These changes are being introduced in accordance with the Tax Code of the Republic of Uzbekistan and the Resolution of the President of the Republic of Uzbekistan of 29 December 2008 No. PR-1024 “On the forecast of key macroeconomic indicators and parameters of the State Budget of the Republic of Uzbekistan for 2009.”

I. On income tax of legal entities

The income tax rate for legal entities is approved in accordance with the Annex No. 7 to the Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008.

The income tax rate for legal entities, except for the legal entities stated in articles 2-5, is kept at the 2008 level at 10%, and for commercial banks - at 15%.

For the companies in the sphere of service, by the volume of services paid for using a plastic card, a tax reduction of 10% from the established tax rate is kept.

For the exporting companies, a regressive scale of taxation depending on the share of the exported goods (works, services, depending on the place of their provision, production) produced by the company in the total volume of sales for hard currency is kept as in 2008.

If the share of export ranges from 15 to 30% in the total sales volume - the tax concession of 30% is applied, and if the share of export is 30% or more of the total sales volume - the established tax rate is reduced by 50%.

For legal entities earning income on organisation of auctions, organisation of mass audience events through the involvement of legal entities and individuals (including non-residents) that have the license for tour-concert activity, the income tax rate is established at 35% of the profit before tax.

The tax on income earned by the residents of the Republic of Uzbekistan in the form of dividends and interest payments is kept at 10%.

II. On personal income tax

Minimum and average tax rates on personal income is reduced to by 1%, and the maximum rate is reduced by 3%.

The tax rate on personal income is established in accordance with the Annex No. 8 to the Resolution of the President of the Republic of Uzbekistan No. PR - 1024 of 29 December 2008, as follows:

Note:

In order to calculate the sum of taxes on personal income the size of the minimum wage is calculated as a growing sum from the beginning of the year (the sum of minimum wages for every month of the corresponding period from the beginning of the year). The sum of taxes on personal income calculated based on the established rates subject to payment to the budget is reduced by the sum of mandatory monthly payments deducted to the individual savings persion accounts of citizens calculated in the amount of 1% of the income subject to taxation.

III. On single tax payment

The rate of single tax payment applied to micro-firms and small companies approved according to the Annex No. 9-1, to trade and public catering enterprises according to the Annex No. 9-2, and to certain categories of companies according to the Annex No. 9-3 to the Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008.

The rate of single tax payment for micro-firms and small businesses, except for the companies in the fields of trade and public catering, as well as enterprises engaged in industrial production, is kept at the 2008 level - at 8%.

For micro-firms and small enterprises in industrial production, the size of the single tax payment is reduced by 1%, and established at 7% in 2009.

The tax benefits are kept for the following companies: companies at which the development and integration of computer software products makes up at least 80% of the total volume of sale of goods (works, services) - at 5%; agricultural businesses - for the main activity, except for the agricultural producers paying the single land tax - at 6%.

For the exporting small businesses (micro-firms) a regressive scale of taxation on the single tax payment depending on the share of export of goods (works, services, regardless of the place of their performance, provision) locally produced and sold for hard currency in the total volume of sales is kept at 2008 level.

If the share of exports ranges from 15 to 30% of the total sales volume - the established tax rate is reduced by 30%; and if the share of exports is 30% or more of the total sales volume - the established tax rate is reduced by 50%.

For micro-firms and small businesses earning income by conducting the auctions, organizing mass audience events involving legal entities and individuals (including non-residents) licensed to conduct tour-concert activity - a single tax rate is established in the amount of 30% of the profit before tax.

For micro-firms and small businesses:

- engaged in stocking and supply-sale activities, brokerage (except for those performing brokerage activity in securities market), and those providing intermediary services under the contracts of commission, attorney, and other contracts on provision of intermediary services - the rate of single tax payment is established at 33% of the taxable base;

- performing brokerage activity in securities market - the rate of single tax payment is established at 13% of the taxable base.

At the same time for micro-firms and small businesses stated in this article, the taxable base is determined in the form of the sum of reward (gross income).

