eye                     
   
 

The List of Privileges, Guarantees and Rights awarded to the Foreign Investors and the Enterprises with presence of Foreign Investments by the Legislation of the Republic of Uzbekistan,  in accordance with:

  • DECREE of the President of the Republic of Uzbekistan dated April 11, 2005 №UP-3594 "On additional measures on stimulation of attraction of private foreign direct investments" 
  • DECREE of the President of the Republic of Uzbekistan dated April 10, 2012 №UP-4434 "On Additional Measures on Stimulation of Attraction of Foreign Direct Investments"

Download the full text of the DECREE of the President of the RUz. №UP-3594[MS WORD-format 40,5 kb]

Download the full text of the DECREE of the President of the RUz. №UP-4434[MS WORD-format 66,0 kb]

 

DECREE


With a view of the further improvement of an investment climate in the country, wide attraction of private direct foreign investments for realization the privatization programs, modernization, technical re-equipment and reconstruction of enterprises, creation of new workplaces in labour-redundant regions of the country, as well as maintenance of a reliable legal protection and guarantees for foreign investors:

Exempt, starting from July 1, 2005 enterprises of sectors of the economy, attracting direct private foreign investments, from income tax, property tax, tax on development of a social infrastructure and an accomplishment of territories, ecology tax, single tax for micro-firms and small enterprises, and compulsory payments to the Republican Road Fund.

Determine that tax privileges, stated above, are given with condition of making direct private foreign investments at following volume and periods:

- from $300, 000 up to $3, 000, 000 - for the period of 3 years;

- from over $3, 000, 000 up to - for the period of 5 years;

- over $10, 000, 000 - for the period of 7 years.

Establish that the tax privileges, stated in paragraph 1 of this Decree, are applied under following conditions:

    • location of the mentioned enterprises in such labour-redundant regions as the Republic of Karakalpakstan, Jizzakh, Kashkadarya, Syrdarya, Surkhandarya, Khorezm regions, as well as in rural areas of Navoi, Andizhan, Namangan and Ferghana regions;
    • making private direct investments by foreign investors without granting a guarantee of the Republic of Uzbekistan;
    • the share of foreign participants must not be less than 50 per cent of the authorized capital of the enterprise;
    • making private direct foreign investments after the state registration of the mentioned enterprises;
    • foreign investments must be in hard currency or in the form of new modern process equipment;
    • direction of income, received as a result of using above mentioned privileges during the period of their application, to re-investment with the purpose of the further development of the enterprise.

Entrust the Interdepartmental Council on Foreign Investments and Credits Issues at the Cabinet of Ministers of the Republic of Uzbekistan with a function on definition of conformity of the enterprises, in which direct private foreign investments are involved, to the branches of economy specified in the appendix to the present Decree.

Establish that:

    • interests under the long-term loans, involved by the enterprises with foreign investments without a guarantee of the Republic of Uzbekistan, are not included in taxable base at calculation of the income tax;
    • losses from the primary activity, arising in newly created enterprises with foreign investments, are postponed for up to 5 years by equal shares, for its repayment at the expense of taxable income, within years following the accounting period in which the loss has been received;
    • at deterioration of conditions of investment by the subsequent legislation, the privileges given as in the paragraph 1 of the present Decree, are valid during all period on which they are given.

In case of the shutdown of the enterprise, which received privileges stated in paragraph 1 of the present Decree, one year earlier than the date of expiry of given privileges, repatriation of the profit and export of the capital of the foreign investor abroad is carried out only after compensation of the sums of given privileges to the budget.

Entrust the Ministry of Finance together with the State Tax Committee, the Ministry of Economy, Chamber of Commerce and Industry of the Republic of Uzbekistan within a month to develop and ratify Regulations on the order of implementation of tax privileges for the direct private foreign investments established by the present Decree.

Take into consideration that the guarantees, established for foreign investors by a part four of article 3 of the Law of Republic Uzbekistan "On guarantees and measures of protection of rights of foreign investors ", are applied in following cases:

    • increase in the rate of tax on incomes, received as dividends, paid to the foreign investor;
    • introduction of additional requirements that complicate procedure of repatriation or reduce the size of foreign investor's income (profit), being transferred abroad, except for the cases, when the state stops repatriation of cash of foreign investor on conditions of non-discriminative implementation of legislation acts in case of insolvency and bankruptcy of the enterprise with foreign investments or protection of the rights of creditors, criminal acts or the administrative offences accomplished by the foreign investor - the physical person, or other cases demanding necessity of stoppage of such repatriation according to judicial or the arbitral decision;
    • introduction of quantitative restrictions to volumes of investments and other additional requirements to the size of investments, including in form of increase in the minimal volume of foreign investments in the enterprises with foreign investments;
    • introduction of restrictions on share of the foreign investor in authorized capitals of the enterprises of the country;
    • introduction of additional procedures of registration and prolongation of visas of foreign investors, as well as other additional requirements on making foreign investments.

Entrust the Cabinet of Ministers of the Republic of Uzbekistan within 10 days to ratify Regulations on the order of implementation of the guarantee, established by part four of the article 3 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors ".

Envisage, that at approach of any of the above-mentioned kinds of deterioration of conditions of investment, the foreign investor should notify the corresponding authorized body on application of the specified guarantee.

Entrust the Ministry of Justice of the Republic of Uzbekistan together with the interested ministries and departments within a month to submit to the Cabinet of Ministers proposals on amendments and additions to the legislation acts propceeding from the present Decree.

