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Tax benefits introduced in Uzbekistan for capital markets

15 Feb 2022
Subject Tax Alert
Categories Tax
Jurisdictions Uzbekistan

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On 17 January 2022, President Shavkat Mirziyoyev signed Decree No. PP-90 “On additional measures to implement effective mechanisms to support the capital market” (the “Decree”), aimed at implementing mechanisms for development of the capital market, expanding the privatization of state shareholdings through the capital market, incentivizing the population to invest in securities and creating a competitive environment in the financial market of the Republic of Uzbekistan (the “RUz”).

In particular, this Decree provides for the following incentive measures:

  • Starting from 1 April 2022 to 31 December 2024, a number of tax benefits are being implemented for securities holders:
  • For individuals - both residents and non-residents of the RUz - dividend income on shares is exempt from personal income tax (PIT) (previously, for resident individuals the dividend income on shares was subject to a 5% tax, while for non-resident individuals the dividend income on shares was subject to a 10% tax).
  • For legal entities that are non-residents of the RUz - dividend income on shares is subject to a 5% corporate income tax (CIT) similarly to legal entities that are residents of the RUz (previously, for legal entities that are non-residents of the RUz the dividend income on shares was subject to a 10% tax).
  • For individuals and legal entities – both residents and non-residents of the RUz – accrued interest income on bonds of enterprises is exempt from PIT and CIT (previously, for resident individuals the income was subject to a 5% tax, and for non-resident individuals it was subject to a 10% tax, while for resident legal entities it was subject to a 15% tax, and for non-resident legal entities without a permanent establishment in the RUz it was subject to a 10% tax).
  • Starting from 1 July 2022, in transactions with securities via organized OTC trading, the seller (except for the issuer) will pay a 0.3% fee on the transaction amount instead of CIT and PIT.
  • If a general meeting of shareholders decides to delist shares from the stock exchange, the company is granted the right to buy back the shares belonging to the owners of the voting shares in this company.
  • Until 31 December 2023, foreign banks and investment intermediaries are allowed to carry out underwriting activities in the securities market of the RUz without obtaining a license (subject to certain conditions).
  • Starting from 1 April 2022, local issuers, on the underwriter’s recommendation, have the right to place their shares on foreign stock markets after their preliminary placement on RSE Toshkent or to place them simultaneously on local and foreign stock exchanges.

For the full implementation of the measures specified in the Decree, the state bodies (the Cabinet of Ministers, the Ministry of Finance and others) are mandated to ensure the drafting and approval of a number of documents, in particular, to draft and introduce a draft law that provides for amendments and changes to the Tax Code of the RUz.

We hope that you found this information helpful. It should be noted that the proposed measures may not come into force in full or may undergo changes in the course of discussion by legislators. We would be glad to advise you on these changes in more detail and address your questions and comments. In particular, we can help you as follows:

  • Specifically analyzing the applicability of the above tax benefits to your business;
  • Analyzing to what extent the proposed benefits may contradict other applicable rules of the tax legislation of the RUz, as well as what restrictions may exist for the application of benefits;
  • Analyzing your investment structures and advising on restructuring options, including those allowing you to apply various tax benefits.

Authors:

  • Doniyorbek Zulunov
  • Dilovar Mavlonov