Tax Alert: 12 February 2014

Extensions of rights and enhancement of guarantees for foreign investors

Law of the Republic of Uzbekistan No.ЗРУ-365 of 20 January 2014 introduced a number of amendments to the legislation regulating activities of foreign investors in Uzbekistan, including Tax Code, Law on foreign investments, Law on guarantees and protection of foreign investors’ rights, Law on customs tariff and others.  We have summarized the most notable amendments below.

Tax Code

Investments made by Uzbek citizens permanently residing outside of Uzbekistan are excluded from the list of investments that are treated as private foreign direct investments.

Criteria for eligibility of enterprises with foreign investment for tax exemptions were revised in the Tax Code to bring it in line with other legislative acts in this area; the current criteria are as follows:

  • Enterprise should be located in regions as specified by legislation (previously it was that all regions that are difficult to access that qualified for tax exemptions);
  • Direct private foreign investments are made without provision of guarantees of the Republic of Uzbekistan (no changes);
  • Share of foreign capital of enterprises should not be less than 33 percent (previously, not less than 50 percent);
  • Foreign investments should be made in hard currency or new/modern technological equipment (no changes);
  • Not less than 50 percent of the respective tax savings should be reinvested for further development of enterprises (previously, it was that all savings should have been reinvested).

Law on foreign investments

  • Foreign investments can now be made in the form of ‘acquisition of a right for exploration, prospecting and mining of mineral resources under production sharing agreements’.
  • State registration of legal entities with foreign investments, as well as execution of all necessary licensing documents should be performed by respective state authority through “one window”.
  • The right of foreign investors to dispose of their income received from investment activity (including repatriation) can be executed only after payment of taxes and other obligatory payments.
  • Article 12 of the Law of foreign investments was supplemented by the following paragraph (a ‘grandfathering’ clause).  Specifically, ‘Newly established enterprises with foreign investment in the amount not less than USD 5 million, despite of changes in the tax legislation, can apply for the period of 10 years the norms and regulations on payment of taxes and other obligatory payments that were effective at the date of state registration of such enterprises’.

Law on guarantees and protection of foreign investors’ rights

In accordance with the amendments introduced to the Article 4, additional guarantees for foreign investors (previously provided by special decisions of the Government) can be now provided by decisions of President or Government, which should either lay out terms and commitments of the foreign investors or approve investment agreements between the Government and the foreign investors.


List of technological equipment was updated

New edition of the list of technological equipment exempt from import customs duty and value added tax was approved by Resolution of the Ministry of Economy, Ministry of Finance, Ministry of Foreign Economic Relations and Trade and State Tax Committee, registered by the Ministry of Justice No.2436-1 of 16 January 2014.

Changes affected two trade positions – 8415 and 8704.  At your request we can provide you details of the changes introduced.