Assign the first deputy of the Prime Minister of the Republic of Uzbekistan Azimov R.S. to control over implementation of the present Decree.

I.A.Karimov
The President of the Republic of Uzbekistan

Tashkent city,
April 11, 2005

Basic rights and guarantees

Basic rights and guarantees

Contents of guarantees, privileges and rights

Legislative  Act

1

Foreign investors in the Republic of Uzbekistan are:

- foreign states, administrative bodies or territorial authorities of foreign states;

- international organizations those having been established by agreements or other treaties between states, or those being subjects of public international law;

- legal entities, any other partnerships, organizations or associations those having been established in accordance with and operating under the legislative acts of foreign states;

- individuals being citizens of the foreign state, persons without citizenship, and citizens of the Republic of Uzbekistan permanently residing abroad.

Article 4 of the Law of the Republic of Uzbekistan «On foreign investments»

 

2

Foreign investors may make investments in the territory of the Republic of Uzbekistan in the following ways:

- share participation in the authorized capital or other property of business companies and partnerships, banks, insurance organizations and other enterprises established jointly with legal entities and (or) individuals of the Republic of Uzbekistan;

- establishing and developing business companies and partnerships, banks, insurance organizations and other enterprises fully owned by foreign investors;

- acquiring property, shares and other securities, including debt obligations, issued by residents of the Republic of Uzbekistan;

- contributing intellectual property rights, including copyrights, patents, trademarks, utility models, industrial designs, firm names, know-how and goodwill;

- acquiring concessions, including concessions to explore, develop, extract or utilize natural resources;

- acquiring property rights in trading and service sector facilities, in housing together with the land on which it is located, as well as rights to own and to use the land (including on the basis of a lease) and natural resources.

Foreign investors may make investments in the territory of the Republic of Uzbekistan in other forms that do not contradict legislation in force.

Article 5 of the Law of the Republic of Uzbekistan «On foreign investments»

 

3

Foreign investors may establish on the territory of the Republic of Uzbekistan enterprises with foreign investments and shall enjoy all rights, guarantees and advantages provided for by the legislation of the Republic of Uzbekistan.

An enterprise with foreign investments may be created either by establishment of such an enterprise, or by purchasing stockholdings (portions, shares) in an earlier established enterprise without foreign investments, or by purchasing such enterprise entirely, including a purchase made through privatization.           Parts1 and 3 of the Clause 6 of the Law of the Republic of Uzbekistan "On foreign investments".

Parts1 and 3 of the Clause 6 of the Law of the Republic of Uzbekistan "On foreign investments".

 

4

It shall be  established that from July 1, 2002 newly founded enterprises with the foreign investments, on the territory of the Republic of Karakalpakstan and Khorezm region being subject to the state registration by the according regional branches of the Ministry of Justice of the Republic of Uzbekistan, are the enterprises which have their authorized capital equal to not less than the amount equivalent to 75 thousand US dollars, at that meting the other established criteria.          

Paragraph 1 of Clause 1 of the Decree of the President of the Republic of Uzbekistan as of 11.06.2002. № UP-3090 "On additional measures to stimulate development of small enterprises in the Republic of Karakalpakstan and Khorezm region".

5

An enterprise with foreign investment may establish in the territory of the Republic of Uzbekistan subsidiaries and branches with the status of a legal entity, as well as representative offices and other separate subdivisions without the status of a legal entity in compliance with the requirements of legislation of the Republic of Uzbekistan.

Subsidiaries, branches, representative offices and other separate subdivisions of the enterprises with foreign investments may be established outside the Republic of Uzbekistan.

Article 7 of the Law of the Republic of Uzbekistan "On foreign investments".

 

6

The State guarantees and protects all rights of foreign investors in process of their conducting investment activities in the territory of the Republic of Uzbekistan.

Foreign investors and foreign investments shall be granted fair and equitable treatment and full and constant protection and security. Such treatment can not be less favorable than that provided by international treaties signed by the Republic of Uzbekistan. The legal regime for foreign investments may not be less favorable than that provided for the investments being made by legal entities and individuals of the Republic of Uzbekistan.

Part 1 - 3 of the Article 9 of the Law of the Republic of Uzbekistan "On foreign investments".

 

7

The foreign investor shall, in accordance with the principles of international law and legislation of the Republic of Uzbekistan, be entitled to:

- determine, at his own discretion, the amount, type and sphere of investment;

- conclude contracts with legal entities and individuals to perform an investment activity;

- own, use and dispose of its own investments and outcomes of its investment activity. By the decision of a foreign investor, the rights to own, use and dispose of its own investments and outcomes thereof may be transferred to other legal entities and individuals in accordance with the procedure established by the legislation of the Republic of Uzbekistan. The mutual relations between the parties, while transferring these rights, shall be regulated by them on a contractual basis;

- make, at his own discretion, decisions to patent abroad and in the Republic of Uzbekistan his inventions, utility models and industrial designs resulting from an investment activity in the Republic of Uzbekistan;

- independently and freely dispose of revenue (including unimpeded repatriation thereof) received from an investment activity;

- attract into the Republic of Uzbekistan funds in the form of credits and loans;

- use funds in the national currency on its accounts to purchase foreign currency on the internal currency market;

- acquire rights to land lots in the cases and on the conditions provided for by legislation;

- use property and any property rights pertaining to it on the basis of ownership rights as security for all forms of obligation assumed by an investor, including obligations aimed at attracting loans in accordance with legislation of the Republic of Uzbekistan;

- receive adequate compensation in the event of the requisition of his investment or other assets;

- receive indemnification for damages caused as a result of the illegal actions (inaction) and decisions taken by state bodies, local authorities and officials thereof.

