Tax Alert / Issue No. 3 / 3 May 2017 Changes in excise tax rates for certain products / Fines for absence of reconciliation act with debtors / Benefits for entities registered and operating in the Republic of Karakalpakstan and Khorezm region / Amendment to the Law «On foreign investments / Incentives for private healthcare institutions / Localization Program / New small industrial zone / Changes in mandatory sale of currency for individual entrepreneurs Recent changes in legislation In this issue, we have summarised notable recent amendments in the Uzbek legislation Excise tax rates for certain products decreased Effective 1 April 2017, Presidential Decree #ПП-2862 reduces the excise tax rates for some products, including: wheat flour, sunflower and safflower oil, certain vegetables, fruit and vegetable juices (except for pineapple and citrus juices), trucks with engine volume less than 2,800 cc. www.pwc.com
Morever, the following products are no longer subject to excise tax: various pasta types, certain types of polyethylene, plain steel rolled metal and others. If you are interested in receiving the list of HS codes of the abovementioned products please let us know. Fines for absence of reconciliation act with debtors Legal entities who have not settled their tax liabilities within the prescribed deadlines are required to submit reconciliation acts with debtors or written notice to tax authorities on the absence of overdue accounts receivable. Law #ЗРУ-429 of 18 April 2017 introduces administrative fine of 1 to 3 minimum monthly wages (approx. USD 40 to USD 120) to taxpayers-for not providing the above documents. Benefits for entities registered and operating in the Republic of Karakalpakstan and Khorezm region Presidential Decree #ПП-2843 of 17 March 2017 provides certain benefits for legal entities registered and operating in the Republic of Karakalpakstan and Khorezm region, including: Exemption from mandatory sale of foreign currency proceeds from export of industrial products of own production. Exemption does not apply to export of certain raw materials, e.g. cotton, natural gas, precious metals and others. Exemption until 1 January 2022 from property, land and infrastructure development taxes, as well as obligatory payments to the Republican Road Fund for entities producing pharmaceuticals, electrotechnical products and finishing construction materials. To qualify for the exemption net revenue from sale of the above products (as per the list approved by responsible government institutions) should be at least 60% of total revenue in the reporting period. Internal transportation tariffs shall be applied for export shipments for transportaion till the customs border of Uzbekistan. Amendment to the Law On foreign investments Law of the Republic of Uzbekistan On foreign investments was amended to include a provision that newly established manufacturing enterprises with foreign investment may apply the rates of taxes and other obligatory payments effective at the date of their state registration within 5 years from state registration. Please note that this provision does not apply to customs payments, water use tax, land tax, taxes and special payments paid by subsurface users. Incentives for private healthcare institutions Presidential Decree #ПП-2863 of 1 April 2017 On measures for the further development of the private healthcare sector envisages range of measure for development of healthcare sector. Specifically, the Decree, among others, provides for the following: Increase of maximum headcount of the entities in healthcare sector to qualify as small enterprise to 100 people (effective 1 May 2017) Sale of buildings and facilities not in use to providers of medical services at zero cost conditional on investment and social commitments by new owners.
Expand volume of procurement of modern high-tech medical equipment and its provision to medical organization under a financial lease. Exemptions provided to private healthcare institutions servicing public (except for dentistry and cosmetology) until 1 January 2022 from: all types of taxes and mandatory contributions to designated state funds, whereby saved funds shall be used for purchase of modern medical, engineering and technical equipment and its maintenance, purchase of spare parts, consumables and other medical devices, carrying out new construction, reconstruction and capital repairs of buildings and facilities for the provision of medical services; as well as for provision of free medical services to socially vulnerable categories of population; customs payments (except for customs clearance fees) for imported new medical equipment, components, spare parts and consumables for medical equipment in accordance with the list approved by the Cabinet of Ministers of the Republic of Uzbekistan. Exemption from unified tax payment for newly established microfirms and small enterprises providing medical services and located in rural areas, for a period of 10 years from the date of their state registration. Exemption from personal income tax on income of foreign doctors, technical specialists providing maintenance of medical equipment and managerial personnel of private medical institutions. Exemption from unified social payment on income of foreign doctors and technical specialists paid by private medical institutions. Localization Program Resolution of the Cabinet of Ministers #197 of 10 April 2017 introduced amendments the Program for localization of manufacturing of finished products, components and materials for the period 2015-2019. Specifically, 12 new projects on production of domestic appliances, medical equipment etc. Enterprises participating in projects included into localization programs are eligible for various exemptions and benefits for a period of 3 years. Such exemptions (subject to certain limitations) include relief from payment of: customs payments (except for customs clearance fees) for imported technological equipment, spare parts and components not produced in the country, used in localized production; income tax, unified tax payment (for entities applying simplified taxation regime) in part related to the localized production; property tax on fixed assets used for localized production. If you are interested in receiving the updated list of projects included in Program please let us know. New small industrial zone Presidential Decree #ПП-2860 of 30 March 2017 envisages establishment of a small industrial zone in the town of Yangier in Syrdarya region. The
industrial zone will operate for 30 years with possibility of prolongation. It is expected that 207 projects amounting to USD 40 million are to be implemented at the territory of industrial zone. Micro-firms and small enterprises operating in the small industrial zone shall be exempt from: unified tax payment; customs payments (except for customs clearance fees) for imported equipment, raw materials, spare parts and components for their own production needs in the framework of projects being implemented in industrial zone, as well as metalware and construction materials as per the lists approved by the Cabinet of Ministers. Please note that these exemptions are valid for the period of 3 years provided that the investment amount is not less than 2,000 minimum monthly wages (MMW, approx. USD 80, 000) and annual revenue is not less than 1,000 MMW (approx. USD 40,000). Moreover,, if equipment, raw materials, spare parts and components, as well as metalware and construction materials imported with exemption from customs payments are sold or transferred within three years after importation, customs payments shall be payable in full. Changes in mandatory sale of currency for individual entrepreneurs Resolution of the Cabinet of Ministers #245 of 26 April 2017 provides exemption for individual entrepreneurs from mandatory sale of foreign currency proceeds from export of goods (works, services) of their own production. The exemption is not applicable to individual entrepreneurs - exporters of agricultural products, natural gas, copper and copper products.
Let s talk For a deeper discussion of how this issue might affect your business, please contact: Michael Ahern, Partner, Tax michael.ahern@kz.pwc.com Otabek Muhammadiyev, Director, Assurance otabek.muhammadiyev@uz.pwc.com Jamshid Juraev, Director, Tax jamshid.juraev@uz.pwc.com Audit Organization PricewaterhouseCoopers LLC 88A, Mustaqillik prospekt, Mirzo-Ulugbek district, Tashkent 100000, Republic of Uzbekistan T: +998 (71) 120 6101, F: +998 (71) 120 6645, www.pwc.com/uz 2017 PwC. All rights reserved. Not for further distribution without the permission of PwC. "PwC" refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm's professional judgment or bind another member firm or PwCIL in any way. The material contained in this alert is provided for general information purposes only and does not contain a comprehensive analysis of each item described. Before taking (or not taking) any action, readers should seek professional advice specific to their situation. No liability is accepted for acts or omissions taken in reliance upon the contents of this alert.