Taking into account distinctions which a lawmaker sets up in the tax rules, it is not fair to subject to sanctions or fulminate those ones who use these distinctions to their profit. From the speech of Lord Samner, the English judge (1928)

BUSINESS ACTIVITY OF FOREIGN LEGAL
ENTITIES IN UZBEKISTAN

According to the Instruction on the Procedure of Taxation of Income (Profit) of Foreign Legal Entities Operating in the Republic of Uzbekistan (registered with the Ministry of Justice on 05.10.2004.N 1416):
- The non-resident conducting businesses in the Republic of Uzbekistan via his permanent establishment shall pay the income (profit) tax from the sources in the Republic of Uzbekistan that are associated with such permanent establishment; the tax value shall be reduced at the amount of deductions stipulated by the current legislation of the Republic of Uzbekistan.
For purposes of taxation, the permanent establishment of the non-resident in Republic Uzbekistan is understood as any place of business aimed at deriving revenue in territory of the Republic of Uzbekistan, and also as any organizations and physical persons authorized by non-residents to accomplish representation functions in the Republic of Uzbekistan, in particular:
Any place of business connected with manufacturing, processing, completing, pre-packing, packaging, procurement and sale of the goods;
Any place of management, branch, department, representation, bureau, office, agency, factory, workshop, laboratory, shop and warehouse of the non-resident; Any place of business connected with mining operations; mines, oil wells and (or) gassers, open pits; Any place of business (including the control or supervision activity) connected with pipelines, gas pipelines, exploration and (or) natural resources development, installation, mounting, assembling, setting-up, start-up and (or) maintenance of the equipment;
Any other place of business connected with operation of the game-playing machines (including additional attachments), computer networks and communication channels, side­shows, transport or other infrastructure. The permanent establishment is considered as formed in the day of commencement of operation (rendering of services, etc.), if this day can be expressly determined. If such day cannot be expressly determined, the day of the permanent establishment formation shall be considered as one of the
below days:
The day of commencement of operation (rendering of services, etc.) specified in the contract;
The day of submission of the first invoice for payment, including the invoice for advance payment;
The day of commencement of the license, if the license has been obtained to perform any works or render services under a specific contract;
At the same time, the permanent establishment is considered as formed, if the earliest of the above actions has been accomplished.
The non-resident conducting his businesses in the Republic of Uzbekistan via the permanent establishment is obliged to be registered with the State tax bodies no later than 10 days after the date of his activity commencement irrespective of the fact whether, in compliance with the legislation of Republic Uzbekistan and the international treaties (agreements), his further activity will be recognized by the State tax body as
subject to taxation or not.
The permanent establishment shall be registered with the State tax body at the place of its business.
The very fact of commencement of the non-resident's activity via his permanent establishment in the Republic Uzbekistan shall be the grounds for his registration with the State tax bodies instead of availability or unavailability of tax liabilities complying with the legislation of Republic Uzbekistan or international treaties (agreements).
Registration of the permanent establishment with the State tax bodies shall be made irrespectively of the non-resident's registration with the other State bodies of the Republic of Uzbekistan.
In  case  of evasion  from  registration  of the  permanent establishment with the State tax bodies, the relevant penal
sanctions shall be applied to the non-resident in the manner prescribed by the legislation of Republic Uzbekistan; such penal sanctions shall be applied via his plenipotentiary, i.e. via the permanent establishment.
The permanent establishment of the non-resident shall pay the income (profit) tax once a year without effecting current payments.
Payment to be effected to the non-resident of Republic Uzbekistan shall be exempted from taxation at a source of payment, if the below documents are submitted: Application for immunity from taxation that complies with the international treaties; such application shall be certified by the State tax bodies;
Statement confirming that the non-resident conducts his businesses and is registered with the State tax body as the permanent establishment of the non-resident; such statement shall be certified by the State tax bodies. The non-resident, having the right to a tax privilege in compliance with the international treaty (agreement), is obliged to present to the State tax body at the place of his business the official paper to confirm the above person's permanent residence in the country with which the Republic of Uzbekistan has the international treaty (agreement) on the tax matters.
The appl ication related to reduction of the tax amount or to tax immunity shall be submitted to the State tax body prior to tax payment. For the enterprises and organizations, being legal entities of the Republic of Uzbekistan and paying their revenue (profit) to the non-resident, the mark made by the State tax body on the given application shall be the grounds for reduction of the tax amount or for tax immunity.