The foreign investor shall also have other rights provided by the legislation of the Republic of Uzbekistan.

Article 10 of the Law of the Republic of Uzbekistan "On foreign investments".

8

Enterprises with foreign investments shall conduct, at their own discretion, export and import transactions in compliance with the requirements of legislation of the Republic of Uzbekistan. The export of products of their own manufacture shall not be subject to licensing or quotas.

Enterprises with foreign investments shall be entitled - without a license - to import products destined for their own production needs in accordance with the legislation of the Republic of Uzbekistan. Enterprises with foreign investments shall, at their own discretion, determine the list and the procedure for establishing and using the enterprises' funds.

Enterprises with foreign investments may acquire land lots in the cases and under the conditions provided by the legislation.

Part 4 - 5, 8, 11 of the Article 12 of the Law of the Republic of Uzbekistan "On foreign investments 

9

Foreign investors shall be granted concessions to explore, develop and exploit natural resources and to conduct other business activities in all spheres and kinds of activity provided they are not prohibited by the legislation of the Republic of Uzbekistan and meet the objectives of concluded concession contracts.

Article 13 of the Law of the Republic of Uzbekistan "On foreign investments".

10

Foreign investors and enterprises with foreign investments shall, in accordance with the legislation of the Republic of Uzbekistan, have the right to freely conclude labor contracts with citizens of any foreign state or persons without a citizenship, residing outside the Republic of Uzbekistan, for the purposes of effecting investment activities. Such persons shall be permitted to enter the territory of the Republic of Uzbekistan, remain there for the period of the labor contract with the receipt of the according multiple-entry visas.

The remuneration and other income received by such employees in a lawful manner may be transferred outside the Republic of Uzbekistan upon the payment of any applicable taxes and other mandatory fiscal obligations established by the legislation without any restrictions whatsoever.

Part 1-2 of the Article 14 of the Law of the Republic of Uzbekistan "On foreign investments".

 

11

Foreign investors, their representatives and foreign personnel being present in the Republic of Uzbekistan in connection with an investment activity shall have the right to freely move anywhere within the territory of the Republic of Uzbekistan.

Part 1 of the Article 15 of the Law of the Republic of Uzbekistan "On foreign investments".

12

The insurance of investments and risks of foreign investors shall be effected on a voluntary basis.

Foreign investors shall have the same rights as local investors to obtain any type of insurance from any insurance organization lawfully operating in the territory of the Republic of Uzbekistan. The insurance of a foreign investment against political and other risks may also be provided by international organizations, foreign state export credit agencies and other insurance companies.

Foreign investment insurance shall secure insurance protection and guarantees against political and other risks, including the following:

- the expropriation of property as well as any legislative or administrative measures taken leading to the seizure or alienation of property, loss of control over property or over income received in connection with the concerned property concerned;

- the introduction of restrictions on the transfer of foreign currency outside the country;

- the introduction into legislation of the amendments those discriminate certain groups of investors;

- the interference by state bodies, local authorities and officials thereof with the contractual relations of investors;

- war, civil unrest or similar events;

- other types of political and other risk related to foreign investors and foreign investments

Parts 1-2, 4 of the Article 16 of the Law of the Republic of Uzbekistan "On foreign investments".

 

 

13

The State guarantees and protects the rights of foreign investors who perform investment activity within the territory of the Republic of Uzbekistan.

The state guarantees and protects rights of the foreign investors who are carrying out investment activity on territory of the Republic of Uzbekistan No discrimination shall be allowed against foreign investors on the basis of their citizenship, place of residence, religion, place of conducting business activities, nor on the basis of the country of origin of foreign investors or investments, taking into consideration the implementation of international treaties signed by  the Republic of Uzbekistan.

Legislative acts, including departmental normative acts, shall not be retroactive if they cause damages to foreign investors or foreign investments.

If subsequent legislation of the Republic of Uzbekistan worsens the conditions for investment, the foreign investments, for the period of 10 years from the moment of the investment, shall enjoy the legislation that has been in effect at the moment of the investment. A foreign investor shall be entitled to apply, at its own discretion, those provisions of new legislation that improve the conditions for his investments. As deterioration of conditions of investment are considered modification and additions in the legislation, and also acceptance of new legislative acts of the Republic of Uzbekistan, providing:

- increase of size of the income tax received in form of dividends paid to the foreign investor; additional requirements complicating procedure of repatriation or reducing the size of incomes (profit) of a foreign investor, transferred outside the Republic of Uzbekistan, except for cases of suspension by authorized state body of repatriation  of the foreign investor’s means on condition of non-discriminatory application of the legislative acts in cases of insolvency and bankruptcy of  an enterprise with foreign investments or protection  rights of creditors, crimes or the administrative offences accomplished by the foreign investor-individual, or other necessity of suspend such repatriation according to judicial or  arbitral award;

- introduction of quantitative restrictions upon volumes of making the investment and other additional requirements concerning the size of investments, including raising the level of minimal size of foreign investments into enterprises with foreign investments;

- introduction of restrictions on share participation of a foreign investor in authorized capitals of enterprises;

- introduction of additional procedures for registration and prolongation of visas of foreign investors – individuals, and also other additional requirements on realization of foreign investments.

