Uzbekistan is located in central Asia and is a land locked country with other countries bordering it on each side. The north and west side of Uzbekistan is bordered by Kazakhstan and, with Kyrgyzstan and Tajikistan at the east. The country is further bordered by Afghanistan and Turkmenistan to the south. The official local currency of Uzbekistan is Uzbekistani Som (UZS). The capital city is Tashkent and the official local language is Uzbek. However, the international communication language for the Uzbekistan is, Russian.
Uzbekistan is rich not only in terms of its cultural heritage and art but also in terms of its natural resources. In the past, during the late 1980’s, the country was producing 90% of the total cotton of the Soviet Union, as well as one third of the total gold, and half of its uranium as well. While Uzbekistan became independent in 1991, it has been trying to reduce its great economic dependence on agricultural products as the country is the 11th largest cotton exporter in the world and the 6th largest cotton producer globally. It also exports natural gas and petroleum products.
Corporate Income Tax (CIT) in Uzbekistan
The corporate income taxes in Uzbekistan are applicable on resident corporations with their worldwide income being taxable, as well as non-resident corporations where foreign organizations and legal entities pay corporate income tax on any earnings arising from activities or sources based in Uzbekistan.
The non-residents corporations are usually taxed at the level of their Uzbek private equity or through withholding tax (WHT) which is applicable at the payment source of their Uzbek-based income.
The corporate income rate is chargeable on taxable profit which is calculated by deducting expenses from gross income and any applicable incentives which might be given by the tax code, existing laws, or presidential decrees.
The organizations in Uzbekistan are in general subject to a 15% corporate income tax rate for the year 2021, as set in the Tax Code. Additionally, the commercial banks, cement producers, and polythene granule producers as well as mobile service providers and shopping malls or markets are taxed at a rate of 20%.
A simplified tax regime option is available to all legal entities and entrepreneurs in Uzbekistan where the turnover for organizations is not over UZS 1 billion and for individual entrepreneurs between UZS 100 million to UZS 1 billion. As a part of this tax regime, the turnover tax replaces the CIT and VAT. While the general turover tax rate is 4%, it may vary for legal entities based on their type and the service they provide with the turnover tax then ranging between 1% to 25%. However, some entities are exempt from opting for the simplified tax regime which include those involved in the sale of petrol, diesel, or gas fuels, importers and producers of excise liable goods and those entities which are involved in subsurface extraction.
Personal taxes rates (PIT) in Uzbekistan
The Uzbekistani residents and non-residents are both subject to tax in the country. The residents are taxed on their worldwide income whereas the non-residents are only taxed on income which arises from sources based in Uzbekistan.
The resident status of an individual is determined by two important tests under which either one should be met:
The first test says that the individual must be present in uzbekistan for 183 days or more during a tax year from its start to its end to be a resident a uzbekistan,
The second test includes that if an individual is staying for less than 183 days in uzbekistan but more than in any other country, the individual will be deemed to be a resident.
Based on this, the law which determines the personal income tax rates for residents and non-resident includes the following:
For residents of Uzbekistan, a tax rate of 15% is applicable on employment and rent incomes as well as any capital gains. The dividends and interest incomes of residents are subject to a 5% tax.
The non-residents individuals are taxed at a 10% withholding rate for income from dividends and interests and other incomes such as employment, and royalty etc are subject to a 20% tax. The transportation services income is subject to a 6% withholding tax.
There is also a provision of foreign tax relief for individuals who have paid taxes in a foreign country with which Uzbekistan has a double taxation treaty (DTT). In such cases the individuals are eligible to claim an exemption or credit.
- Social tax
A social tax is also charged on the gross payroll of local and foreign employees and is payable by the employers. The government of Uzbekistan instated that the state budget will compensate all the organizations, the amount of social tax they paid for their employees who are below 25 years old. However, organizations which have a state share in their authorized capital are exempt from such returns of social tax. Budget organizations have the highest ST rate which is 25%.
- The standard VAT (Value Added tax) rate is 15% in Uzbekistan and the property tax rate of 0.2% to 4% is levied based on the value and type of the property, on all legal entities and non-resident individuals.
- There are no local taxes in the country.