Privileges and Preferences

· Newly created enterprises, including the enterprises with foreign investments (except for those engaged in trading, intermediary, supply-marketing and procuring activity) pay the income (profit) tax in the first year from the moment of registration at a rate of 25% and in the second year at a rate of 50% from the established rate. The following years, the income (profit) tax is paid in the full size under the established rate;

· Newly created enterprises, including the enterprises with foreign investments (except for those engaged in trading, intermediary, supply-marketing and procuring activity) created in a rural area, in the first year from the moment of registration are released from payment of the income (profit) tax, in the second year pay the tax at a rate of 25 % and in the third year at a rate of 50 % from the established rate. The following years the income (profit) tax is paid in the full size on the established rate.

· Newly created enterprises, including the enterprises with foreign investments, are exempted from the property tax within two years from the moment of registration;

· 50 % reduction in the income (profit) tax – if the company exports not less than 30 % of total amount of sales of produced goods (works, services);

· 30 % reduction in the income (profit) tax – if the company exports from 15 % up to 30 % of total amount of sales of produced goods (works, services);

· Exemption of the enterprises with the foreign investments, engaged in production activity, from payment of the land tax within two years from the moment of registration.

The enterprises of sectors of the economy attracting direct private foreign investments, are exempted from payment on primary activity:

-the income (profit) tax;

-the property tax;

-the tax to development of a social infrastructure and an development of territories;

-the environmental tax;

-the single tax for microfirms and small enterprises;

-mandatory deductions in the Road Fund.

The specified tax privileges are given at volume of direct private foreign investments:

· from US $ 300 thousand up to US $ 3 million - for the period of 3 years;

· from above US $ 3 million up to US $ 10 million - for the period of 5 years;

· from above US $ 10 million - for the period of 7 years.

In accordance with the Resolution of the Cabinet of Republic of Uzbekistan dated 13 November, 2002, №390 On measures of encouragement of filling the market by consumer goods and improvement of relations of producers and the trading organizations from 1 January, 2003 till 31 December, 2007:

· the enterprises producing consumer goods, pay the income (profit) tax under the incomes earned from production of consumer goods, under the rate lower by 20 % against current;

· the enterprises producing the goods of children's assortment, pay the income (profit) tax under the incomes earned from production of the goods of children's assortment, under the rate of 7 %;

· microfirms and small enterprises pay the single tax from the proceeds received from production of consumer goods, under the rate lower by 25 % against current;

· the incomes (profit) of the production enterprises received due to a growth of physical volumes of production of consumer goods, are exempted from payment of the income (profit) tax and the single tax;

· the enterprises producing non food consumer goods (except for tobacco and jewels, household and toilet soaps, as well as gasoline), are exempted from payment of the excise tax under condition of a target direction of liberated resources for increasing production, expansion of assortment and increase of competitiveness of produced consumer goods.

From the customs duties also are exempted:

· the property imported by foreign investors in the Republic of Uzbekistan for own industrial needs, and also for personal needs of foreign investors and citizens of the foreign states residing in the Republic of Uzbekistan in accordance with labor contracts with foreign investors;

· the goods imported by foreign legal entities, which made direct investments into economy of the Republic of Uzbekistan for a total sum of more than US $ 50 million provided that the imported goods are goods of their own production;

· the goods, works and the services intended for work under the Production Sharing Agreement and imported into the Republic of Uzbekistan according to project documentation by the foreign investor or other persons, participating in performance of works under the Production Sharing Agreement, and also goods exported by the investor belonging him/her according to the Production Sharing Agreement;

· the technological equipment imported on customs territory of the Republic of Uzbekistan by foreign investors as their contribution into charter capital of the enterprises with foreign investments, and also imported into the country in accordance with the projects approved on creation of new, and also modernization and re-equipment of operating productions, at presence of corresponding acknowledgement of the authorized bank.

