11.06.2024
Uzbekistan: Legal Update
1. Changes in the insolvency law
2. The Rating of sustainability of business entities is being formed
3. The requirement to submit 8 types of reports of business entities has been abolished
4. A system of registration of consignment notes in electronic form will be introduced
6. Executive documents will be issued in electronic form
7. The limitation period for taxes in Uzbekistan has been reduced to 3 years
8. Currency operations rules have been amended
9. An International Center for Digital Technologies will be established in the IT Park area
10. Some customs procedures will be improved
11. The range of services provided by residents of the IT Park has been expanded
12. The basis for suspending the validity of VAT certificates has been changed
1. Changes in the insolvency law
On February 22, 2024, Law No. 911 "On Amendments and Additions to Certain Legislative Acts of the Republic of Uzbekistan in connection with the adoption of the Law of the Republic of Uzbekistan "On Insolvency" came into force.
The document amended 25 laws and provisions relating to various aspects of insolvency. Thus, changes have been made to the norms of the Criminal, Civil Codes and the Code of Administrative Responsibility.
In particular, the amendments made to the Civil Code allow the court to recognize an individual as insolvent. To do this, it must be proved that it is unable to satisfy creditors' claims or fulfill duties on taxes and fees.
The inability to fulfill tax obligations may also become the basis for recognizing an individual entrepreneur or a legal entity as insolvent. The clause on mandatory liquidation of an insolvent legal entity has been deleted.
Amendments have been made to the Tax Code, according to which:
- during the procedure of judicial reorganization or external management, all current tax payments are suspended, with the exception of income tax on employment contracts and civil law contracts, as well as social contributions. Thus, the tax arrears formed during the reorganization or external management can be paid in installments. In this case, the specified debt is payable in equal installments within 6 months from the date of approval by the court of the report, the rehabilitating manager or the external manager and the issuance of a ruling on the termination of insolvency proceedings;
- the share of funds received from the sale of the debtor's property declared bankrupt and aimed at paying off the debt is not taken into account as the debtor's income. A court administrator involved in insolvency cases is allowed to file lawsuits and other applications to the court without paying a state fee. Later, the expenses will be reimbursed at the expense of the debtor's property out of turn.
2. The Rating of sustainability of business entities is being formed
On January 23, 2024, the Presidential Decree "On measures to implement the Sustainability Rating of business entities" No. PP-39 was adopted.According to the Resolution, starting from February 1, 2024, the Sustainability Rating of Business Entities is being introduced, which provides for the identification and additional encouragement of business entities operating in compliance with legal requirements.
According to the Rating, business entities are divided into the following categories:
- categories "AAA", "AA" and "A" – high sustainability rating;
- categories "BBB", "BB" and "B" – average sustainability rating;
- categories "CCC", "CC" and "C" – satisfactory stability rating;
- category "D" – low stability rating.
The Chamber of Commerce and Industry, together with the Tax Committee, the Business Ombudsman and interested departments, was instructed to develop a methodological guide on the criteria of rating indicators within 2 weeks and ensure its dissemination to businesses through the taxpayer's personal account.
Business entities with a high sustainability rating are recommended annually on the eve of August 20, the Day of Entrepreneurs, to be awarded state awards and the badge "Faol Tadbirkor".
Tax audits will not be conducted for business entities with a high sustainability rating.
Tax audits are not carried out in the activities of business entities of the "AAA" category (with the exception of inspections conducted in criminal cases), as well as reimbursement (refund) of VAT amounts of this category of business entities is carried out within a one-day period without inspections.
Entrepreneurs with an AA rating and above, working in areas of the 4th and 5th tax categories, can purchase state property and land on more favorable terms. In particular, if you pay an initial payment of at least 15% for a state asset and a non—agricultural land plot, the remaining part can be paid within 5 years (currently 3 years). At the same time, annual interest at the Central Bank's basic rate is not accrued on the remaining amount.
For business entities of category "A" and above:
- refund of overpaid amounts of taxes (excluding VAT) is carried out within three days;
- the procedure for mutual accounting of VAT amounts paid when importing goods and selling goods (services) is applied.
Starting from April 1, 2024, subsidies, benefits and preferences are applied to business entities depending on their rating level.
3. The requirement to submit 8 types of reports of business entities has been abolished
On January 9, 2024, Presidential Decree No. 8 "On measures to further simplify the processes of reporting and statistical data by business entities" was adopted.The decree approved a unified list of reports and statistical data submitted by business entities to government agencies.