For the companies of the public catering, the rate of single tax payment is kept at 10% of the taxable base, and for the specialized enterprises of public catering providing service to public schools, boarding schools, secondary specialized professional and higher educational institutions - at 8% of the taxable base.

For the retail trade companies (except for retail drug stores) located in: the cities with the population of 100,000 and more people the rate of single tax payment is kept at 4%; other cities, towns and villages - the single tax payment rate is kept at 2%; and for those located in distant and mountainous areas - the single tax payment rate is kept at 1%.

For the retail trade companies (except for wholesale drug selling organizations) regardless of the place of location the rate of single tax payment is kept at 5%.

At the same time, for the Republican specialized wholesale warehouse-offices and their territorial (regional, inter-regional, and inter-district) bases included in the system of the Association f the Enterprises of Wholesale Trade is kept as stated in the Resolution of the President of the Republic of Uzbekistan of 8 June 2006 No. PR-374 “On improvement of the rules of taxation of specialized wholesale base-companies” until the end of the validity period of the benefits established.

The rate of the single tax payment established for wholesale and retail drug selling organizations located in: located in cities with the population of 100,000 and ore people - at 3%; other populated areas - at 2%; and distant and mountainous regions - at 1%.

The classification of the populated areas as located in distant and mountainous areas is determined by the Instruction on the Rules of Classification of the Populated Locations as Distant and Mountainous Regions (approved by the Resolution of the Ministry of Finance No. 101, State Committee of Land Geodesy Cadastre No. 113 and State Tax Committee No. 2008-43 of 14 October 2008 and registered by the Ministry of Justice under No. 1868 of 11 November 2008).

For the enterprises of public catering, retail trade, including retail drug sale (except for enterprises of wholesale trade and wholesale drug trading) a reduction of the tax rate by 10% of the established rate for the volume of goods (services) sold and paid for using a plastic card is kept.

For the companies performing the activity on the organisation of lotteries (within the frame sof this type of activity) a single tax rate is established at 33% of the taxable base.

For the notaries, engaged in private practice, the rate of single tax payment is established at 50% of the taxable base.

IV. On fixed tax

The rates of fixed tax for certain types of entrepreneurial activities of legal entities and individuals and the rates of fixed tax charged from individuals engaged in entrepreneurial activity without the establishment of legal personality (individual entrepreneurs) are established in accordance with the Annexes No. 10 and No. 11 to the Resolution of the President of the Republic of Uzbekistan No.-1024 of 29 December 2008.

The fixed tax rate has been reduced by 1.33 rate points for individuals engaged in entrepreneurial activity without the establishment of legal personality approved in accordance with the Annex No. 11 to the Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008.

V. On value added tax

The value added tax is kept at 20%. At the same time, in calculation of the value added tax, a 0% value added tax rate is applied to cotton cleaning factories of HlopkoProm in sale of cotton fibre and lint for export on the orders of HlopkoProm Company and invoices signed on the basis of these orders.

According to the addenda introduced to the Article 8 of the Resolution of the President of the Republic of Uzbekistan of 21 February 2008 No. PR-800 “On establishment of the enterprise with foreign investments, General Motors Uzbekistan”, the services of the official dealers of ZAO General Motors Uzbekistan on repair and maintenance servicing of automobiles, including the cost of spare parts, junctions, aggregates and materials installed in provision of these services and the sale of spare parts, junctions, aggregates and materials through their distribution networks 0% value added tax is applied.

For the enterprises operating under the system of UzDonMahsulot State Company selling grains and byproducts and wastes after the initial processing of grain of state resources for industrial processing, the size of the taxable turnover subject to value added tax is determined depending on the sum of margin. At the same time the turnover earned on the sale of grain to other oganisations, including the producers of alcohol, are charged the value added tax according to the general rules (Article 4 of the Resolution of the Cabinet of Ministers of 25 May 2006 No. 695 “on additional measures to improve the system of record keeping of grains and products of its processing, and strengthening control over its safety”).

VI. On excise tax

The rate of excise tax for the goods subject to excise taxation produced in the Republic of Uzbekistan and rate of excise tax for the goods subject to excise taxation imported to the territory of the Republic of Uzbekistan are established in accordance with the Annexes No. 12-1 and No. 12-2 to the Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008.

