTOMS DUTIES
Following Presidential Decree No. UP-55 of 21 January 2022, the Cabinet of Ministers has approved lists of medical and laboratory equipment, its components, spare parts, raw materials, medical products, and packaging materials for pharmaceutical production exempted from customs duties till 1 January 2025. Where imported products have been misused for 3 years starting from the date of their conditional import in Uzbekistan in accordance with the Customs Code, the relevant exemption terminates.
Resolution of the Cabinet of Ministers No. 519 of 21 September 2022
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Sincerely,
Kosta Legal Law Firm