Order of application of positions of parts- 4 and 5 of this Article is determined by the Cabinet of the Republic of Uzbekistan.

All contracts on foreign investments, first of all the private ones, in part of providing the unconditional guarantees of their implementation are under the control of the corresponding bodies duly authorized by the Government of the RU.

In case while performing their legal prerogatives,

 state bodies and bodies of the government in regions find out infringement of legislation done by a foreign investor, they can take only those measures for which they are authorized also which are directly connected to elimination of a concrete infringement. State bodies or bodies of the government in regions cannot use the fact of presence of infringement as the basis for intervention or restriction of other lawful activity of a foreign investor. Worsening conditions for investing are considered introduction of amendments and addenda into legislation as well as adoption of new legislative acts by the Republic of Uzbekistan, foreseeing:

- increase of the tax rate for income gained in form of dividends paid to a foreign investor;

- introduction of additional requirements complicating the procedure repatriation or reducing the income (profit) of a foreign investor subject to transfer outside Uzbekistan excluding cases of suspension of repatriation of a foreign investor’s monetary means by an authorized state body based on non-discriminative application of legislative acts in cases of insolvency and bankruptcy of an enterprise with foreign investments or protection of creditors’ rights or administrative law violations committed by a foreign investor as an individual person as well as any other necessity to suspend such a repatriation in accordance with court or arbitrary decision;

- introduction of quantitative limitations for investing volumes and other additional requirements related to investments’ volumes including those in form of increase of minimal size of the foreign investment into enterprises with foreign investments;

- introduction of limitations related to share participation of a foreign investor in the charter fund (charter capital) of enterprises;

- introduction of additional procedures related to formalizing and prolongation of visas for foreign investors as individual persons as well as other additional requirements related to making foreign investments.

Parts 1 - 9 of the Article 3 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors". The Law of the Republic of Uzbekistan «On guarantees and measures of protection of the rights of foreign investors» as of 16.09.2005.More in detail about the order application of the guarantee established by  part-4 of the Article 3 of the Law of the Republic of Uzbekistan «On guarantees and measures of protection of the rights of foreign investors» see the decision of the Cabinet of the Republic of Uzbekistan as of 2.08.2005 №180 «On measures  of realization of the Decree of the President of the Republic of Uzbekistan «On additional measures to  stimulate attraction of direct private investments » №DP-3594 as of 11.04.2005 years ».

 

14

Legislation may provide, along with general guarantees and measures to protect foreign investors, additional guarantees and safeguards, including those ensuring the unconditional execution of the obligations of the partners of foreign investors.

Additional guarantees and safeguards may be granted to foreign investors on a case-by-case basis when investing:

 - in priority sectors ensuring the sustainable economic growth and progressive structural adjustments of the county's economy;

 - in priority projects ensuring the strengthening and expansion of the export potential of the Republic and its integration in international economic relations;

 - in projects in the sphere of small and medium-size entrepreneurship, the implementation of which is aimed at processing raw materials, manufacturing consumer goods, providing services and ensuring employment.

Additional guarantees and safeguards for foreign investors may include ensuring guarantees by the Government of the Republic of Uzbekistan, assisting in funding investment projects, creating special tax and payment regimes, carrying out state monitoring over the implementation of projects concerned and taking other measures in accordance with the legislation.

 Additional guarantees and safeguards shall be granted to foreign investors by special decisions of the Government which shall particularly envisage the conditions of and the procedure for investing, using and ensuring the return on foreign investments.

Article 4 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors".

 

15

Foreign investments and other assets of foreign investors in the Republic of Uzbekistan shall not be subject to nationalization. Foreign investments and other assets of foreign investors shall not be subject to requisition except in the event of a natural calamity, emergency, epidemic or epizootic. A decision on requisition shall be taken by the Cabinet of Ministers of the Republic of Uzbekistan provided that the following requirements, when requisition takes place, are met:

 - the requisition affects the minimum amount of the investment or other assets necessary to implement the purpose connected with the specific case;

- the requisition is executed on a non discriminatory basis and in accordance with the procedure established by the legislation;

 - the requisition is accompanied by indemnification adequate to the damages incurred.

The State is the guarantor of the timely execution of indemnification. The foreign investor shall be entitled to contest in court or in arbitration the following:

- the legitimacy of the purpose for executing the requisition; - the amount of the requisition;

- the valuation of the investments and other assets subject to the requisition;

-the adequacy of the indemnification to be paid;

- the procedure observed by the state bodies and local authorities while executing the requisition.

Article 5 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors".

 

16

Revenues of the foreign investor generated in the Republic of Uzbekistan may be re-invested on the territory of the Republic of Uzbekistan or used in any other way at the foreign investor's discretion.

Enterprises with foreign investments in accordance with the legislation shall have the right:

- to open, use and dispose of accounts in any currency in any bank on the territory of the Republic of Uzbekistan and outside it;

- to receive and repay loans in foreign currency        

Parts 1-2 of the Article 6 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors".

 

17

Foreign investors shall be guaranteed the free transfer of funds in foreign currency into and from the Republic of Uzbekistan - without any restrictions whatsoever - provided that they have paid all taxes and other mandatory payments in accordance with the procedure established by the legislation of the Republic of Uzbekistan. Such transfers shall include:

 - the initial and additional funds to maintain or to increase the level of foreign investments; - the revenue from investments;

 - the funds received in accordance with this Law as indemnification for damages incurred;

 - the payments effected in connection with the execution of contracts; - the profits received from the sale of all or part of a foreign investment;

- the payments resulting from a dispute settlement, including any judicial or arbitral decisions;

 - the salaries of and other remuneration to employees; - the funds from other sources received in accordance with legislation. 

