Сhanges to the tax law 2025

In October 2024, the Ministry of Economy and Finance of the Republic of Uzbekistan (hereinafter, “Uzbekistan”) published the Budget Message for 2025–2027 (hereinafter, the “Message”).

Some of the novelties provided for by the Message were already announced earlier in 2024; however, some initiatives were publicly outlined for the first time. We will await the final wording of the changes that will be made to the Tax code.

In this review, we have summarized the changes that we believe to be the most significant ones. However, to review the full list of changes and understand the logic behind these changes, we recommend that you review the full text of the Message.

For the value-added tax:

• It is proposed to transfer legal entities classified as large taxpayers from the accelerated VAT refund procedure (7 days) to the general procedure (30 days).
• Starting from 1 January 2025, it is proposed to abolish the VAT exemption for the turnover from the sale of:
  • goods and services sold by legal entities whose sole participants are public associations of persons with disabilities;
  • passenger transportation services at uniform rates.

For the excise tax:

• Starting from 1 January 2025:
  • The excise tax on mobile communication services will be abolished;
  • Regarding the excise tax on alcoholic products, the excise tax rate on local products will be indexed by 10% and set at 44,000 soums per liter of alcohol contained in the product. For imported products, the excise tax rate will be reduced by 25% and set at 76,000 soums (currently 101,500 soums).

• Starting from 1 January 2025, it is proposed to:
  • Abolish the excise tax exemption on the sale of imported natural gas to consumers and, at the same time, reduce the excise tax rate on natural gas from 20% to 12%.
  • Regarding the excise tax on tobacco products:
    • Abolish the ad valorem part of the excise tax at a rate of 10% on filtered cigarettes, setting the excise tax rate at 300,000 soums for the domestic market and 330,000 soums for imports, and, starting from 1 July 2025, unify the excise tax rates on imported and local cigarettes, setting them at 340,000 soums per thousand pieces;
    • Set the excise tax on other tobacco products, including nicotine-containing liquid (vape), at 2,000 soums per ml (currently 670 soums), on cigars at 20,000 soums per piece (currently 6,400 soums), on heated tobacco sticks at 450,000 soums per kg (currently 382,000 soums), and on smoking, rolling and hookah tobacco products at 600,000 soums per kg (currently 382,000 soums).
  • Regarding the excise tax on alcoholic products:
    • Set the excise tax on natural wines at 5,000 soums per liter of local wine (currently 1 soum) and 14,000 soums per 1 liter of imported wine (currently 28,500 soums), and on other types of wines at 6,000 soums per liter of local wine (currently 2,300 soums) and 20,000 soums per liter of imported wine (currently 40,600 soums);
    • Set the excise tax on local beer at 2,000 soums per liter (currently 1,600 soums) and on imported beer at 6,000 soums per liter (currently 12,200 soums);
    • Equalize the excise tax on imported and local ethyl alcohol, setting it at 15,000 soums per liter. Additionally, clarify the calculation of the excise tax on grain distillate and the initial fraction of ethyl alcohol used for producing technical alcohol.

• Starting from 1 April 2025, it is proposed to:
  • Increase the excise tax rates on petroleum products, specifically gasoline, aviation kerosene, diesel fuel, ECO diesel fuel, motor oil for diesel or carburetor (injection) engines, as well as on gasoline, diesel fuel, liquefied and compressed gas sold to the end consumer, by 10%;
  • Introduce an excise tax of 500 soums per liter on non-carbonated cool teas, fruit juices, stewed fruit produced at an industrial scale, and other non-carbonated sweet drinks containing sugar;
  • Abolish the procedure under which the excise tax is not levied on the sale of imported natural gas to consumers and reduce the excise tax rate from 20% to 12%.
• Starting from 1 April 2025, the excise tax on carbonated drinks containing other sweeteners or flavorings will be reduced from the current 500 soums to 300 soums per liter, and the same tax will be levied on non-carbonated drinks.

