On amendments and additions to some legislative acts of the Republic of Uzbekistan in relation to the adoption of the main directions of tax and budget policy for 2023

The aim of this alert is to provide brief review of the most important amendments. However, it is recommended to get familiarized with the text of respective legislative acts, in order to understand the new rules fully or contact our specialists.

VAT

1. From January 1, 2023, the tax rate is reduced from 15% to 12%.
2. The term for the in-house tax audit for the VAT refund is 30 days (previously 60 days).
3. Abolishing:

• from April 1, 2023, benefits provided for:
  • geological services provided within the framework of annual state programs for the development and reproduction of the mineral resource base at the expense of the budget;
  • turnover on the implementation of research and innovative work carried out at the expense of the budget.
• from July 1, 2023, benefits provided for the services of the security units of the National Guard of the Republic of Uzbekistan.

4. State and Administration Bodies may be recognized as VAT taxpayers on the basis of a decision of the President or the Cabinet of Ministers of the Republic of Uzbekistan.
5. From January 1, 2023, a procedure is introduced stipulating that the amount of tax paid (payable) on goods (services) actually received, which is not offsetable due to the suspension of the VAT certificate, in case of renewal of the VAT certificate is subject to adjustment (attribution to offset) both for the taxpayer and buyers for the period when the VAT certificate was suspended.

Excise tax

1. From February 1, 2023, excise tax rates on petroleum products, as well as on manufactured alcohol and tobacco products are indexed by 10%.
2. From January 1, 2023, the excise tax rate is increased on rectified ethyl alcohol from food raw materials, rectified technical ethyl alcohol from the ether aldehyde fraction and the head ethyl alcohol fraction (UZS 7,450 per 1 liter (previously UZS 14,900 per 1 dal (or UZS 1490 per 1 liter).
3. From January 1, 2023, excise tax rates for imports of alcohol and tobacco products will be reduced by 5%.

Corporate Income Tax

1. Income from the sale of goods (services) for export are subject to taxation at a tax rate of 0%, regardless of the share of export revenues in total income. At the same time, the tax rate of 0% is not applied to income received from the provision of services to non-residents of the Republic of Uzbekistan operating in the Republic of Uzbekistan through Permanent Establishments from January 1, 2023.
2. From January 1, 2023, the right to reduce the income tax rate by 50% is granted for the following category of taxpayers:
3. after September 1, 2022, revenue-based tax taxpayers, who first switched to paying corporate income tax – during one tax period following the year in which the taxpayer switched to paying corporate income tax, provided that in the tax period in which the reduced tax rate is applied, the total income of the taxpayer did not exceed UZS 10 bn (while these taxpayers have the right to determine the tax base in a simplified manner in the amount of 25% of the total income);
4. after September 1, 2022, taxpayers, whose total income during the current tax period for the first time exceeded UZS 10 bn – during the current tax period and the subsequent tax period, provided that in tax periods in which the reduced tax rate is applied, the total income did not exceed UZS 100 bn.

The reduced tax rate does not apply to taxpayers of subsoil use tax and excise tax, as well as in case of liquidation of the taxpayer, and (or) detection of facts of division (splitting) of income from the sale of goods (services) of the taxpayer between two or more business entities for the application of a reduced tax rate.

3. From January 1, 2023, during the period of mining at the deposit, stripping costs form a separate group of depreciable assets, calculated in proportion to the volumes in the context of stages or components of ore bodies according to the feasibility study of the project and the tax and accounting policy of the taxpayer.

• These expenses are deducted from the total income of the taxpayer in the form of depreciation deductions.
• The annual amount of depreciation deductions is calculated by applying the depreciation rate, determined at the discretion of the taxpayer:
  • but not more than 15% of the amount of accumulated expenses for the group of depreciable assets incurred before the start of production;
  • but not more than 33% of the amount of accumulated expenses for a group of depreciable assets incurred during the production period.

4. A non-resident operating through a Permanent Establishment has the right to apply a reduced tax rate provided by the international treaty of the Republic of Uzbekistan on income in the form of dividends.
5. From January 1, 2023, within the framework of a foreign trade agreement for the purchase (sale) of equipment, providing for the implementation by a non-resident of installation and (or) commissioning services and other similar services, if the cost of services provided is not indicated separately, then the taxable income of a non-resident is determined based on the market value of such services (previously – 20% of the cost of equipment).
6. From January 1, 2023, the taxpayer has the right to submit a certificate of the amount of advance payments before the 15th day (previously 10th day) of the first month of the next quarter based on the expected amount of profit in the current quarter.

Personal income tax and social tax

1. The amount of non-taxable income increases from UZS 15 mln up to 80 times the minimum wage (or UZS 73.6 mln to this date) when individuals transfer their income to repay mortgage loans, with the simultaneous abolition of the requirement for the cost of housing (to this date, UZS 300 mln).
2. From April 1, 2023, personal income tax benefits in terms of income of individuals transfer to pay for long-term life insurance of individuals are abolished.
3. Personal income tax rates for individual entrepreneurs who pay tax in fixed amounts are indexed by 10%.
4. The deadline for submission of annual tax reports on personal income tax and social tax is no later than February 15 of the year following the reporting year (previously the deadline for submitting annual financial statements).
5. The minimum rental rates established for individuals, for the purpose of calculating personal income tax, are indexed by 10%.

