Uzbekistan:
Permanent Establishments: Key Features And Taxation
20 April 2017
Kosta Legal
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Today's Legal Highlight is dedicated to such complex topic
as permanent establishment ("PE"). Under
Uzbek Law, PE is not considered as separate legal entities and used
solely for tax purposes.
Below we briefly touch upon those provisions on PE set in
article 20 of the Uzbek Tax Code that are either different from or
supplement the OECD Model Tax Convention on Income and Capital.
It should be noted that the principle of supremacy of
international law is recognized in the Uzbek legislation. This
principle is fixed, among others, in article 4 of the Uzbek Tax
Code. Hence, one should always consult relevant Double Tax Treaty
that Uzbekistan has concluded with the other states to see whether
there are any discrepancies.
Permanent
Establishment |
- any place through which business is being carried out;
- carrying out business for more than 183 days within any
subsequent 12-month period
|
Examples |
- any place related to production, processing, making complete
set, packaging and sale of goods;
- any place related to pipelines, gas pipelines, exploration of
natural resources;
- any place related to installation, assembling, erection,
setting, commissioning and/or maintenance of equipment;
- operation of game machines (including play-stations), computer
networks, amusement rides, transportation and other
infrastructure;
- sale of goods through warehouses located at Uzbekistan and
belonging to, leased or used by the non-resident on any legal
grounds;
- doing any works, rendering any services, and conducting any
activities, except for those included in the exclusions.
|
Exclusions |
- use of facilities solely for the purpose of storage, display
and/or delivery of goods belonging to the non-resident prior to
sale of the goods;
- operations on export and import of goods to Uzbekistan done
exclusively in the name of the non-resident;
- possession of shares, participatory interest in the capital
funds of the residents of Uzbekistan as well as possession of any
other property in the territory of Uzbekistan;
- secondment of personnel to residents of Uzbekistan for
undertaking of works in Uzbekistan provided such personnel acts in
the name of and in the interests of the resident to whom such
personnel was seconded.
|
Date of
creation |
- On the date of commencement of works, services;
- For construction (installation, assembly, erection) works
– from the date of transfer of a construction site to the
contractor.
|
Date of
termination |
Date of termination of
activities through permanent establishment:
- day of signing the act of acceptance of performed works and/or
rendered services;
- day of issuance of the last invoice for works performed and/or
services rendered;
- day of submission of the final report on calculation of the
profit tax to the state tax authorities of Uzbekistan,
whichever is later. |
Bank Accounts in
UZS |
Foreign legal entities
through their PEs may open bank accounts in UZS that can be used
for paying:
- taxes and other mandatory payments;
- transfer to foreign entity's other accounts opened in banks
of Uzbekistan
- operating expenses of PE including:
- rental costs;
- utility payments and other similar payments;
- purchase of commodities and materials necessary for daily
operations of PE;
- communication channel lease payments;
- costs of shipping and delivery of goods;
- costs for mailing and periodicals;
- salary payments and remuneration for employees;
- employee travel expenses;
- insurance premiums for mandatory and volunteer insurances;
- medical treatment of employees in case of accidents and
deceases.
Foreign entities may deposit the following monetary funds into the
PE's bank accounts:
- funds from sale of goods, performance of works and services and
carrying out PE's other activities in Uzbekistan;
- funds from PE's other bank accounts opened in banks of
Uzbekistan;
- funds from sale of foreign currency to its servicing bank.
|
Bank accounts in
foreign currency |
Foreign legal entities
through their PEs may open bank accounts in foreign currency that
can be used:
- for covering employees' travel expenses in foreign currency
for business trips outside of Uzbekistan;
- to sell foreign currency to its servicing bank in
Uzbekistan;
- to be transferred to other bank accounts of PE in
Uzbekistan;
- for other legitimate purposes.
Foreign entities may deposit the following monetary funds into the
PE's bank accounts:
- funds transferred from bank accounts of foreign entities
abroad;
- funds from PE's other bank accounts opened in banks of
Uzbekistan;
- funds from sale of foreign currency to its servicing bank.
|
Import |
Foreign entities acting
through PE may import in its name goods (works and services) into
Uzbekistan. |
TAXES PAYABLE BY PERMANENT ESTABLISHMENT IN 2017
TAXES |
TAX
BASE |
TAX
RATE |
Corporate Income
Tax |
Net income before tax
adjusted for non-deductible expenses |
7.5% |
Net Profit
Tax |
Net income after
Corporate Income Tax |
10% |
Property
Tax |
Average annual net book
value of fixed assets (incomplete construction and uninstalled
equipment) accounted for in the books of PE |
5% |
Land
Tax |
Area of land plots owned
or used |
Rates vary depending on
the location and type of land parcel |
Water Use
Tax |
Volume of consumed water
from surface and underground sources |
1 cubic meter of surface
water – UZS 85.4
1 cubic meter of subsurface water – UZS 108.5 |
Unified Social
Payment |
Total remuneration
payable to staff (local and foreign) |
25% |
Personal Income
Tax (as tax agent) |
Income paid to employees
including in-kind benefits |
0-1 MMW1 -
0%
1-5 MMW – 7.5%
5-10 MMW - 17%
10+ MMW - 23% |
Contribution to
Pension Fund (as tax agent) |
Total remuneration
payable to local staff and foreign staff permanently living in
Uzbekistan |
8% |
Footnote
1. As of March 2017 one minimal monthly salary equals to
UZS 149.755, which is equal to approximately USD 43.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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