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CHANGES IN TAXATION

Below is the brief summary of the most important updates, which took place in the period   1 August 2007  31 October 2007

Incentives to commercial banks
On 12 July 2007 Presidential Decree No.ПП-670 (Decree) was issued on “Measures for further increase of capitalisation of banks and their participation in investment projects”.

The Decree stipulates that commercial banks should aim at increasing capitalisation through increasing their equity, reinvesting profits (at least 30% of profits after tax), stock exchange trading; reducing non-bank cash turnover; expanding the network of mini-banks and the range of services they offer.

The Decree provides a number of tax benefits to commercial banks:

• Exemption from value added tax and income (profits) tax would be available in respect of assets transferred by the commercial banks to their subsidiaries;
• Exemption from income tax withholding would be available in respect of interest and other payments made by the commercial banks under loans of foreign financial institutions attracted for financing the investment projects;
• Exemption from the customs payments and property tax granted to the commercial banks by Resolution of the Cabinet of Ministers No.445 of 24 September 2004 (in respect of imported plastic cards, electronic personalisation devices, terminals, bank machines, etc) would be prolonged till 1 January 2010.

Loans to “young” families
Resolution of the Cabinet of Ministers has approved a regulation for commercial banks to issue loans to young families with a lay-off period (delay of repayment of the loan principle).  “Young” families are defined as spouses in the age under 30 who are in their first marriage.

Loans can be issued for entrepreneurial, housing and consumer purposes.

Housing loans can be issued for (i) construction / re-construction of individual houses, and (ii) purchase of the individual house or apartment.  Housing loans should be issued for a period not less than 15 years and the maximum amounts are set as follows:

• for construction or purchase of the individual house  3,000 times the minimum monthly wage (approximately USD36,000);
• for re-construction of the individual house and purchase of the apartment  2500 times the minimum monthly wage (approximately USD30,000).

The initial contribution of at least 25% of the value of the house/apartment can be made by employers of the spouse(s) of the young family. The lay-off period for housing loans is set as 3 years and 6 months for consumer loans.

Minimum monthly wage
As of 1 August 2007 the minimum monthly wage is increased from UZS 12,420 to UZS 15,525.  It is also to increase to UZS 18,630 from 16 November 2007 according to the Presidential Decree of 23 October 2007.  Based on the above the overall increase of the minimum monthly wage will be 50% since the beginning of the year.