The rates for alcoholic products, vegetable oil and cigarettes with filters are indexed by 10%, and for cigarettes without filters - by 30%.

The tax rates for beer are unified and established at 1,500 soums per 1 decaliter of ready product.

VII. On taxes for use of water resources

The tax rates for the use of water resources are approved in accordance with the Annex No. 13 to the Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008. The rates applied in 2008 have been indexed 1.25 times.

VIII. On taxes for mining

The tax rates for mining approved in accordance with the Annex No. 14 to the Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008. The tax rate for mining applied in 2008 are kept.

IX. On taxes on super-profits

The tax rates on super-profits applied in 2008 are kept. At the same time, however, the definition of the size of the taxable base is changed in accordance with the Annex No. 15 to the Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008.

X. On property tax

The property tax rate for legal entities is established at 3.5% as stated in the Annex No. 16 to the Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008.

For the equipment not installed in the normative time, the property tax is doubled.

For the exporting companies, the regressive scale of taxation depending on the share of exported goods (works, services regardless of the place of their performance, provision) of the company’s own production sold for hard currency in the total volume of sales is kept as applied in 2008.

If the share of export ranges from 15 to 30% of the total sales volume - the established tax rate is reduced by 30%, and if it makes up 30% and more of the sales volume - the established tax rate is cut by 50%. At the same time, no tax concessions are applied to the value of incomplete construction and equipment not installed in the defined (normative) timeframe.

The rate of property tax for individuals is established at 0.5% of the stock value of the property in accordance with the Annex No. 17 to the Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008.

If the stock value of the property is not determined by the authorized bodies for valuation of property of individuals, a conditional value of 16,800.0 thousand soums is charged in Tashkent city and regional centres, and 7,300.0 thousand soums - in other cities and rural areas.

When the objects of housing fund is transferred by the individuals to the category of non-dwelling fund or when individuals purchase the objects of non-dwelling fund (buildings, spaces in buildings) the property tax is paid by individuals according to the tax rate established for legal entities.

XI. On land tax The rates of land tax are approved in accordance with the Annex No. 18 to the Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008. The tax rates applied in 2008 have been indexed 1.25 times.

XII. On single land tax

The rate of the single land tax for agricultural commodity producers is approved in accordance with the Annex No. 19 to the Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008.

For agricultural commodity producers paying single land tax depending on the normative value of the agricultural property, the rate of the single land tax is increased from 2.8 to 3.5% of the normative value of the agricultural property.

XIII. On local taxes and duties introduced by local authorities on spots

In accordance with the Annex No. 20 to the Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008, starting from 1 January 2009 the maximum rates of local taxes and duties are established as follows:

Specific size of tax rates for individuals for the consumption of petrol, diesel fuel for vehicles and the date of their validation are approved by the Cabinet of Ministers of the Republic of Uzbekistan.

Starting 1 January 2009 the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan of 30 December 2008 No. 286 establishes the following tax rates for individuals for the consumption of: petrol, diesel fuel for vehicles - 120 UZS per liter; gas for vehicles - 120 UZS per one kilogram (immediate information from the State Tax Committee of the Republic of Uzbekistan of 31 December 2008).

XIV. Mandatory deductions to the Republican Road Fund

The rates and objects of deductions and duties to the Republican Road Fund are approved in accordance with the Annex No. 21 and No. 22 to the Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008. The rates of deductions and duties to the Republican Road Fund are kept as in 2008.

XV. Mandatory deductions to off-budget Pension Fund and School Education Fund

The objects subject to mandatory deductions to off-budget Pension Fund and School Education Fund under the Ministry of Finance are determined as stated in the Annex No. 23 to the Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008.

The rate of mandatory deductions to the Pension Fund and the rate of mandatory deductions to the School Education Fund are kept as in 2008, at 1%.

XVI. Mandatory duties and deductions for social security

The rate of single social payment is kept at 24%, according to the Annex No. 24 to the Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008.

At the same time, the sum of the single social payment is determined as follows: to the Off-Budget Pension Fund - 23.6%, to the State Fund to Assist Employment - 0.2%; to the Trade Unions’ Federation Council - 0.2%.

