Uzbekistan has recently been making considerable progress towards a market economy, one of the principal steps being the creation of a tax system - during the Soviet period there were practically no taxes except for personal income and payroll taxes. From 1 January 1992, a new system was introduced, which included an income tax on enterprises, VAT, excise tax and property tax.

Since that time, Uzbekistan's tax system has undergone significant and frequent change. A major reform was implemented on 1 January 1995, when the income tax levied on enterprises was replaced for most enterprises by profits tax, under the terms of which many more expenses are deductible. At the same time, a sales tax for trading enterprises and VAT on import were introduced whilst depreciation tax and most export taxes were abolished.

The Uzbek tax system currently grants several tax concessions for enterprises which are wholly or partly owned by foreign investors. The income tax regime applicable to such an enterprise depends on the percentage of capital held by the foreign investor(s), with a 30% or more holding qualifying for more benefits - for example very low rates of tax on profit (although salaries are non-deductible) - than a holding of less than 30%.

VAT is currently applied at a rate of 18%, and personal income tax at a rate of 40%. Employer social contributions also amount to 40%

Until very recently, the Uzbek currency (the Som) was not freely convertible. Individuals were allowed to buy no more than $500 of foreign currency per year and purchases were controlled by corresponding stamps in the internal passport. From 1 July 1995, the Government lifted all restrictions on foreign exchange operations for private individuals.

Enterprises, however, must surrender 15% of hard currency proceeds from their export sales with the Central Bank of Uzbekistan at the official rate of exchange.

A new tax code is currently being prepared which the Uzbek tax authorities are anxious to introduce as from 1 January 1996, although there are doubts that this can be achieved.

Coopers & Lybrand

Coopers & Lybrand provides accounting, taxation and consultancy advice to companies and governmental bodies in Uzbekistan as well as to overseas companies investing into Uzbekistan. Our office is situated in the capital, Tashkent.

This publication is intended for general guidance only and should not form the basis of specific decisions.

For further information contact on +750 2225 8600, or enter text search 'Coopers & Lybrand' and 'Business Monitor'.