Property tax

1. Amendments have been made to the deadlines for submitting tax reports and paying tax (advance payments). In particular, the following deadlines shall be established:

• submission of tax reports – not later than March 1 of the year following the reporting tax period. Within the same period, the final payment of tax for the tax period is made, taking into account advance payments (previously the deadline for submitting annual financial statements);
• submission of a certificate of tax amount for the current tax period (advance payments) – not later than January 20 of the current tax period (previously January 10 of the current tax period);
• payment of advance payments by VAT payers – not later than the 20th day of the third month of each quarter. For other taxpayers, the terms of payment of advance payments are preserved – until the 10th day of each month, while for the month of January they pay not later than January 20 (previously January 10 of the current tax period).

Land tax

1. The tax rate for agricultural land provided to individuals, as well as for dehkan farming, is set at 0.95% of the standard value of agricultural land. At the same time, in case of deterioration or improvement of the quality of agricultural land (decrease or increase in the bonita score) on dehkan farms and on individuals with agricultural land, the tax is paid from the normative value of agricultural land based on the bonita score that existed before the deterioration of the quality of land (previously this was applicable only for legal entities). At the same time, the normative value of land plots is determined on average for irrigated or non-irrigated land of the district (city), respectively.
2. Amendments have been made to the deadlines for submitting tax reports and paying tax on non-agricultural land. In particular, the following deadlines shall be established:

• submission of tax reports and a certificate of land plots available to a legal entity that are not subject to taxation – not later than January 20 of the current tax period (previously January 10 of the current tax period);
• for the taxpayers of revenue-based tax – not later than the 20th day of the third month of each quarter. For other taxpayers, the deadlines for payment of the tax are preserved – until the 10th day of each month, while for the month of January they pay not later than January 20.

Water use tax

1. Water use tax is introduced for individuals who have:

• non-residential real estate objects intended for entrepreneurial activity and (or) income generation at tax rates established for individual entrepreneurs.
• agricultural land at tax rates established for dehkan farms.

2. Amendments have been made to the deadlines:

• submission of tax reporting for legal entities of the Republic of Uzbekistan (except for agricultural enterprises), which is established not later than March 1 of the year following the reporting tax period (previously not later than the deadline for submission of annual financial statements). Within the same period, the final payment of tax for the tax period is made, taking into account advance payments (previously by the deadline for submission of annual financial statements);
• delivery by the tax authorities of a payment notice of tax payment, which is established not later than March 1 of the year following the tax period (previously February 1 of the year following the tax period).

3. For agricultural enterprises, 2 deadlines for payment of the tax are established:

• until October 1 – 70% of the annual tax amount determined by the tax authorities on the basis of the volume of water used by the agricultural enterprise in the previous tax period for watering agricultural land and breeding (growing) fish. In the absence of information on the volume of water used by an agricultural enterprise in the previous tax period, the amount of tax is determined according to the standards of water consumption approved by the authorized body in the field of water use and water consumption;
• until December 15 – the remaining amount of tax.

Subsoil use tax and special rent tax on mining

1. For ferrous, precious, non-ferrous and radioactive metals, as well as rare and rare earth elements (hereinafter referred to as metals), an order is introduced according to which:

• taxable base is the volume of actual sales of mined (extracted) metals (previously the volume of extraction / extraction of minerals);
• taxable base is the value of the volume of actual sales of mined (extracted) metals (previously the value of the volume of extracted minerals, calculated at the weighted average selling price for the tax period).

2. Taxable base for gas condensate is determined in the same way as the procedure provided for natural gas and oil.
3. The tax rate on iron is reduced from 5% to 2%.

Revenue-based tax

1. Revenue-based tax rates will be unified, with the establishment of a unified rate of 4% for all categories of taxpayers. At the same time, reduced tax rates are maintained for entities located in hard-to-reach and mountainous areas in the amount of 1%, in other settlements – 2% (including e-commerce) and in cities with a population of 100,000 people or more – 3%.
2. From 2023, revenue-based tax taxpayers have the right to voluntarily choose to pay tax in a fixed amount. At the same time, with an amount of total income not exceeding UZS 500 mln, the right to choose to pay tax in a fixed amount of UZS 20 mln per year is granted, and with a total income of more than UZS 500 mln – UZS 30 mln per year. Tax in a fixed amount is paid in equal installments monthly no later than the 15th day of the month following the calendar month.

Dividends paid to revenue-based tax taxpayers in a fixed amount are not subject to dividend and personal income tax.

When switching to the payment of VAT on voluntarily or mandatorily basis, the right to offset VAT to such taxpayers on the balances of goods purchased with VAT is not granted.

3. Taxpayers, including newly created legal entities and newly registered individual entrepreneurs, whose total income during the tax period exceeded UZS 1 bn, switch to pay VAT and corporate income tax from the date of reaching the specified amount of total income (earlier starting from the first day of the month following the month in which such an excess occurred).