Localization Program

A number of additional incentives and preferences is envisaged for enterprises taking part in realization of Localization Program of finished goods, component items and materials on the basis of local raw materials aimed at increasing the competitiveness of Uzbek products and optimization of imports.

In particular, enterprises, included in Localization Program, are exempted from paying:

· customs duties (except for fees for customs formalities) for imported technological equipment, spare parts and components which are not produced in the country and are used during the production process of the goods that are being localized;

· income (profit) tax, the single tax (for the enterprises that are using simplified system of taxation) with regards to goods produced within the projects of localization;

· property tax with regards to the basic production assets used for the production goods that are being localized.

Special preferences for some sectors

Oil and gas field:

foreign companies engaged in prospecting and exploration of sub-soil are provided the Most Favored Nation Treatment, which provides:

· exclusive right to carry out prospecting works on certain territory with further exploration of a deposit from those discovered on the above mentioned territory by establishing a joint venture on the basis of concession or production sharing;

· advantageous right for a new territory to continue prospecting and exploratory works in case a company was not able to discover any resources with industrial value on the territories stipulated in the agreement on carrying out such works;

· property right and the right for free export of a part of extracted hydrocarbons, envisaged by constituent documents of a joint venture or concession agreement as well as products thereof on the basis of tolling;

· guarantee of recovery of actual expenses spent for prospecting and exploration works in discovering deposits with industrial value in case they are passed for further exploration to the Uzbekneftegaz National Holding Company.

Foreign companies attracted in oil and gas prospecting and exploration works are exempted from:

· all types of taxes and payments in force on the territory of the Republic of Uzbekistan for the period of prospecting and exploration works;

· customs duties in import of equipment, material and technological resources and services needed for carrying out prospecting, exploration and other associated works.

Oil and gas joint ventures established with participation of foreign companies, which carried out oil and gas prospecting exploration works, are exempted from:

· income (profit) tax for 7 years from the moment of starting extraction of oil or gas. Upon expiry of the above term, income (profit) tax rate for the said enterprises shall be determined as 50% of current rate;

· property and income of foreign participants’ tax from equity participation share in joint ventures;

· mandatory surrender of a part of hard currency proceeds from sales of products received as a result of activity on extraction and refinement of oil and gas, for the period of compensation of invested capital for search and prospecting works.

Light industry:

· enterprises specialized on production of ready-made-garments (garment, knitted and leather products), hosieries and footwear, are exempted from payment to the state budget of all kinds of taxes and duties, except for the value added tax;

· enterprises are exempted from payment of customs duties (except for customs formalities fees) on technological, auxiliary and industrial equipment and spare parts imported for own needs.

Moreover, it should be noted, that liberated resources are subject to the subsequent direction to the technological re-equipment and modernization of production, assimilation of new kinds of finished goods, filling own cash flows, encouragement of labor of workers.

The Program of development of silk industry of Uzbekistan envisages exemption of:

· value added tax till 1 January, 2010, graining factories – with regards to sale grainy of own production to cocoon growing entities under direct contracts and through cocoon procuring entities and the enterprises engaged primary processing of cocoons – with regards to sale of dry cocoons to the processing enterprises of silk industry of the country;

· till 1 January, 2008, from customs duties (except for fees for customs formalities) raw material, dyes, chemicals and the auxiliary materials not produced in the country, imported by the enterprises of silk industry of JSC Uzbekyengilsanoat (light industry) for own production needs.

Production of building materials:

The enterprises and the organizations specialized on production of building materials, works and designs are exempted from customs duties (except for fees for customs formalities) in import of the equipment and components thereof for their production.

Clean Development Mechanism of Кyoto Protocol:

In implementation of investment projects within Clean Development Mechanism of Кyoto Protocol to the UN Framework Convention on climate change, the foreign partners carrying out direct investments into said projects are provided with additional advantage in the form of exemption of tax on income (profit) gained within projects in the territory of the Republic of Uzbekistan.