Part 1 of the Article 7 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors".

18

The foreign investor shall have the right to terminate an investment activity in the Republic of Uzbekistan in accordance with the procedure established by the legislation. Upon termination of an investment activity, the foreign investor shall have the right to freely repatriate his assets, in the form of money or in kind, received as a consequence of the termination of the investment activity without prejudice to the requirement that the foreign investor comply with any pre-existing obligations towards the Republic of Uzbekistan or other creditors.

Article 8 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors".

19

Legislative acts, including departmental normative acts and judicial decisions, somehow influencing the interests of foreign investors must be made available to them, whereas in cases directly foreseen by the legislation of the Republic of Uzbekistan those acts must be published.

State bodies and local authorities must provide, upon the request of a foreign investor, the information of interest thereto in accordance with the procedure foreseen for by legislation.

Article 9 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors".

 

20

In case of any inconsistency between the provisions of the Laws "On foreign investments", "On guarantees and measures of protection of the rights of foreign investors" and other legislative acts or international treaties signed by the Republic of Uzbekistan, the provisions being most favorable for foreign investors shall prevail            

Article 22 of the Law of the Republic of Uzbekistan "On foreign investments" and Article 12 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors".


3. GUARANTEES AND PRIVILEGES GRANTED AT IMPLEMENTATION OF THE INVESTMENTS THROUGH CONCLUSION OF THE PRODUCTION-SHARE AGREEMENTS

The content of guarantees, privileges and rights

Legislative act

37

Production received in according with the terms of a production-share agreement into the foreign investor's property, may be exported without any restrictions from the Republic of Uzbekistan or may be sold by an investor in the local market on the terms and in the order, determined by the agreement.

Part 2 of the Article 16 of the Law of the Republic of Uzbekistan "On agreements on production sharing".

38

Foreign investors, as well as their contractors and subcontractors are exempted from payment of all kinds of taxes established in the Republic of Uzbekistan, duties and other obligatory payments connected with carrying out of research and exploration works on deposit areas, determined by the agreements.

Part 1 of the Article 20 of the Law of the Republic of Uzbekistan "On agreements on production sharing".

39

In the case if during the validity of the production-share agreement the legislation establishes the norms worsening commercial results of a foreign investor's activity within the framework of the agreement the terms stipulated in the agreement will be applied. This provision is not applicable in cases when by legislation amendments into safety standards (norms, rules) concerning the works’ performance, security of deposits, environments and health of citizens are being introduced.

Part 2 of the Article 24 of the Law of the Republic of Uzbekistan "On agreements on production sharing".

Facilities

Facilities

The content of guarantees, privileges and rights

 

Legislative act

 

Related to the Income (Profit) Tax

21

Taxable corporate income reduced by the amount:

- Fees, funds in the form of sponsorship and charitable assistance to environmental, health and charities, cultural institutions, health, labor and social security, physical culture and sports, educational institutions, public authorities in the field, self-governing bodies of citizens, but no more than two percent of taxable income;

- Funds to build colleges, academic colleges, schools and preschool educational institutions to address the Cabinet of Ministers, but not more than 30 percent of taxable income; - monetary means allocated at modernization, technical and technological re-equipment of the production processes, purchases of the new technological equipment, expansion of production on forms of new construction, reconstruction of buildings and facilities used for production needs, as well as debt recovery of loans obtained for those purposes, repayment of costs of the leased objects with deduction of depreciation accumulated during the according taxation period, but not more than 30 percent of taxable income. Reduction of taxable profit is applied within the five years period starting from taxation period during which the abovementioned expenses were made, as for technological equipment – since the moment of its operational start-up. In cases of sale or gratuitous assignment of the new technological equipment within the period of three years since its purchase (imports) the said privilege is considered void with restoration of the obligation on paying the profit tax by legal entities for the whole period when that privilege has been applied. This privilege is enjoyed by taxpayers performing production of goods (works, services);

- monetary means gratuitously allocated at payments to be made for mortgage credits and (or) purchases of dwelling into proprietorship of the personnel relevant to category of young families but not more than 10 percent of taxable income.

Paragraphs two, three, four and six of Article 159 of the Tax Code of the Republic of Uzbekistan

22

Joint ventures, controlled by "Uzbeklegprom" (association of companies in light industry) and "Mahalliy-sanoat" (local industries), in charter funds of which the share of a foreign partner constitutes not less than 50%, shall be exempted from income (profit) tax provided that the whole amount of the tax is reinvested into development and expansion of the consumer goods production, first place, infant goods.

Clause 7 of the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan as of 29.04.1996. №166 " On measures on the state support of development of the light and local industry"».

23

The proprietor - a legal entity or an individual, in respect of a low-profitable, unprofitable, economically insolvent enterprise (its property) or low-liquidity object acquired for the zero purchase price is not levied accordingly by the tax on income (profit) as well as the tax on an individual’s income.

Paragraphs-5 of the Clause 3 of the Resolution of the Cabinet of Ministers as of 26.08.2003 №368 «On additional measures to accelerate of privatization state low-rofitable, non-profitable, economically insolvent enterprises and objects».