Also, according to the Decree, from 2024, 8 types of mutually duplicated reports and statistical data requested from business entities, which state bodies can receive from other bodies, will be abolished.
From now on, reports will be provided only through information systems.
By January 1, 2026, a unified reporting system will be introduced, providing for the formation and submission of it to government agencies through the "personal account of a business entity".
Reporting is carried out in the following order:
- from January 1, 2026, for all business entities – voluntarily;
- from January 1, 2027, it is mandatory for small and medium–sized businesses;
- starting from January 1, 2028, it is mandatory for all business entities.
4. A system of registration of consignment notes in electronic form will be introduced
On December 21, 2023, the Cabinet of Ministers adopted Resolution No. 673 "On additional measures for the use of modern information and communication technologies in tax administration". By this Resolution, the Regulation "On the procedure for registration of consignment notes in electronic form" was introduced into the CMR No. 249 dated 28 April, 2021. In accordance with the Resolution, a system of registration of consignment notes in electronic form will be phased in.The system of registration, storage and accounting of consignment notes in electronic form on the territory of Uzbekistan will be implemented:
from April 1, 2024 - for large taxpayers;According to the Regulation, cargo transportation is carried out by the shipper, the consignee, the forwarder or persons providing services on the basis of a cargo transportation agreement, on their own or rented vehicle.
from July 1, 2024 — for all business entities.
An electronic bill of lading is generated using an EDS (Electronic digital signature) in the information system of operators of the electronic document management system.
The processes of sending, delivering and receiving cargo through ETN are confirmed or rejected using EDS with an indication of the reasons.
Advantages of converting Bill of lading to electronic form:
- Bill of lading registration at any time and in any place;
- Real-time tracking of cargo delivery;
- saving paper, labor and time;
- verification of the authenticity of the electronic Bill of lading information by scanning a special QR code;
- automatic reflection in the electronic Bill of lading of all relevant details when entering the TIN (Taxpayer Identification number) or PINFL (Personal identification number of an individual);
- automatic reflection in electronic invoices (e-invoices) of the relevant information when specifying the ID number generated during the registration of the electronic Bill of lading in it;
- delivery of goods by electronic Bill of lading is the basis for accounting for transport work on the basis of a contract, payroll to the driver (the responsible person delivering the cargo).
In case of technical failures, the Bill of lading is issued in paper form. At the same time, if the fight is officially confirmed by the system operator, after its elimination, the electronic Bill of lading is entered into the information system within 5 calendar days by the date indicated in the paper version.
5. Simplified procedure for issuing licenses and permits
On January 9, 2024, the President signed a decree "On measures to reduce mandatory requirements in the field of entrepreneurship and simplify licensing and licensing procedures." The decree was developed by assessing the impact of regulation of the licensing and licensing system and adopted by the Ministry of Justice.
According to the document, from March 1, 2024, 16 types of licenses and permits will be canceled, including:
- 7 types of permits will be completely canceled (for example, a permit for the transportation of goods will no longer be required when entering into the Register of Customs Carriers);
- 6 types of permits are canceled by unification;
- the permit for the export of export control objects and the license for the export and import of special goods will be combined into one permissive document;
- 3 licenses and permits will be replaced by a notification procedure (for example, it will now be possible to engage in travel agency activities without obtaining a license).
The requirement to have a reserve in the safe tourism fund in the amount of 15 thousand US dollars for the implementation of outbound tourism will be abolished.
From now on, legal entities will be able to independently choose the places of technical inspection of the vehicle belonging to them (until today, technical inspection was carried out in places designated by the internal affairs bodies).
With the introduction of the above innovations, it is expected that the expenses of entrepreneurs will be saved by about 350 billion soums.
6. Executive documents will be issued in electronic form
On January 3, 2023, the President signed Decree No. 1 "On additional measures to reform and digitalize the system of execution of judicial acts and acts of other bodies." The decree came into force on January 4, 2024.
From May 1, 2024, executive documents based on judicial acts will be issued in electronic form. At the same time:
- executive documents on cases of economic courts will be issued exclusively in electronic form;
- in cases of other courts – usually in electronic form;
- executive documents issued on the basis of judicial acts will be certified with a QR code and an electronic digital signature;
- legal entities will receive and provide enforcement documents, as well as decisions taken and other documents within the framework of enforcement proceedings through the taxpayer's personal account;
- individuals will be able to receive and provide executive documents through the Unified program of interactive public services or terminals for the provision of interactive services.