For the corporate income tax (“CIT”):

• It is proposed to abolish the CIT benefits (0%) and turnover tax benefits (0%) on the sale of goods (services) for export.
• For entities engaged in electronic commerce of goods (work, services), the following rates are established:
  • 10% (instead of the current 7.5%) for CIT;
  • 3% (instead of the current 2%) for turnover tax.
• For legal entities and individuals renting out property, the minimum rental rates used for taxation purposes will be indexed by 10–12%.

For expanding the powers of local authorities:

• To the Jokargy Kenes of the Republic of Karakalpakstan, regional and Tashkent city Councils of People’s Deputies:
  • Within the minimum and maximum fixed tax rates (range) established by Article 383 of the Tax Code, the authority is granted to set the fixed tax rates for individual entrepreneurs based on the level of economic development of districts and cities;
  • It is proposed to grant the authority to apply an increasing coefficient of up to 2 to the established minimum rental rates per square meter of real estate for taxation purposes, particularly to apply this coefficient in zones within the city of Tashkent, by analogy with the land tax.
• To the local Councils of districts (cities):
  • The authority is granted for applying a decreasing coefficient (down to 0.7) and an increasing coefficient (up to 1.5) to the water tax rate (excluding agriculture, power plants, utility companies, and large taxpayers, the list of which is approved by a decree of the President of the Uzbekistan);
  • It is proposed to grant the authority to apply an increasing coefficient (up to 1.3) to the established fixed rate for non-metallic construction materials (excluding cement).

For the subsoil use tax:

• It is proposed to:
  • Establish separate tax rates for marble, granite, natural decorative stone, sand and gravel mixture (including construction sand and sandstone), considering that the mineral extraction tax is very low relative to their purchase price;
  • Index the established fixed amounts for the volume of raw material extraction for the mining and chemical industry and other non-metallic construction materials by 10%.

For the water resource use tax:

• Starting from 1 January 2025, it is proposed to:
  • Index the tax rates applied to the volume of water used by power plants, utility companies, producers of non-alcoholic beverages and alcoholic products (excluding beer and wine), as well as industrial enterprises, by an average of 10%;
  • In accordance with the directive for the phased unification of water resource use tax rates, as provided by Decree of the President of Uzbekistan No. PP-107 dated 1 April 2023, equalize the water tax rates for enterprises in other sectors of the economy and individual entrepreneurs with the rates established for industrial enterprises;
  • Set the tax rate at 15,000 soums per cubic meter of water used for car washing.

For the property tax and land tax:

• Starting from 1 January 2025, the base land tax rates for legal entities and individuals will be indexed by an average of 10%.

For the turnover tax:

• Starting from 1 January 2025, for entrepreneurs with an annual turnover of up to 500 million soums, the tax amount is set at 30 million soums, and for entrepreneurs with an annual turnover from 500 million to 1 billion soums, the tax amount is set at 40 million soums. The duration of this procedure is established until 1 January  2026 (currently, the duration is not specified).
• Starting from 1 January 2025:
  • The fixed tax rates for individual entrepreneurs will be indexed by 10%, based on the inflation rate, and minimum and maximum rates (range) will be established depending on the type of activity and location;
  • Employees of individual entrepreneurs with a total annual income of up to 100 million soums are granted the right to pay personal income tax (PIT) at a rate of 12% of the monthly salary or 50% of the fixed tax rate established for the individual entrepreneur;
  • The amount of social tax for employees of individual entrepreneurs in the farmers’ markets and shopping complexes is set at 1 base specified value (“BSV”) (375,000 soums) per year, by analogy with the employees of individual entrepreneurs in other locations, instead of 6 BSV (2.2 million soums) per year.

Other changes:

• In 2025–2026, it is proposed that no additional tax and customs benefits be provided and no previously abolished benefits be reinstated.

Authors:

• Doniyorbek Zulunov
• Sergey Bachmanov
• Maryna Tarnavska