Related to the Value Added Tax

Related to the value added tax

24

- goods (works, services) purchased by legal entities at the expense of loans (credits) extended by international and foreign governmental financial institutions based on the international agreements signed by the Republic of Uzbekistan as well as those received at the expense of grants;

- property handed over in way of fulfillment of investment obligations in accordance with an agreement signed between an investor and a state body authorized for managing the state-owned property;

Article 208 of the Tax Code of the Republic of Uzbekistan

 

 

25

Imports of the following is exempted from the Value added Tax (VAT):

2) goods intended for official usage by foreign diplomatic and equated to them representation offices as well as those designed for personal usage by diplomatic and administration and technical personnel of those offices including their families’ members living together with them;

4) goods brought in as charitable aid including technical assistance rendered by states, governments and international institutions;

8) property being brought in as investment obligations in accordance with an agreement signed between an investor and a state body authorized for management of the state-owned property;

10) raw materials, materials and half-finished products for usage at the own manufacturing process imported by enterprises with foreign investment specializing at kids’ footwear production;

Article 211 of the Tax Code of the Republic of Uzbekistan

26

It shall be established that the enterprises and organizations being residents of the Republic of Uzbekistan carrying out supplies of materials, performing works and rendering services to the foreign companies executing the oil and gas exploration works, are exempted from value added tax.

Clause 5 of the Decree of the President of the Republic of Uzbekistan as of 28.04.2000 №UP-2598 "On measures to attract direct foreign investments into oil and gas exploration".

In respect of the Customs Duties

27

The followings are released from levying by customs duties:

vehicles carrying out international transportations of cargoes’, luggage and passengers, and also items of material-technical supplies (logistics) and equipment, fuel, foodstuffs and other property needed for their normal operation during the period of their being en route, at points of their intermediate stop or acquired abroad connected with necessity to liquidate failure (trouble-shooting) of the said vehicles;

- currency of the Republic of Uzbekistan, foreign currency (except for the ones used for numismatic purposes), and also securities according to the legislation;- items of material-technical supplies (logistics) and equipment, fuel, the foodstuffs and other property to be transported out of the limits of customs territory for maintenance of activity of the ships of the Republic of Uzbekistan and ships, rented freighted) by legal entities and individuals of the Republic of Uzbekistan conducting a sea craft as well as production of their craft imported into the customs territory of the Republic of Uzbekistan;

- goods subject to become the property of the state, in cases stipulated by the legislation;

- subjects which are imported into customs territory or taken out of that territory for official or personal use by representatives of foreign states, individuals having the right for duty-free imports of such items on basis of legislations or international contracts signed by the Republic of Uzbekistan;

- goods imported into the customs territory of the Republic of Uzbekistan for rendering aid as a result of the natural disasters, military conflicts, accidents or casualties, in way of humanitarian aid and gratuitous technical assistance, and also the goods imported on the charitable purposes by the states, governments, international organizations;

- manuals for free-of-charge educational, preschool and medical establishments;

- goods moved under customs control in a mode of transit through customs territory and destined for the third countries;

- goods moved through customs border by individuals and not intended for industrial or other commercial activity according to customs legislation;- goods originated and imported from states with which the mode of free trade is established;

- goods delivered on intergovernmental and credit agreements, made on behalf of the Government of the Republic of Uzbekistan or under its guarantees;

- property imported by foreign investors into the Republic of Uzbekistan for their own industrial needs;

- property imported for personal needs of foreign investors and citizens of foreign states residing in the Republic of Uzbekistan according to labor contracts concluded with foreign investors;

- goods imported by foreign legal entities having made direct investments into economy of the Republic of Uzbekistan in a total sum of more than fifty million US dollars, provided that the imported goods are production of their own manufacture;

- goods, works and services intended for works under the production-share agreement and imported into the Republic of Uzbekistan in conformity with project documentation by a foreign investor or other persons participating in performance of works under the production-share agreement, and also production belonging the investor and being taken out in conformity with the production-share agreement;

- goods imported for advertising and presentations; goods imported into the Republic of Uzbekistan by the budget-financed organizations (or upon their orders) on the account of budgetary allocations for their own needs;

- technological equipment imported into customs territory of the Republic of Uzbekistan:

for implementation of investment projects financed on the account foreign credits under a guarantee of the government;

for newly built and being reconstructed enterprises, specializing on manufacture of the consumer goods;

brought in by foreign investors as their contribution in the charter fund of the enterprises with foreign investments;

according to authorized in the established order projects on creation of new, and also modernization and technical re-equipment of operating production facilities, with presentation of the corresponding confirmation of the authorized bank;

for transfer into leasing, with presentation of the corresponding confirmation of the authorized bank;

by enterprises of small and medium business for organizing their own production.

Privileges foreseen by paragraphs-4,15,18 of this article, are not spread upon the consumer goods imported into the Republic of Uzbekistan by legal entities.

Privilege foreseen by the paragraph of the thirteenth part first present article, it is not spread upon consumer goods, imported into the Republic of Uzbekistan by legal entities, except consumer goods imported for rendering hotel services.

Specifying the goods as the consumer ones is carried out in accordance with the legislation.

Article 33 of the Law of the Republic of Uzbekistan «On custom duties ».

 

28

At realization of foreign-trade policy of the Republic of Uzbekistan within the limits of its customs territory, granting tariff privileges in ways of returning of previously paid duty, lowering the rate of the duty and exemption, in exclusive cases, from the duty is allowed concerning the goods:

- imported into customs territory of the Republic of Uzbekistan as the contribution into the charter fund of an enterprise with foreign investments or a foreign enterprise as well as being exported by such enterprises as the goods of their own manufacture;

- in cases stipulated by share-production agreements on section of production, in accordance with the legislation.