In case of submission of the application for reimbursement of the paid tax amounts, the State tax body shall duly consider such application and reimburse the overcharged and paid taxes in the generally prescribed manner. The application for reduction of the tax amount or for tax immunity shall be submitted to the State tax authority; it should be accompanied by the cover letter and a copy of the contract (agreement) under which the non-resident obtains revenue (profit) from the source in Republic Uzbekistan. In case such application is submitted to the State tax body not by the non-resident himself but by his plenipotentiary, the latter shall present the relevant power of attorney based on which he submits the application.
The book keeping data of the permanent establishment shall include information on the procedure of amortization of the fixed assets and intangibles, on evaluation of the finished products, production stocks and work-in - process, stipulated by the current legislation.
In order to define the taxable base complying with the Tax Code  of the Republic of Uzbekistan,  the permanent establishments of the non-residents shall keep books allowing to take into account the total income being obtained and relevant deductions being made.
In accordance with the Tax Code of the Republic of Uzbekistan, the taxable income (profit) of the permanent establishment shall be defined as a difference between the total income amount and income-related deductions that are directly connected with businesses being conducted by the non-resident in the Republic of Uzbekistan. The object of taxation shall be the income obtained by the non-resident as a result of his business activity conducted via his permanent establishment in territory of the Republic of Uzbekistan.
At the non-resident's option, income (profit) of the non­resident, matching the attributes of the permanent establishment, to be obtained in the course of his business activity that lasts up to 183 days of the calendar year will be subject to taxation at a source of payment (without deductions) or via the permanent establishment (with the view of deductions).
It is natural, that for the tax payer it is more favorable to withhold from the taxable base.
The procedure for defining deductions, costs and allocations shall be specified by the Provision on the Structure of Production and Sale Costs for Products (Works, Services) and on the Procedure of Formation of Financial Results; the Provision was approved by the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan on February 5, 1999 and registered under #54 (CR of the Republic of Uzbekistan, 1999, #2, p.9).
In case, if the income (profit) has been obtained by the non­resident from the source located in the Republic of Uzbekistan, and such income (profit) is not related to the non­resident's businesses conducted via the permanent establishment, and in the case the source of payment in the Republic of Uzbekistan has already withheld and transferred to the budget the tax relating to the above income (profit), recalculation of the given amounts shall not be made at the permanent establishment of this non-resident. Respectively, it is necessary for the tax payer to beforehand determine an option for taxation and develop a system of tax payments complying with the scheme of his convenience. It would be desirable to say a few words about representations.
The representation is a detached subdivision of the legal entity; it is located outside of the legal entity's principal place of business and represents and protects its interests.
Representations are not legal entities, if otherwise is not stipulated by the law. The legal entities, which have established the representations, provide them with property, and representations operate on the basis of the provisions approved by the legal entities. Heads of the representations are appointed by the legal entity and operate pursuant to the relevant power of attorney.
According to article 7 of the Law of the Republic of Uzbekistan «On Foreign Investments» dated April, 30,1998 # 609-1
«An enterprise with foreign investments shall be eligible to establish in territory of the Republic of Uzbekistan subsidiaries, branch establishments with the rights of a legal entity, as well as representations and other detached subdivisions without legal entity status pursuant to the provisions of the legislation of the Republic of Uzbekistan». Particulars related to establishment and functioning of the representations of the foreign commercial organizations are regulated by the "Provision on the Procedure of Accreditation and Activity of Representations of Foreign Commercial Organizations in the Territory of the Republic of Uzbekistan" and, accordingly, by the «Provision on the Procedure of Establishment, Registration and Accreditation of Representations of Foreign Banks in the Territory of the Republic of Uzbekistan».
The representation office represents the foreign legal entity in territory of the Republic of Uzbekistan, and it shall comply with all the laws of the Republic of Uzbekistan. According to the Law of the Republic of Uzbekistan «On Book Keeping» dated August, 30,1996 #279-1 «The subjects of book keeping shall be the bodies of the State authority and management, the legal entities registered in the Republic of Uzbekistan, as well as their subsidiaries, branch establishments, representations and other structural subdivisions located both inside and outside of the territory of the Republic of Uzbekistan».

Thus, any representation is obliged to conduct book keeping in compliance with the procedure generally established for the enterprises of the Republic of Uzbekistan.

Prepared by: Vera Makarova, Director of Audit Company AUDIT-AS, Chairperson of AmCham Tax and Accounting Committee. Contact: Navoi str., Tashkent, tel/fax:
+99871114-60-12, e- mail: audit-as@sarkor.uz Article translated by: Lyubov Belokon