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Changes in Taxation Quarter II of 2006
Below is the brief summary of the most important updates, which took place in the
period 1 April 2006 30 June 2006.
Incentives for service companies
A new Decree of the President of the Republic of Uzbekistan "On Measures for Facilitating the Development of Services Sector in the Republic of Uzbekistan in 2006-2010" was issued on 17 April 2006.
Aimed at facilitating the development of the servicing industry in Uzbekistan, the Decree provides a 3-year exemption from income (profits) tax and unified tax payment, as of I April 2006, to companies engaged in certain types of activity:
Financial, Banking Services
a. Leasing
b. Insurance
c. Audit services
d. Bookkeeping services
Consumer Services
a. Repair of footwear and leather goods
b. Watch repairs
c. Repair and maintenance of home appliances (television sets, audio and video equipment, computer, and printer equipment, home refrigerators, and air conditioners etc.)
Other services
a. Veterinary services
b. Educational services including computer skills training
c. Services of children's sport organisations
d. Social services (babysitting, handicap and aged people care services)
Abolishment of incentives
In accordance with Resolution of the Cabinet of Ministers of the Republic of Uzbekistan #74 of 1 May 2006 "On additional measures for increasing the stimulating role of incentives provided to enterprises with foreign investment" (the Resolution), certain tax and customs incentives are expected to be abolished effective 1 June 2006.
The Resolution contains a number of important provisions concerning enterprises with foreign investments:
"Taxation of enterprises with foreign investments registered in Uzbekistan is executed in accordance with the legislation effective at the moment of taxation. Enterprises with foreign investments registered in Uzbekistan are subject to all general tax and customs incentives established by legislative acts, as well as additional incentives that may be granted only in accordance with procedures and conditions set by the legislation (including investment agreements and production sharing agreements).
Additional incentives with respect to payment of taxes, customs and other mandatory payments are provided to enterprises with foreign investments only for a certain period and cannot he of permanent nature.
Effective I June 2006, all non-compliant and permanent incentives with respect to payment of taxes, customs and other mandatory payments provided earlier by decisions of the Government to enterprises with foreign investments, are abolished."
The Resolution further states that enterprises with foreign investments that have been earlier granted with permanent ineentives may apply to the Cabinet of Ministers, whieh will consider granting tax and customs incentives for a certain period of time. In this case, investment agreements should be concluded as per Resolution of the Cabinet of Ministers #180 of 2 August 2005 "On measures for implementation of the Decree of the President of the Republic of Uzbekistan "On additional measures for attracting direct private foreign investments".
Changes to Unified Tax Payment
Certain amendments2 were introduced to Instruction on procedure for calculation and payment of the unified tax payment, registered with the Ministry of Justice under # 1501 of 2 August 2005. Major changes are described below: - Effective 9 May 2006, payers of the unified tax payment are permitted to choose paying value-added tax (VAT). Decision to pay VAT should be communicated to the tax authorities at least one month in advance of the reporting quarter for existing entities; new entities may exercise this right from the commencement of activities. If such taxpayers later decide to stop paying VAT, they would cease charging VAT as of the next reporting year; relevant notification should be made to the tax authorities al least one month before the next reporting year. VAT is calculated and paid in accordance with the general rules, including the input VAT offset rule.
- VAT payable to the state budget (difference between output VAT and input VAT) by the payers of the unified tax payment is credited against their unified tax payment liabilities within 50% of these amounts.
- VAT on imported services was included in the list of taxes payable by the payers of the uni fied tax payment.
- 5% rate of the unified tax payment was introduced for entities with 80% or more of revenues related lo development and implementation of computer software.
Increase of salary, pension allowance and other social grants
On 9 June 2006, a new Presidential Decree was issued to provide for an increase of state salaries, pensions and other social security payments. According to this Presidential Decree, effective 1 July 2006 a minimum monthly wage was increased to UZS 10,800 from the current UZS 9,400.
1 Unofficial translation
2Joint Resolution of the Ministry of Finance and State Tax Committee registered with the Ministry of Justice #1501-1 of 29 April 2006 |