Also, from May 1, 2024, a minimum amount of guaranteed income of citizens will be established, which cannot be foreclosed on. At the same time:
- the minimum amount of guaranteed income is applied when collecting funds for citizens' debts and is half of the established minimum wage;
- it is prohibited to withhold (write off) funds from citizens' bank accounts, including from their bank cards, on the basis of executive documents on debt, if the amount of funds on them does not exceed half of the established minimum wage.
Since December 1, 2024, the institute "Register of Obligations" is being introduced to ensure the unconditional execution of judicial acts and acts of other bodies. The registry will be maintained by the Bureau of Enforcement. At the same time:
- if it is impossible to recover due to the debtor's lack of property, information about it is entered into the Register without fail;
- after entering information about the debtor into the Register, all restrictions applied to him in the framework of enforcement proceedings are retained;
- in case of identification of property and funds from the debtor, information about which is entered in the Register, compulsory enforcement actions will continue;
- in case of fulfillment by the debtor of its obligations under the enforcement document, his death, cancellation of a judicial act or an act of another body on the basis of which the enforcement document was issued, cancellation or invalidation of a document that is an enforcement document, failure to identify information about the debtor's property or funds for 10 years, or recognition of his bankruptcy, information information about the debtor is excluded from the Register at the request of the claimant.
Also, current state executors with secondary specialized education will be trained in stages at the Law Enforcement Academy.
7. The limitation period for taxes in Uzbekistan has been reduced to 3 years
From January 1, 2024, the tax authorities of Uzbekistan will be able to inspect businesses for the last 3 years instead of 5 years. This is provided for by amendments to the Tax Code in connection with the adoption of the main directions of tax and budget policy for 2024.According to the amendment to part 2 of Article 88 of the Tax Code, the limitation period for a tax obligation has been reduced from 5 to 3 years, that is, a tax or other authorized body may conduct a tax audit only for 3 years — after the end of the tax period or from the moment of an event or action, if the tax obligation is related to this event or action.
As noted, for taxpayers and tax agents, the reduction of the limitation period for taxes means, in particular, that:
- they now have to keep tax reports and other documents related to the calculation and payment of taxes for 3 years instead of 5 years;
- it is now possible to apply for a set-off or refund of the amount of overpaid tax within 3 years from the date of payment of this amount;
- it is also possible to apply for a set-off or refund of the amount of excessively collected tax within 3 years from the day when they became aware of the fact of excessive tax collection, or from the date of entry into force of the court decision;
- within the framework of tax control in transfer pricing, controlled transactions can be verified no more than 3 years before the decision to conduct an audit is made. And the decision to conduct an audit may be made no later than 3 years from the date of receipt of the taxpayer's notification of controlled transactions;
- if more than 3 years have passed since the date of the commission of a tax offense or from the day after the end of the tax period during which it was committed and until the decision on bringing to justice was made, they will not be held accountable.
The desk audit will be conducted by the tax authority itself without the participation of the taxpayer and only on the basis of information available to the tax authorities.
These restrictions do not apply to in-house verification of the refund (refund) of the VAT amount.
8. Currency operations rules have been amended
On December 18, 2023, Resolution No. 3281-3 of the Central Bank Board was adopted.According to the document, internal currency operations, among other things, include transfers related to the purchase and sale of shares and bonds (excluding Central Bank bonds) by non-residents on organized securities exchanges, including through stock brokers and investment intermediaries.
Foreign currency acquired by the client, as well as previously debited from this account but unused, and returned for other reasons, is credited to a special currency account.
The provision stating that foreign currency previously debited from the special currency account and unused, as well as returned for other reasons, must be resold to a commercial bank or re-transferred for the purposes specified in the application within 3 banking days has been excluded.
Currency funds acquired by the bank's client (including unused or returned) must be used within 7 banking days from the date of crediting to the client's special currency account, or no later than the next banking day after the end of this period must be resold to a commercial bank.
9. An International Center for Digital Technologies will be established in the IT Park area
On February 1, 2024, Presidential Decree No. UP-25 was issued regarding urgent measures to establish the International Center for Digital Technologies, named "ENTERPRISE UZBEKISTAN". This center will become a special territory with favorable conditions for the production of products and provision of services in the field of digital technologies.