The rate of mandatory social security payments for the citizens from their income on labour remuneration to the off-budget Pension Fund is established at 3.5% in 2009, against 2.5% in 2008.

XVII. Other taxation issues

The Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008 exempts the personal income earned by individuals in the form of dividends on the micro-firms and small businesses founded by them, and the funds directed by legal entities towards capitalization, investments, and payments for previously received loans from income tax for the period of five years.

The rules of application of the said benefits is established by the Ministry of Finance, the Ministry of Economy, and the State Tax Committee of the Republic of Uzbekistan and is described separately.

The Resolution of the President of the Republic of Uzbekistan No. PR-1024 of 29 December 2008 establishes that:

- income from the single tax payments are distributed to the State Budget, the Republican Road Fund, the off-budget Pension Fund and off-budget School Education Fund in the proportions determined by the Ministry of Finance of the Republic of Uzbekistan;

- the income of the Republic of Uzbekistan on the sale of goods within the frames of the product sharing agreements with investors is directed to the State Budget;

- business entities are granted the right, in special cases, to make depreciation deductions lower than the established norms in 2009-2010, and in cases if the world prices for the products manufactured by them fall lower than their production costs the business is allowed to stop charging depreciation as agreed with the Ministry of Finance of the Republic of Uzbekistan for the period of up to 6 months;

- for the enterprises exporting goods manufactured by them for hard currency at the prices lower than their cost of production, for the purposes of taxation the income earned on their sale is determined based on the factual prices of sale of exported goods.

To ensure the deductions for the single social security payment are made in full amount, new regulations are introduced from 1 January 2009 according to which the estimation and payment of single social payments are made in the amount of 24% of the labour remuneration fund, but not less than one minimum wage for each employee for all business entities (except for farming businesses); 50% of the minimum wage for every employee for farming businesses.

At the same time, the state tax services are granted the right to charge additional sums for single social payments within the established limits for violation of the established regulations. The additional deductions are made from the income left to the discretion of the payer.

Starting from 1 January 2009 new regulations are introduced, according to which the previously privatized enterprises - payers of the single tax payment whose sales volume of goods (works, services) was lower than ten estimated sums of taxes on property and land taxes determined by the tax agencies for two consecutive quarters without any objective reasons, the enterprises are transferred to the generally established regime of taxation on the written notification of the taxation agency.

The existing regulation on mandatory sale of 50% of hard currency income has been extended to cover all enterprises exporting and transiting gas (except for investors performing the activity within the frames of product sharing agreements) with purposes direction of the funds received towards the repayment of the debts due to the budget, state purposeful funds and off-budget Fund of School Education.

In 2009 the application of the fine in the amount of 100% of not received foreign currency funds to resident legal entities that allowed the delay of inflow of foreign currency income from abroad beyond the established timeframe, the timeframe has been extended from 30 to 60 banking days (paragraph three of the article 4 of the resolution of the Cabinet of Ministers of 29 June 2000 No. 245 “On measures to further develop and strengthen off-budget currency market” (No. 6, art. 33, 2000).

In case of centralized procedure of calculation of taxes on profit and taxes on value added, non-refundable transfer of property between the enterprises included in the system of Uzbekiston Temir Yullari (Uzbekistan Railways), the object of transfer is not made subject to taxation on profit and taxation on value added both for the transferring and receiving parties (paragraph five of the article 4 of the Resolution of the Cabinet of Ministers of 3 March 2001 No. 108 “On improvement of organisation of management of Uzbekiston Temir Yullari State Joint-Stock Railway Company).

The validity period of benefits established by the Resolution of the President of the Republic of Uzbekistan of 21 May 2007 No. PR - 640 “On additional measures to speed up the development of services sphere and service in the Republic of Uzbekistan during the period through 2010” has been extended to 1 January 2012.

The validity period of the benefits established in the Resolution of the Cabinet of Ministers of 27 January 2005 No. 38 “On measures to attract investments to textile industry of the republic” has been extended to 1 January 2012.

Source; UzReport.com