Amendments to the Tax Law in the Republic of Uzbekistan

The Cabinet of Ministers of the Uzbekistan Republic approved a new Regulation on the procedure for special registration of value-added tax payers in tax administration (Appendix no. 1 to the PCM no.595 dated September 22,2021). The goal is to form a unified system of registration accounting for taxpayers, ensuring the systematization of their accounting, control over the right to offset the “input” VAT and the completeness of tax payments to the budget. The regulation entered into force on December 22, 2021.

What has been changed in the registration procedure for VAT payers’ registration?

The new procedure provides for a preliminary check of taxpayers applying a risk analysis system. Pursuant to its results a decision is made to register the taxpayer for VAT and assign him/her an individual VAT registration number (VAT numbers) or to refuse to do so.

TAX payers are entitled to accept for offset “input” VAT only on invoices from suppliers registered as VAT payers with a valid registration certificate. VAT cannot be deducted on the ESF of suppliers with suspended, revoked or terminated certificate.

A business entity liable to be registered, but not been done as a VAT payer it becomes a VAT payer within the time limits established under legislation, i.e., from the beginning of the month following the month when the registration obligation accrued. He/she pays VAT according to the established procedure, but has no right to accept for offset. The present right appears only after getting the VAT number.

After a VAT payer submits an application for registration as a business entity the tax administration analyses information about it in accordance with a number of criteria:

• banking activities and EIF – for compliance with the nature of business, the range of purchased and sold items (services);
• correspondence of the number of employees or contracted personal working for line – to the specifics of the conducted activities based on the data of UNLS (Unified National Labour System), etc.

The sources of information for risk analysis – Central database and other databases of tax administration, ministries, departments and local government authorities.

According to the results of data analysis the taxpayer is assigned a tax risk level:

• high – should there be one of the 13 categories under Provisions;
• medium – subject to the existence of one of the 4 categories;
• low – with no category defined for high and medium level.

Only taxpayers with medium and low tax risks are liable to be registered as a VAT payer.

Subsequently, taxpayers with medium risk level will additionally be checked (inspections, surveys, office and field audits, control over reported and effective number of personal).

Receiving a refusal for registration the taxpayers may reapply eliminating the cases having led to the refusal.

The suspended certificate may cause:

• failure to file TAX reporting for more than two consecutive tax years;
• VAT arrears;
• failure of carrying out financial and economic activities for more than 3 months and other reasons.

The certificate is automatically renewed within one (1) day after elimination of the mentioned cases.

“Input” VAT credited to the set-off before the suspension of the certificate is not corrected.

Should the certificate is annulled the VAT payer registration certificate may be cancelled too, if:

• during a tax inspection non-conformance between the banking activity of business entity and/or the range of purchased and sold goods (services) are exposed;
• the court declares the activity of the taxpayer to be pseudoenterpreunership;
• the main goal of the taxpayer in making a deal turns out to be not to pay VAT or provide someone the possibility of unwarranted VAT offset.;
• the liability for the deal (operations) is carried out by a person who is not a party to the contract or by someone who is not imposed an obligation on performance of transactions (operations) under the contract or the law.

The certificate is annulled from the date of its issue.

When the certificate is cancelled the decision on termination of the validity of the certificate may be made by the tax body, upon:

• verification the fact of taxpayer’s absence at the stated address;
• non-renewal of the validity of the suspended certificate by the taxpayer for more than 9 (nine) months;
• removal of a taxpayer from VAT registration (while voluntarily switching to tax paying, if the total revenue at the end of the current tax year does not exceed one (1) billion soums, and not earlier than 12 months; when termination of a legal entity-i.e., VAT payer; discontinuation of the activity of an individual undertaker– VAT payer.