Uzbekistan: Peculiarities of non-residents taxation

Peculiarities of taxation of non-residents of the Republic of Uzbekistan are determined in Articles 20, 154 and 155-1 of the Tax Code of the Republic of Uzbekistan which settle the relations between nonresidents and residents of Uzbekistan at payment of income to nonresidents gained in the territory of Uzbekistan through permanent establishment or without formation of permanent establishment.  The principles of the taxation of foreign legal entities in Uzbekistan correspond to the international practice. So according to these principles there are two main options of income gaining by the foreign organization and, respectively, two options of its taxation: through permanent establishment and without formation of permanent establishment.

1. Activity through permanent establishment

Permanent Establishment” is recognized as any place through which a non-resident carries out business activities in Uzbekistan, including activities carried out by an authorised person. Permanent establishment of the non-resident in the Republic of Uzbekistan is also recognized as implementation of business activity in the Republic of Uzbekistan which lasts for more than hundred and eighty three calendar days in any consecutive twelve-month period. In case such representation is available, its profit is generally taxed at a base rate as if it was the usual national enterprise..

At the same time, if the foreign company has an authorized person in Uzbekistan, i.e. "the dependent agent", it is considered for the tax purposes that permanent establishment is present. The authorized person is a representative of the foreign organization who has authority to represent its interests and regularly uses it to make contracts on behalf of the organization or to coordinate their essential conditions.

At the same time if the foreign company operate in Uzbekistan through the independent agent (the broker or the commission agent), this fact in itself doesn't lead to formation of permanent representation.

The code especially stipulates some important situations which don't create permanent establishment. In particular, they include:

1) activity of a preparatory or auxiliary character;

2) implementation of activity through the independent intermediary: the broker, the commission agent, the attorney, the professional participant in securities market or any other person acting under the commission agreement or other similar contract and not authorized to sign contracts on behalf of the nonresident of the Republic of Uzbekistan. The independent intermediary is understood as the person acting within the usual (main) activity and being legally and economically independent of the non-resident of the Republic of Uzbekistan;

3) execution  of operations on import to the Republic of Uzbekistan or export from the Republic of Uzbekistan of goods, including within the foreign trade contracts made exclusively on behalf of the non-resident of the Republic of Uzbekistan and associated with purchase of goods in the Republic of Uzbekistan and operations on goods export to the Republic of Uzbekistan;

4) the non-resident of the Republic of Uzbekistan possesses of securities, shares in authorized fund (authorized capital) of legal entities - residents of the Republic of Uzbekistan, and other property in the territory of the Republic of Uzbekistan. If the nonresident of the Republic of Uzbekistan entrusts such legal entity with representative mandate, except for the functions of preparatory or auxiliary character according to point 1 of the present part, such legal entity besides being an independent taxpayer, is at the same time  considered as permanent establishment of the non-resident of the Republic of Uzbekistan;

5) the non-resident the Republic of Uzbekistan provides personnel for work in the territory of the Republic of Uzbekistan to the legal entity -resident of the Republic of Uzbekistan or other non-resident of the Republic of Uzbekistan who carries out activity in the Republic of Uzbekistan through permanent establishment with no signs of permanent establishment provided by a part 3 of the present article if such personnel act exclusively on behalf and for the benefit of the organization where personnel has been sent to.

Besides, the code stipulates rules of the taxation of construction sites.

Permanent establishments submit reports once a year. 

2. The income of nonresidents of the Republic of Uzbekistan not connected with permanent establishment

If the foreign company has no permanent representation to Uzbekistan, it doesn't mean that such foreign company isn't a tax payer of a tax as in case it gains income from sources in the Republic of Uzbekistan, this income is taxed at a payment source. It means that the tax is paid not by the foreign organization, but the resident of Uzbekistan – the income payer (it can be the Uzbek organization or permanent establishment of the foreign company in Uzbekistan), which in this case is a tax agent.

The following is not considered as incomes of non-residents of the Republic of Uzbekistan from the sources in the Republic of Uzbekistan:

- income of non-resident of the Republic of Uzbekistan gained from the foreign trade operations (including goods exchange) carried out exclusively on behalf of this non-resident and related exclusively to procurement (purchase) of goods, and goods import to the territory of the Republic of Uzbekistan;

- income from rendering the services related to opening and managing correspondent accounts of banks - residents of the Republic of Uzbekistan and payments under these accounts, and payments by means of the international payment cards;

- income from work performance, rendering services outside the Republic of Uzbekistan, except for the income from work performance, rendering services provided by a part 3 of article 155 of the Tax Code.

- Deduction of income at the source of payment from legal establishments shall be carried out by the residents of the Republic of Uzbekistan, and  the nonresidents of the Republic of Uzbekistan  carrying out activity in the Republic of Uzbekistan through permanent establishment and paying the income to other non-resident of the Republic of Uzbekistan.

Payer carrying out payment to the non-resident is assigned  responsibility for completeness of deduction and timeliness of tax transfer to the budget.

At the same time, it should be kept in mind that the standard of the international treaty shall be applied if the existing international treaties of Uzbekistan stipulate other rules.

In so doing according to provisions of the Tax Code payment of:

- the income to the non-resident of the Republic of Uzbekistan is made without deduction of income tax of legal entities at a payment source under presence of the certificate witnessing that the non-resident of the Republic of Uzbekistan carries out activity and is registered in the State Tax Administration as permanent establishment of the non-resident of the Republic of Uzbekistan authorised by bodies of the State Tax Administration of the Republic of Uzbekistan  according to income gained from activity which results in formation of permanent establishment according to article 20 of the Tax Code;

- the income to the non-resident of the Republic of Uzbekistan shall also be made without deduction of income tax of legal entities at a source of payment or with application of the lowered rate of income tax of legal entities according to provisions of the international treaty of the Republic of Uzbekistan provided that  the document submitted by the non-resident of the Republic of Uzbekistan issued by competent authority of the foreign state confirming permanent residency of this person in the country the Republic of Uzbekistan has international treaty (agreement) on tax issues with, is available at a source of payment.

In case of payment of the income to foreign banks and the international interbank telecommunication systems confirmation of the fact of permanent residence of foreign bank or the international interbank telecommunication system in the country  the Republic of Uzbekistan has international treaty regulating taxation issues with isn't required if such residence is confirmed by data of public information sources.

The incomes of the nonresident which aren't subject to the taxation at a payment source

The incomes on the loans attracted to finance investment projects paid by banks and lessors of the Republic of Uzbekistan to foreign financial institutions aren't subject to the taxation.

(Source: «Business partner.uz» newspaper)
 

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