Changes with regard to taxation of e-commerce operators

On 26 December 2024, the Cabinet of Ministers of the Republic of Uzbekistan (hereinafter, “Uzbekistan”) passed Resolution # 885 On Measures for the Further Development of E-commerce in Uzbekistan (hereinafter, ”Resolution # 885”).

In this review, we have summarized the changes that we believe to be the most significant ones. However, for a complete list of changes, we recommend reviewing the text of Resolution # 885.

Resolution # 885 introduces the following key novelties in e-commerce:

• only resident legal entities of Uzbekistan can carry out activities as e-commerce operators (according to Resolution # 885, e-commerce operators include operators of electronic trading platforms, aggregators of orders and digital streaming services);
• at the same time, a legal entity and/or individual entrepreneur providing users with information about a product (work, service) and digital product through their information resource or platform, without any obligations to conclude electronic contracts or electronic transactions, is not considered an e-commerce operator.

Resolution # 885 instructs the National Agency for Perspective Projects of Uzbekistan in cooperation with the interested ministries and departments to submit the following documents to the Cabinet of Ministers within three months: draft regulatory legal acts that provide for amendments and additions to the Tax Code of Uzbekistan, the Laws of Uzbekistan On E-commerce and On Licensing, Permission and Notification Procedures, as well as other regulatory legal acts providing for:

• addition of concepts and terms to e-commerce legislation;
• introduction of a procedure for e-commerce operators to carry out their activities on a notification basis from 1 July 2025;
• maintenance of a register of e-commerce entities.

Additionally, the Tax Committee of Uzbekistan, together with the National Agency for Perspective Projects of Uzbekistan, is instructed to study the completeness of tax coverage and payment by foreign legal entities providing services in electronic form, where the place of supply is Uzbekistan, within three months and to submit proposals on the implementation of mechanisms ensuring effective control in this area to the Cabinet of Ministers of Uzbekistan. For more detailed information on the tax monitoring of foreign companies providing electronic services to Uzbek customers follow this link.

Considering the requirements of Resolution # 885, non-resident legal entities of Uzbekistan engaged in
e-commerce in Uzbekistan need to analyze their existing business models (including contractual relationships with their agents) to determine whether their activities lead to the obligation to conclude electronic contracts or electronic transactions, i.e., whether they fall under the definition of e-commerce operators in Uzbekistan. If recognized as an e-commerce operator, such a non-resident must adhere to the following conditions and requirements:

• Register as a legal entity in Uzbekistan;
• Comply with e-commerce legislation, personal data protection, copyright and related rights, consumer rights, and advertising legislation;
• Provide information about their activities free of charge to the authorized state body upon its request;
• Comply with retail trade rules;
• Have an information system that ensures proper operation.

Accordingly, both foreign companies providing electronic services and companies that are operators of electronic trading platforms selling goods from abroad can potentially be qualified as e-commerce operators under Regulation # 885.

Some of these foreign companies providing electronic services to individuals in Uzbekistan are already registered as VAT payers. However, such VAT registration of non-residents for electronic services does not imply the establishment of a legal entity in Uzbekistan and the payment of other taxes. With regard to the sale of goods by non-residents from abroad, the legislation does not require tax registration at all.

In the event that e-commerce operators are forced to create a separate legal entity in the country, such legal entities will be taxpayers of all applicable taxes (in addition to VAT, they will also pay corporate income tax, payroll taxes, etc.). Compared to registration as a VAT non-resident providing services exclusively in electronic form, the volume of tax reporting and potentially tax payments will increase.

Thus, there is a possibility that the activities of foreign entities potentially falling under the definition of e-commerce operators, but not having registered a legal entity in Uzbekistan by 1 July 2025, may be subject to restrictions.

Authors:

• Doniyorbek Zulunov
• Sergey Bachmanov
• Maryna Tarnavska