Failure to meet investment obligations can result in 3-fold property tax

By Azernews

By Kamila Aliyeva

In Uzbekistan, non-fulfillment of investment obligations will be punished with 3-fold tax on property.

This is reflected in a draft law "On introducing amendments and supplements to the Tax Code of Uzbekistan" to be submitted for the first reading at the Uzbek parliament.

The document is aimed at ensuring timely fulfillment of social and investment obligations by legal and physical persons, who received land plots.

A land plot of up to 1 hectare, inclusive, is allocated to legal entities and individuals to carry out entrepreneurial activities on the terms of a tender with certain obligations placed on them, according to the resolution "On measures to further improve the procedures for granting land plots on the basis of a tender for the implementation of entrepreneurial activities and the procedure for obtaining construction permits" approved by the Cabinet of Ministers.

To ensure the fulfillment of these obligations, the document stipulates a 3-fold tax on property, if business entities fail to organize the production of goods and services at the completed facility within 12 months.

The introduction of the above-mentioned period is aimed at eliminating the risks associated with future business lending, technology installation and production process.

The adoption of this law will facilitate the effective use of land, attraction of the necessary investments, creation of modern production and new jobs as well as timely completion of construction works.

New private direct investments are critical for maintaining the economic stability of the country, especially after sharp economic slowdowns in Russia and Kazakhstan, Uzbekistan’s main trade partners. The statistical data shows that in 2014-2016 export earnings of the country decreased by 17 percent and the inflow of remittances by 63 percent.

The overall investment climate demonstrated some improvement in recent years in Uzbekistan – the government simplified business registration procedures, introduced some additional tax incentives for investors, improved private property protection legislation and streamlined customs regulations.

In 2017, the government reduced the mandatory sale rate by businesses of foreign currency earnings from 50 to 25 percent. The president announced upcoming liberalization of the banking sector and transition to a system of free currency conversion.

 In particular, restrictions were lifted for legal entities and individuals to convert the national currency. Currently, Uzbek people can buy foreign currency solely on plastic payment cards, which can be used abroad without any restrictions.

In addition, legal entities can purchase foreign currency in banks without restrictions for payment on current international transactions - for the import of goods, works and services, repatriation of profits, repayment of loans, travel expenses and other non-trade transfers.

At the same time, without the support of state-owned or state-affiliated entities, foreign investors usually have limited business opportunities in Uzbekistan. The government generally welcomes investors and investment projects that are in line with its import-substitution and export-oriented industrialization policy, and discourages investments in import-consuming sectors.

Thus, traditionally over 70 percent of all foreign investments have been directed to the oil and gas sector, one of the main generators of export earnings. In 2016, over 72 percent of all FDIs and loans were consumed by the oil and gas industry, which generated 13.6 percent of the country’s export earnings.