Paragraph-1,5 of the Article 35 of the Law of The Republic of Uzbekistan « On custom duties ».

29

Spare parts and accessories to the technological equipment, imported to the Republic of Uzbekistan on account of investment obligations of a foreign investor for technical re-equipment and modernization of production facilities, are exempted from customs duties (except for charges for customs procedures) for the investment period since the moment of acceptance by the investor of investment obligations.

The paragraph 4of the Clause 4 of the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan as of 17.04.2003 №185 "On program of denationalization and privatization of the enterprises for 2003-2004".

30

To improve the quality and competitiveness, as well as expanding the range of light industry products free for a period up to January 1, 2009, from payment of import customs duties and imported by the enterprises HOOK Uzbekengilsanoat chemicals, dyes, accessories and supplies, and other auxiliary materials not produced in Republic.

The first paragraph of paragraph 6 of the Cabinet of Ministers of 25.03.2004g. № 141 "On measures to improve the management structure of Public Joint Stock Company «Uzbekengilsanoat» and stimulate further development of light industry of the republic"

paragraph 5 of the Cabinet of Ministers of 27.01.2005g. № 38 "On measures to attract investment in the textile industry of the republic."

Related to several types of taxes and other obligatory payments

31

Foreign companies performing the research and exploratory works on oil and gas, as well as foreign contractor and subcontractor organizations involved by them, are exempted from:

 

- all kinds of taxes, deductions and the payments in force within the territory of the Republic of Uzbekistan, for the period of carrying out of geological survey;

 

- customs duties (except for fees for customs procedures) at imports of the equipment, material-technical resources and the services necessary for carrying out of research, exploratory and other accompanying works.

Clause 4 of the Decree of the President of Republic Uzbekistan as of 28.04.2000 №UP-2598 "On measures to attract direct foreign investments into investigation and extraction of oil and gas".

32

Joint ventures on an oil and gas extraction, formed with participation of the foreign companies which are carrying out research and exploration on oil and gas, shall be exempted from:

- income tax for the period of seven years since the start-up of the oil and gas extraction. After expiration of the above mentioned period, rate of the income tax for the said joint ventures shall be established at a rate of 50 percent from the rate in force;

- property tax and on incomes of foreign participants in those joint ventures.

 

Paragraphs of 1 - 3 of the Clause 7 of the Decree of the President of the Republic of Uzbekistan as of 28.04.2000 №UP-2598 "On measures to attract the direct foreign investments into investigation and extraction of oil and gas".

33

To establish, that from July, 1, till January, 1, 2009 the industrial enterprises with foreign investments State Joint Stock Company "Uzbekyengilsanoat" specializing on manufacture of ready-made garments (sewing, knitted and leather items), hosieries and footwear, are released from payments into the state budget of all kinds of taxes and tax collections, except for the value added tax.

 

 

 

Claus1 of the Decree of the President of The Republic of Uzbekistan from 20.06.2003г. №DP-3267 «On additional measures to stimulate increase manufactures of ready consumer goods by the enterprises with foreign investments »,Claus 5 of the Decision of the Cabinet of The Republic of Uzbekistan from 27.01.2005г. №38 «On measures to attract investments into textile branch of the Republic».

34

To release since July, 1, 2005 of the enterprises of branches of economy, according to the appendix, involving direct private foreign investments, from payment on their main activity of the incomes (profit) tax, the property tax, the tax for accomplishment and development of a social infrastructure, uniform tax payment or the uniform tax for micro firms and small enterprises, and also obligatory deductions into the Republican Roads Fund.

To determine that the specified tax privileges are given at volume of direct private foreign investments:

- from 300 thousand US dollars up to 3 million US dollars - for the period of 3 years;

- from above 3 million US dollars up to 10 million US dollars - for the period of 5 years;

- from above 10 million US dollars - for the period of 7 years.

To establish, that the above mentioned tax privileges are applied under following conditions:

- location of the said enterprises in manpower-abundant regions - the Republic Karakalpakstan, Dzhizak, Kashkadarinskai, Syr-Darya, Surkhan-Darya, Khorezm regions as well as in rural settlements of Navoiy, Andizhan, Namangan and Fergana regions;

- bringing-in by foreign investors of private direct foreign investments without granting a guarantee of the Republic of Uzbekistan;

- the share of foreign participants in the charter fund of the enterprise should be not less than 50 percent;

- contributing the private direct foreign investments after the state registration of the said enterprises;

- contribution of foreign investments in form of the hard currency or the new modern technological equipment;

- direction of the income received as a result of granting of the specified privileges during term of their application, on reinvestment with the purpose of the further development of the enterprise.

To establish, that:

- interests under the long-term credits involved by the enterprises with foreign investments without a guarantee of the Republic of Uzbekistan shall not be included in taxable base at calculation of the income (profit) tax;

- losses from the main activity, arising at newly created enterprises with foreign investments, are transferred for the term of up to 5 years by equal potions for repayment on the account of the taxable income during the years following after the accounting period within which the loss has been suffered;

- at worsening of investment conditions by the subsequent legislation, privileges granted by the item 1 of the present Decree shall be in force during the whole period for which they had been granted.

