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UZBEKISTAN LEGAL NEWSLETTER FOR JANUARY 2024

Some of the most notable general legal developments in Uzbekistan in January 2024 were the introduction of a business stability rating, simplification of some licensing and general regulatory procedures, and changes in the rules and procedures for the lease of agricultural lands. There were also a number of numerous legal acts introducing important regulatory changes in specific sectors, including waste management, the electro-technical industry, pharmaceutics, tourism, and the capital market.

1. BUSINESS STABILITY RATING

The President has signed a Resolution on the introduction of a bussing stability rating for business entities starting from 1 February 2024. The rating will be assigned automatically on a specialized online platform maintained by the Tax Committee through the data exchange among a number of state authorities. It is then published on the website of the Chamber of Commerce and Industry. The following incentives are, among others, available for entities with a high rating (except for state unitary enterprises and entities wherein the state share exceeds 50%):

exemption from tax audits (except for those conducted in the course of criminal investigations);
the right to get a VAT refund within 1 day without an audit;
the right to get a refund of overpaid taxes (except for VAT) within 3 days;
more favorable terms of payment in installments for acquired state assets and non-agricultural land plots (specific requirements and terms apply).

Further incentives are planned to be introduced starting from 1 April 2024.

Presidential Resolution No. PP-39 of 23 January 2024

2. SIMPLIFICATION OF LICENSING REQUIREMENTS

The President has signed a Decree on simplifying specific licensing and regulatory procedures. The following changes have, among other things, been introduced:

a number of specific licenses and permits (e.g. a license for the retail sales of ophthalmic products) have been abolished;
where a business entity is registered or re-registered, its founder’s (shareholder’s) registered/residence address may be specified as this business entity’s postal address;
where a fine is imposed on a legal entity for violating license procedures/requirements, if it is paid within 15 days after the violation, an infringer gets a 50% discount; if within 30 days – a 30% discount;
it is now allowed to check compliance with license requirements with the use of video communication means.

Presidential Decree No. UP-8 of 9 January 2024

3. LEASE OF AGRICULTURAL LANDS

The President has signed a Decree on improvement of the procedure for leasing state-owned agricultural lands. It is, among other things, provided that starting from 1 March 2024, relevant land plots will be leased out for 30 years based on an online electronic auction rather than open trades. A normative value of a land plot will be used as the starting price. Lessees will be able to transfer their lease to a third party if the purpose of using relevant land remains the same and provided (i) a lessee has himself used the land for at least 3 years before an envisaged transfer; (ii) where the land has been provided based on a decision of state authorities, without conducting open trades, at least 5 years have passed from the date of state registration of the lease rights. Winners of online auctions may pay the winning bid in monthly installments for a period of up to 3 years.

The Decrees also envisages the following:

the Ministry of Investments, Industry, and Trade and the Ministry of Justice are instructed to develop legal acts (i) simplifying the procedure for selecting the best offer for implementing an investment project for direct land allocation; (ii) improving the order of allocation of lands to enterprises with foreign investment (i.e. companies with foreign participation);
with respect to irrigated lands, when compensation for losses of a relevant agricultural and/or forestry value is payable (e.g. in cases where such lands are converted into industrial lands), it shall be paid in full in all cases, except for cases where such lands are seized for public needs.

Presidential Decree No. UP-15 of 18 January 2024

4. REFORM OF WASTE MANAGEMENT SYSTEM

The President has signed a Decree on improving the waste management system. It highlights the main deficiencies of the current system and, among other things, envisages the following measures to improve it:

gradual introduction of a comprehensive system of video control and recording of environmental law infringements;
strengthening of responsibility for waste mismanagement;
starting from 1 January 2024, minimum tariffs for waste disposal services will reconsidered annually;
starting from, 1 April 2024, waste management companies shall charge for services to citizens through the Single Electronic System;
starting from 1 June 2024, secondary raw materials being separated from household waste may be sold only through the commodity exchange;
till 1 July 2024, the Ministry of Ecology, Environmental Protection, and Climate Change (the “Ministry of Ecology”) and other state bodies shall develop a list of goods whose package shall provide for information on their recycling;
till 1 August 2024, the Ministry of Ecology shall implement a system of “green subsidies” for enterprises that have introduced eco-friendly methods of recycling wastes specified in Annex 2a to the Decree;
starting from 1 July 2024, business entities using separate real estate in their activities shall purchase waste disposal services from waste management companies based on their public offers (some exceptions apply). Relevant tariffs are set by local counsels;
general waste disposal services are rendered based on public-private partnership agreements between local municipalities (acting as public partners) and waste management companies (acting as private partners);
starting from 1 June 2024, waste management companies having special vehicles provide waste disposal services for such types of waste as industrial, liquid and large-sized household, construction, medical, and toxic chemical waste for separate regulated fees;
starting from 1 January 2025, the transportation of liquid and solid household, construction, medical, industrial, dangerous, and toxic waste will become subject to licensing by the Ministry of Ecology. All special vehicles will have to be equipped with GPS trackers to allow the population to monitor their movement;
starting 1 from November 2024, civil liability insurance will have to be obtained by companies disposing of solid household waste;
starting in 2030, it will be prohibited to place waste suitable for processing and generating alternative energy using the thermal method in household waste landfills;
regional municipalities are allowed to outsource landscaping and public amenities services from third parties based on public-private partnership agreements. In 2024-2025, as an experiment, relevant services for a least one district in each region (oblast) of the country shall be outsourced based on public-private partnership;
till 21 December 2024, the Ministry of Ecology, the Ministry of Economy and Finance, and the municipalities of the Namangan, Syrdarya, Surkhandarya, Jizzakh, Samarkand, and Khorezm regions shall ensure the transfer of territories serviced by the State Unitary Enterprise “Toza Khudud” to waste management companies based on public-private partnership.

