Tax Alert: 7 January 2014

Presidential Decree No.ПП-2099 of 25 December 2013

Presidential Decree No.ПП-2099 of 25 December 2013 introduced amended rates of certain taxes, as well as other changes to tax legislation.  In this newsletter, we describe the most notable changes effective as of 1 January 2014.

  • Corporate income tax rate is reduced from 9% in 2013 to 8%.
  • Minimum rate of personal income tax (PIT) for monthly taxable income of up to 5 MMW* is reduced from 8% in 2013 to 7.5%.  MMW effective as of 1 January 2014 is to be applied for calculation of PIT during the entire tax year irrespective of further increases of MMW during 2014.
  • Individual pension fund contribution rate is increased from 6% in 2013 to 6.5%.
  • Unified tax payment rates for service companies on proceeds paid by plastic cards are reduced by 5% (previously, it was 10% reduction).
  • Excise tax rates for production, among other items, of alcoholic drinks and cigarettes are increased.
  • Water use tax rates are increased by approximately 1.2 times.
  • Land in Tashkent is divided into five zones (instead of fourteen zones previously used) for land tax purposes, and the land tax rates are increased by 20%.
  • Property tax rate for legal entities is increased from 3.5% in 2013 to 4%.
  • Property tax rate for individuals is increased from 1.04% in 2013 to 1.2%.  Tax rates for individuals owning flats and houses in cities with the total area of more than 200 and 500 square metres respectively, are increased from 1.25% to 1.4% for flats, and from 1.55% to 1.8% for houses.
  • Monthly fee payable by mobile operators for each customer number is increased from Uzbek Soum 500 in 2013 to Uzbek Soum 600.
  • Obligatory revaluation of fixed assets is to be performed by micro firms and small enterprises once in three years (other categories of enterprises that are subject to this requirement should perform revaluation every year).
  • Obligation of maternity allowance to be payable by employers is extended until 1 January 2015 (prior to 1 January 2010 it was paid at the costs of social security bodies).
  • Minimum rates of rental payments for individuals are introduced for non-living space and motor transport. Previously, they were applied only for living space.

The Decree (Annex 34) also extended some exemptions:

  • Reduction of the unified tax payment rate by 50% for micro-firms and small enterprises producing food products, as well as exemption from customs payment (under ПП-1047 dated 26 January 2009) and tax/customs benefits to domestic producers of non-food consumer products (under ПП-1050 dated 28 January 2009) – till 1 January 2016 (previously effective till 1 January 2014).
  • Exemption from customs payments for producers of bank plastic cards and payment terminals (under ПП-433 dated 3 August 2006) – till 1 January 2017 (previously effective till 1 January 2014).

The Decree (Annex 36) introduces amendments to certain legislative acts; the most notable are as follows:

  • Textile enterprises with a ratio in total sale of 80%+ of finished goods or 60%+ of semi-manufactured textiles are exempted from property tax until 1 January 2016.
  • In case of sale of buildings and constructions owned by foreign legal entities or foreign individuals, the state registration of such transaction will be performed only upon provision of a certificate confirming payment of CIT or PIT from income received from such sale.

Double Tax Treaty with the Republic of Estonia

As of 23 December 2013, Convention between the Republic of Uzbekistan and Republic of Estonia for the avoidance of double taxation and prevention of fiscal evasion with respect of taxes on income and capital came into force.

 

*MMW (minimum monthly wage) is set as Uzbek Soum 96,105 (approx. USD 44) as of 15 December 2013 (Presidential Decree No.УП-4582 of 2 December 2013)