Accounting Outsourcing and
Tax compliance in Uzbekistan
Uzbekistan– Accounting Outsourcing and Tax Compliance
Global Expansion Plus provides accounting outsourcing and tax compliance in Uzbekistan. We provide services with support of our local accountants and tax specialists. We will perform bookkeeping, accounting and filling tax return on your behalf bearing all associated compliance risks. Uzbekistan, as a state, offers a way for its citizens and legal entities to give back, through taxes. It provides clear tax laws that discloses the rates, and how a wide range of taxes should be accounted for.
Uzbekistan in facts
- Location: Central Asia
- Territory: 448,978 square kilometers
- Capital: Tashkent
- Official language: Uzbek
- Currency: Uzbek som (UZS)
- Population: 34,04 million
Corporate income tax (CIT)
Business entities operating in Uzbekistan will attract a CIT at variant rates. In the year 2019, it was set at 12%, which is the general rate. However, this does not apply to everyone. For example, corporates in the cement production industry will attract a 20% CIT and commercial banks settle for the same. This also goes for businesses in mobile service provision, regardless of the amount of profit they make.
To support small and medium enterprises in Uzbekistan, the tax code in place has a simplified tax regime in place. Such businesses are gauged on the annual revenue they generate. Any entity with an annual revenue of less than UZS 1 billion, will benefit from the much lower rate.
Due to this, several taxes come up and they include:
- Unified tax payment (UTP) – Set at 4%;
- Unified land tax (ULT) – Applies to businesses in the agricultural sector at the rate of 0.95% of the value of the land on which revenue is generated. It is also known as a fixed rate;
The much lower tax rate for small and medium businesses replaces other taxes such as VAT and CIT.
Value-added Tax (VAT)
Imports and sales in the local economy will be subject to VAT. A normal VAT rate of 15% is imposed for the goods and services. When it comes to imports, the vatable value is determined by the entire cost of the items coming into the country. For example, the initial value of the product plus other duties charged on it before it leaves the point of entry. Financial services and exports have a zero rate VAT.
To qualify for registration as a VAT payer, an entity must post more than UZS 1 billion in revenue. Those with up to UZS 3 billion can register for the lower VAT of 4% to 15%.
Personal Income tax (PIT)
Incomes earned by individuals living in Uzbekistan are subject to taxation. They could be due to dividends, salaries, or windfalls of any nature. Whichever the case, a PIT rate applies. Different rates based on the source are summarized as follows.
- Interest income and dividends, 5% for residents, and 10% for non-residents.
- Rental, asset gain and employment incomes, 12% for residents, and 20% if otherwise.
- Freight and transport services, 6% for non-residents.
Withholding tax
Non-resident entities whose income is generated in Uzbekistan are liable to pay WHT. However, the terms of double taxation agreement will apply. If a country of resident for the foreign entity has a double taxation treaty with Uzbekistan, then the terms of the agreement will have to come in place.
Payroll related taxation
Payroll depicts salaries. All salaries are remitted by employers through a comprehensive process that involves deductions. One of those deductions goes to the state, as taxes on the employment income. For the case in Uzbekistan, it is a social payment termed as unified social payment (USP). Employers are liable to pay a rate of 12% on the gross income of their salaried employees. It is deducted from their incomes and remitted to the government, as revenue.
Industries or businesses where the 12% applies include:
- Artistry
- Farming industry
- Entrepreneurship
A 25% rate, nonetheless, will apply to entities where the state owns a minimum of 50%, and government businesses.
Employers have an obligation against the pension insurance contributions. For the local employees, they are subject to deduct 20% of their gross income and 0% for expatriates. An extra contribution of 3.5% is awarded to employees working under risky or dangerous conditions, at the expense of their employers.
For an optional pension contribution, by employees, a minimum rate of 2% will come in play.
Import/ Export related taxation
Custom duty
It is duty on all imports. Clearance at the point of entry of products into the country is critical. Nonetheless, there are limits to how much you can charge for a particular value of the goods. The custom tax rates will range from 5% to 70% depending on a number of factors. Also, a clearance fee is subject to imports which is set at 0.2%.
Subject to how clearance fee should be evaluated, it should not exceed USD 3,000 and a minimum of USD 25.
Excise taxes
The rate ranges from 5% to 70%. Just like customs, excise duty is based on the value of the product where the rates apply. Cigarettes, alcohol and petrol are subject to this duty.
Apart from the above products, services due to mobile communication are also excisable. This is in addition to the sale of alcohol, and liquefied petroleum gas (LPG). In the production of cigarettes, a fix rate for the same will apply.
All these government directives, through the tax laws, add weight to how one should account for taxation in Uzbekistan. With a clear understanding of the rates and which products or incomes should be taxed at what rate, life becomes easier.
