November 2021 – This issue covers the following topics:
Uzbekistan to improve procurement processes
On September 14, 2021, the President of Uzbekistan signed Decree No. Ð£Ð-6313 “[o]n fundamental improvements in contractual relations â(theâDecree“). According to the decree:
1. As of December 1, 2021, certain matters will be released from regulatory control allowing the parties the freedom to contract, as the decree abolished:
- the previous ban on commercial banks restricting the processing of payments for goods delivered, works and services rendered to third parties (i.e. parties who are not suppliers of goods, works and / or services);
- compulsory advances in contracts for the supply of goods, works and services concluded by companies more than 50% owned by the State; and
- compulsory advance payment in contracts with producers of agricultural and livestock products and storage organizations.
2. Individuals are allowed to make loans to each other and to repay such loans in foreign currency, provided that the corresponding loan agreements have been notarized.
3. In addition, from January 1, 2022:
- The concept of duty of good faith will be further extended: a party to a contract who has accepted the full or partial performance of the contractual obligations of the other contracting party or otherwise confirmed the contract, will lose its right to demand the cancellation of the contract in the future, if this request conflicts with the principle of good faith;
- Public procurement contracts would be required to include an anti-corruption clause, the violation of which by one contracting party (or parties controlled by that contracting party) would allow the other party to unilaterally terminate the contract and demand recovery of damages;
- In the event that legal persons and / or individual entrepreneurs (the “Debtorsâ) Do not reimburse their debt on taxes or customs duties, the state customs committee and the state tax committee can send an instruction to a service bank on the freezing of funds belonging to these debtors for an amount equal to the outstanding debt, and this amount may be collected within thirty days, with notice to be sent to such Debtors. If the Debtor challenges in due time before the courts such an instruction to his service bank on product recovery, then this recovery can only be undertaken on the basis of a court decision;
- Public markets in the areas of utilities, energy supply, communication services, passenger and freight transport, and similar areas, with substantial social implications and developed by natural monopoly entities, will be subject to the approval of the Antimonopoly Authority of Uzbekistan before they can be concluded with consumers.
4. The decree provides for the plan setting different tasks for ministries on future steps to improve the legal regime of procurement processes, including:
- Introduction of a “escrowâSystem in the process of selling and buying goods through e-commerce platforms and transactions in other areas;
- Preparation of a bill on abolish administrative liability for overdue accounts payable and receivable;
- Development of suggestions on repeal of the law “[o]n contract and legal basis for the activity of commercial entities â and, where applicable, the reflection of its provisions in the Civil Code;
- Introduction of changes to the laws of Uzbekistan â[o]n joint-stock companies and protection of shareholders’ rights” and “[o]n limited and complementary companiesâProvided that if the company the executive body violates the procedures for concluding a significant transaction or a transaction with related parties (i) as a result of which the company suffers a loss and (ii) the fault of a director, board member or custodian is proven, then the director, the board member administration or the depositary may, together with the company, support subsidiary (secondary) responsibility for losses suffered by creditors.
Uzbekistan takes further steps to speed up geological exploration
On October 6, 2021, the President of Uzbekistan signed Decree No. Ð£Ð-6319 “[o]n measures to further stimulate geological exploration and improve the taxation of underground users” (the “Decree“).
The declared objective of the decree is to provide additional measures to (i) accelerate the industrial development of mineral deposits attracting foreign investment, (ii) stimulate geological exploration using modern methods and technologies, and (iii) develop more taxation with regard to users of the subsoil. .
|From January 1, 2022:|
1. A special tender procedure will be introduced with regard to the rights to use the subsoil for geological exploration or extraction on previously explored subsoil plots of hydrocarbons, precious metals, non-ferrous, rare and radioactive, as well as other types of mineral resources with commercial potential, encompassing the following:
2. Plots assigned to exploration and / or surveying work will not be subject to property tax; and
3. An annual royalty will be introduced for the use of the subsoil for geological exploration purposes, to be calculated according to the allocated area and the types of mineral resources.
From October 1, 2021:
1. The export of natural gas will be subject to the excise tax rate set at zero percent; and
2. Importation of natural gas into the territory of Uzbekistan by legal persons will be exempt from customs duties.
The decree exempts legal persons involved in geological exploration, as well as their contractors and subcontractors, from the payment of:
- Periodic customs duties for the temporary importation of special equipment necessary for carrying out geological exploration, for a period of research, geological exploration and deposit appraisal; and
- Customs duties for importing special equipment, materials and equipment not manufactured in the Republic of Uzbekistan and required for research, geological exploration and deposit development.
The Decree further provides that the incentives (on customs duties) set out in paragraph 3 of Clause 4 of Presidential Decree No. Ð£Ð-2598 of April 28, 2000 originally designed to cover foreign companies will begin to apply. to domestic companies engaged in research and exploration of hydrocarbon deposits in Uzbekistan by exempting them from customs payments (except value added tax and customs clearance fees) when importing equipment , materials and technical resources, and services necessary to carry out prospecting, exploration and other related work.
The decree instructs the Ministry of Finance, the National Tax Commission, the National Commission for Geology and Mineral Resources to submit to the Council of Ministers before December 1, 2021 a bill “[o]n introduce changes and additions to the Tax Code of the Republic of Uzbekistan“providing for the following changes from 1 January 2022:
- Subsurface tax rate reductions for (i) petroleum and natural gas – to 10%, (ii) gold and copper – to 7%, (iii) tungsten – to 2.7% , and (iv) uranium – 8%;
- Introduction of a tax on rental income with regard to users of the subsoil engaged in the extraction of petroleum, natural gas, gas condensates, precious metals, non-ferrous metals and radioactive metals on new deposits;
- Exemption from corporate property tax for new oil and gas wells for the first two years of commissioning and for the following three years – application of reduced corporate property tax (by 50%) ;
- Companies with foreign investments paying tax on rental income will have the right to carry out their tax accounts in USD; and
- The tax rates for the use of the subsoil with respect to non-metallic minerals should be unified.