From June 1, 2024, a special legal regime for foreign companies will be introduced in the Center on an experimental basis for a period of up to 5 years in the following areas:
- Implementation of a "regulatory sandbox" for the production and testing of innovations, services, and business products in the field of digital technologies;
- Customs affairs and taxation;
- Labor relations;
- Financial and banking activities;
- Processing and protection of personal data;
- Provision of public services;
- Protection of intellectual property;
- Resolution of commercial and civil disputes.
The Ministry of Digital Technologies is the authorized body for implementing the special legal regime, with the following additional tasks:
- Facilitating the attraction of investments in the country's digital economy by creating favorable conditions for entrepreneurial and investment activities in the field of digital technologies based on advanced international experience;
- Development of consulting, legal, financial, and other services for residents of the Software Products and Information Technology Technopark (IT Park), as well as other enterprises and organizations;
- Stimulating and supporting the development of exports of digital technologies and services by enterprises and organizations, promoting the expansion of their activities in foreign markets;
- Development of modern infrastructure in the Center's territory.
Additionally, a Coordination Council will be formed to organize and coordinate the activities of the Center, promptly address emerging issues, and ensure the development of documents regulating the special legal regime within the experiment framework. By December 1, 2024, the Ministry of Justice, the Ministry of Investments, Industry and Trade will submit to the Cabinet of Ministers a draft law of the Republic of Uzbekistan "On the International Center for Digital Technologies," taking into account the preliminary results of the experiment. The draft law will include the following provisions:
- Management of the Center and its status;
- Special legal regime defining the special procedures for conducting entrepreneurial activities aimed at attracting investments and stimulating export activities in the field of digital technologies, as well as regulating customs and tax matters, labor relations;
- Separate procedures for conducting financial and banking activities, processing and protection of personal data, provision of public services, protection of intellectual property, as well as resolution of commercial and civil disputes;
- Sources of financing for the Center and other matters.
10. Some customs procedures will be improved
On February 27, 2024, President signed the Presidential Decree No. 913 amending the Customs Code, which will allow for the improvement of customs procedures.On December 28, 2023, the Legislative Chamber adopted the Law, and on January 19, 2024, the Senate approved the Law "On Amendments and Additions to the Customs Code of the Republic of Uzbekistan aimed at further improving customs procedures." The Law is aimed at eliminating gaps in legislation, bringing norms for determining the customs value of goods upon their importation in line with international standards, simplifying procedures for placing goods under customs regimes of export, re-import, and re-export. Additionally, this Law will ensure the harmonization of national legislation with international standards, including creating conditions for fair competition in the economy and attracting foreign investments.
11. The range of services provided by residents of the IT Park has been expanded
On December 29, 2023, the Cabinet of Ministers adopted a resolution "On Amendments and Additions to the List of Types of Activities Allowed to be Carried out by Residents of the Software Products and Information Technology Technopark (IT PARK)." According to the Resolution, residents of IT Park have the right to provide the following types of services:
- Design and multimedia, including web design, graphic design, motion design, game design, as well as the creation of vector and 3D graphics;
- Development of digital animation products;
- Venture financing of projects in the field of information technology and participation in acceleration programs;
- Provision of services in the field of esports.
To obtain the status of an IT Park resident in accordance with the new types of activities, legal entities must meet the following criteria:
- For venture financing of projects in the field of information technology and implementation of acceleration programs, legal entities must be registered and located at the legal address within the territory of IT Park or its branches;
- For providing services in the field of esports, legal entities must have an international certificate according to the list approved by IT Park.
12. The basis for suspending the validity of VAT certificates has been changed
On December 5, 2023, Cabinet of Ministers Resolution No. 644 "On Amendments to the Regulation on the Procedure for Special Registration of Value Added Tax Payers in Tax Authorities," approved by Cabinet of Ministers Resolution No. 595 of September 22, 2021, comes into force. A VAT certificate is an electronic document issued by the tax authority to a VAT payer, confirming registration for special tax accounting and the right to offset value added tax in cases provided for by tax legislation. According to the document, the tax authority may suspend the validity of a VAT certificate only if the transactions (operations) carried out do not correspond to the nomenclature of the goods (services) purchased and sold. The certificate is suspended for 30 days. During this period, the tax authority conducts desk and on-site inspections, and if the circumstances of non-compliance are not confirmed, the certificate's validity is restored. Previously, tax authorities were entitled to suspend the validity of certificates in cases of:
- Tax arrears;
- Assignment of the taxpayer to a group with a high level of tax risk;
- As well as in case of non-performance of financial and economic activities for more than 3 months.