The Appendix - the List of Branches of Economy over which the privileges granted for direct private foreign investments are spread:

1. Products of the radio-electronic industry and manufacture of accessories to computers and computer facilities.

2. Light Industry:- manufacture of finished cotton and woolen fabrics; - manufacture of ready ready-made, knitted, hosiery products and textile haberdashery goods; - leather processing; - manufacture of the footwear, ready-made leather haberdashery products.

3. The Silk Industry:- manufacture of silk fabrics and finished articles made of silk.

4. Construction Materials’ Industry: manufacture of new kinds of the construction materials specified in appendix N1а to the Decree of the President of the Republic of Uzbekistan dated March, 24, 2005 N DP-3586.

5. Industrial production of Poultry Meat and Eggs.

6. The Food-Processing Industry:- manufacture of ready-made industrially-processed food products from local raw material (except for alcoholic, soft drinks and tobacco items).

7. The Meat-and-Milk Industry:- manufacture of ready kinds of meat and dairy production, cheese and animal oil.

8. Chemical-Pharmaceutical:- manufacture of medicaments; - manufacture of synthetic detergents, household chemical goods.

Clauses 1, 2, 4 of the Decrees and the Appendix to the Decree of the President of The Republic of Uzbekistan from 11.04.2005. №DP-3594 «On additional measures to stimulate the attraction of direct private foreign investments».

 

35

In the City of Navoi within the area of Navoi International Airport, Free Industrial Economic Zone “Navoi” (hereinafter referred to as the FIEZ) has been created.

Duration period of functioning of Free Industrial Economic Zone “Navoi” is 30 years with possibility of its further prolongation;

 

During the period of functioning of the FIEZ within its territory the special customss, currency and tax regimes, simplified procedures of entry and exit as well as obtaining permit for performance of labor activity by citizens being non-residents of Uzbekistan shall be applied;

Force of special legal regime including customss, currency and tax regimes shall be applied only to activity performed by economic entities registered by the FIEZ directorate, exclusively on the FIEZ’s territory.

 

 

Economic entities registered in Free Industrial Economic Zone “Navoi” shall be exempted from payments of: land tax, property tax, income tax, tax for improvement and development of social infrastructure, single tax payment (for small enterprises), mandatory allocations to the Republican Highway Fund, Republican School Education Fund depended to volume of investments made:

- from 3 to 10 million Euros – for 7 years;

- from 10 to 30 million Euros – for 10 years. During the following 5 years tax rate for income tax and single tax payment shall be established at size of 50 percent lower than the rates in force;

- over 30 million Euros – for 15 years. During the following 10 years tax rate for income tax and single tax payment shall be established at size of 50 percent lower than the rates in force;

Economic entities registered at the FIEZ shall be exempted from customss’ payments (excluding customs procedure charges) for imported equipment as well as raw material, materials and component items for manufacture of products aimed for exports for the whole period of functioning of the FIEZ.

For the raw material, materials and component items for manufacture of products aimed for sale in domestic market of Uzbekistan, customs payments shall be levied at size of 50 percent of established rates (excluding customs procedure charges) with the award of delay of their payment for the period of up to 180 days provided that legislation has not established a more privileged regime).

In cases of sale or gratuitous assignment of the equipment raw material, materials and component items brought into territory of the FIEZ with application of the said privileges, customs payments shall be collected to the state budget in full volume in order established by legislation.

Decree by President of the Republic of Uzbekistan dated December 2, 2008 No UP-4059 “On Creation of the Free Industrial Economic Zone in Navoi Region”

Decree by President of the Republic of Uzbekistan dated December 2, 2008 No UP-4059 “On Creation of the Free Industrial Economic Zone in Navoi Region”

 

Obligatory sale of currency

36

The followings shall be exempted from mandatory sales of revenue received in foreign currency:

a) for five years since the date of registration – enterprises with foreign investments specializing in manufacture of consumer goods whose share of foreign capital in the charter fund exceeds 50 percent. Those enterprises shall be considered specializing in manufacture of consumer goods in case the own production share constitutes over 60 percent of total volume of revenue received from their economic activity;

Resolution by the Cabinet of Ministers of the Republic of Uzbekistan dated June 29, 2000 No 245 “On measures aimed at further development and strengthening of the over-the-counter currencies’ market”


3. GUARANTEES AND PRIVILEGES GRANTED AT IMPLEMENTATION OF THE INVESTMENTS THROUGH CONCLUSION OF THE PRODUCTION-SHARE AGREEMENTS

The content of guarantees, privileges and rights

Legislative act

37

Production received in according with the terms of a production-share agreement into the foreign investor's property, may be exported without any restrictions from the Republic of Uzbekistan or may be sold by an investor in the local market on the terms and in the order, determined by the agreement.

Part 2 of the Article 16 of the Law of the Republic of Uzbekistan "On agreements on production sharing".

38

Foreign investors, as well as their contractors and subcontractors are exempted from payment of all kinds of taxes established in the Republic of Uzbekistan, duties and other obligatory payments connected with carrying out of research and exploration works on deposit areas, determined by the agreements.

Part 1 of the Article 20 of the Law of the Republic of Uzbekistan "On agreements on production sharing".

39

In the case if during the validity of the production-share agreement the legislation establishes the norms worsening commercial results of a foreign investor's activity within the framework of the agreement the terms stipulated in the agreement will be applied. This provision is not applicable in cases when by legislation amendments into safety standards (norms, rules) concerning the works’ performance, security of deposits, environments and health of citizens are being introduced.

Part 2 of the Article 24 of the Law of the Republic of Uzbekistan "On agreements on production sharing".

??????? Orphus