"On additional measures to stimulate the attraction of decrect private foreign investment"

Decree of the President of Uzbekistan

In order to further improve the investment climate and attract foreign investment to realize the programs of privatization, modernization, technological re-equipment and reconstruction of production, to create new jobs in areas of high unemployment, and guarantee legal defense for foreign investors:

1. Starting July 1, 2005, enterprises that attract foreign investment will be freed of income (profit) taxes on their main activity, property tax, tax for development of social infrastructure, ecological tax, the tax on microfirms and SMEs, and the road fund tax. These tax privileges are for the direct foreign investment as follows:

-$300,000-$3m - for 3 years;

-$3m-$10m - for 5 years;

-more than $10m - for 7 years.

2. The tax privileges in point 1 will apply in the following conditions:

-where the enterprise is located in an area of high unemployment (Karakalpakstan, Jizak, Kashkadarya, Syrdarya, Surkhandarya, Khorezm, rural areas of Navoi, Andijan, Namangan and Fergana;

-where foreign investors do not have state guarantees by the Uzbek government;

-where the share of foreign investors in the founding capital is more than 50%;

-where the foreign investments are made after state registration of the given enterprise;

-where the investment is made in the form of freely convertible currency or as new modern technology;

-where income earned from the tax privileges is reinvested in the further development of the enterprise.

3. Responsibility for determining who qualifies for these privileges lies in the inter-institutional council on questions of foreign investment and credits under the Cabinet of Ministers.

4. It is established that:

-interest on long term credits of enterprises with foreign investment without guarantees of the Uzbek government are not included in the tax base in determining income (profit) tax;

-losses in the main activity in reconstituted enterprises with foreign investments are deferred for up to 5 years in a weighted scale for liquidating the losses in taxable income during the accounting period incurring losses;

-if the laws for investment in subsequent periods become less favorable than herein, this decree takes precedent.

5. If the enterprise ceases activity sooner than one year after the relevant period of tax privilege expires, the repatriation of profits and export of capital of the foreign investor can take place only after paying the amount of tax which was forgiven.

6. The Ministry of finance, the State tax committee, the Ministry of economics, and the Trade-industry chamber will work out within one month a Resolution on the procedures for tax privileges in this decree.

7. The guarantees for foreign investors in part 4, article 3 of the law “On guarantees and measures of defense of the rights of foreign investors” are made in conditions:

-of an increase in the size of the tax on income from dividends paid to foreign investors;

-of the introduction of additional demands complicating the procedure of repatriating or reducing the size of income (profit) of foreign investors, with the exception of situations of suspension by the state of repatriation of the foreign investment in conditions of nondiscriminatory use of laws in cases of bankruptcy of the enterprise with foreign investment or defense of rights of creditors, criminal activity or administrative violations committed by the foreign investor as a physical person, or other necessary suspension in accordance with a legal or arbitrage ruling;

-introduction of quantitative limitations on the size of investment or other additional demands on the size of investment, including increase of the minimal size of foreign investment in enterprises with foreign investment;

-introduction of limitations on the share of the foreign investor in the capital funds of local enterprises;

-introduction of additional procedures of registering and extending visas of foreign investors, and other additional demands on realization of foreign investments.

8. The Cabinet of Ministers will confirm the procedure for these guarantees established in part 4, article 3 of the law “On guarantees and measures of defense of the rights of foreign investors” with a resolution within 10 days.

This takes into account that in the event of the coming into effect of any of the above forms of worsening of conditions of investors, the foreign investor should inform the appropriate authority about his eligibility for the corresponding guarantee.

9. The Ministry of justice together with other appropriate ministries and institutions should submit to the Cabinet of Ministers within a month proposals on any changes and additions to legislation in connection with the introduction of this decree.

10. Control for the execution of this decree lies with the 1st deputy Prime minister Azimov R.S.

Chairman of the Cabinet of Ministers Islam Karimov
April 11, 2003
Tashkent