Presidential Decree No. UP-5 of 4 January 2024

5. DEVELOPMENT OF ELECTRO-TECHNICAL INDUSTRY

The President has signed a Resolution on developing the electro-technical industry. The following is provided in the Resolution:

a target to increase the processing of copper up to 140 thsd tons in 2024 and up to 160 thsd tons in 2025 and to increase the manufacturing and export of electrical products;
reduction of income tax and property tax rates by 50% till January 2027 for enterprises in the electrical industry, at least 80% of total revenue of which is gained from the sale of electrical products. Funds retained as a result of the reduction shall be used for developing relevant production facilities;
in 2024-2026, to provide commercial banks with funds for financing projects in the electro-technical industry, (i) the Fund for Reconstruction and Development will open credit lines for a total amount of USD 100 mln; (ii) credit lines for a total amount of USD 400 mln will be attracted from international financial institutions and foreign banks;
starting from 1 February 2024, the import of specific products (as listed in Annex 3 to the Resolution) into the territory of Uzbekistan will require the presence of authorized representatives or official dealers of manufacturers to ensure their quality, safety, and service guarantees;
the “Eltech Industrial” technopark will be created on the basis of the “Ohangaron Tech Industrial” technopark for manufacturing high-tech electrotechnical products and relevant components;
starting from 1 April 2024, domestic manufacturers of electrical products participating in public procurement procedures with the involvement of foreign manufacturers will have price advantages (the amount of the advantage will depend on the number of domestic manufacturers participating in a relevant procedure).

Presidential Resolution No. PP-15 of 10 January 2024

6. DEVELOPMENT OF THE PHARMACEUTICAL INDUSTRY

A Presidential Resolution on the development of the pharmaceutical industry has been issued. It, among other things, envisages the following:

a target is set to ensure that the share of locally produced pharmaceutical products reaches 70% by 2030;
state-owned Asakabank will get access to a credit line from the Fund for Reconstruction and Development in the amount of USD 100 mln and will attract USD 500 mln from international financial institutions and foreign banks to finance investment projects in pharmaceutics;
a “Biotechnology Cluster” will be established on the territory of the innovative scientific and production pharmaceutical cluster “Tashkent Pharma Park” and an additional territory of 60 ha for implementing projects for developing and manufacturing high-tech biopharmaceutical products;
the Ministry of Health is instructed to annually, till 1 December of each year publish on its website information on demand for pharmaceutical products for a next year;
starting from 1 March 2024, when public entities purchase pharmaceutical products, each procurement position shall relate to one type of pharmaceutical products only (based on a relevant international nonproprietary name);
starting from 1 January 2025, all non-centralized purchases of pharmaceutical products by medical institutions shall be gradually centralized.

Presidential Resolution No. PP-14 of 10 January 2024

7. DEVELOPMENT OF TOURISM

The President has signed a Decree on the development of tourism, which, among other things, provides for the following:

the creation of (i) tourist centers consisting of modern hotels (accommodation facilities) and shopping and entertainment complexes with an area of over 5,000 sq.m in districts and cities with a high tourist potential; (ii) large shopping complexes consisting of duty-free shops and retail stores of international brands on the territory of the recreational zone “Zomin”, the all-season resort “Chimgan”, and the ski resort “Amirsoy”;
the opening of a credit line of USD 200 mln for financing projects in tourism;
from 1 March 2024 to 1 March 2026, imported equipment, machinery, furniture, and materials for the construction, and reconstruction of hotels and accommodation facilities, analogues of which are not produced in Uzbek, as per approved lists, will, among other things, be exempted from customs duties.

Presidential Decree No. UP-9 of 12 January 2024

8. SPECIAL REGULATORY REGIME IN CAPITAL MARKET

The National Agency for Promising Projects has adopted a Regulation introducing a special legal regime “Regulatory Sandbox” in the capital market. As per the Regulation, a foreign legal entity registered in one of 38 recognized jurisdictions (most EU member states, Australia, China, Japan, Turkey, the UK, the USA, etc.) and licensed to operate in relevant capital markets may apply to the Agency to get access to the Uzbek capital market. Successful applicants may, among other things, engage in the following activities:

foreign investment intermediaries may act as an investment intermediary in Uzbekistan;
foreign nominee holders may open securities accounts and carry out their activities directly or through an agent;
foreign nominee holders, including custodian banks, may open accounts in foreign and national currencies with the Central Bank and deposit accounts with the Central Securities Depository and in the depository system of the national foreign currency exchange;
foreign legal entities trading securities at organized trades may open accounts in the national currency in commercial banks;
foreign nominee holders may carry out relevant activities in Uzbekistan without obtaining a license, establishing a subsidiary, or participating in the charter capital of a local legal entity;
qualification certificates of employees of foreign investment intermediaries obtained in a recognized jurisdiction allow these employees to carry out transactions in Uzbekistan without obtaining a local qualification certificate.

Order of the Director of the National Agency for Promising Projects No. 3493 of 29 January 2024

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Sincerely,
Kosta Legal Law Firm

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