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Uzbekistan, formally the Republic of Uzbekistan (Uzbek: Ozbekiston Respublikasi), is a Central Asian republic with two geographical borders. It is bounded to the north by Kazakhstan, to the northeast by Kyrgyzstan, to the southeast by Tajikistan, to the south by Afghanistan, and to the southwest by Turkmenistan. Tashkent is the country's capital and biggest city. Uzbekistan is a member of the Organization of Turkic States and a member of the Turkic languages world. Uzbek is the most widely spoken language in Uzbekistan. Islam is the primary religion in Uzbekistan, with the majority of Uzbeks being Sunni Muslims.
Eastern Iranian nomads known as Scythians were the first recorded settlers in what is now Uzbekistan, establishing kingdoms in Khwarazm (8th–6th centuries BC), Bactria (8th–6th centuries BC), Sogdia (8th–6th centuries BC), Fergana (3rd century BC – sixth century AD), and Margiana (3rd century BC – sixth century AD). The territory was integrated into the Iranian Achaemenid Empire and thereafter governed by the Iranian Parthian Empire and, later, the Sasanian Empire until the Muslim invasion of Persia in the seventh century. The Early Muslim conquests and the following Samanid Empire converted the majority of the population, including the local governing elites, to Islam. During this time, towns like Samarkand, Khiva, and Bukhara started to prosper as a result of the Silk Road, becoming a hub of the Islamic Golden Age, with luminaries like Muhammad al-Bukhari, Al-Tirmidhi, al Khwarizmi, al-Biruni, Avicenna, and Omar Khayyam.
The Mongol invasion of the 13th century toppled the indigenous Khwarazmian kingdom, resulting in Turkic supremacy. Timur (Tamerlane), who founded the Timurid Empire in the 14th century, was from Shahrisabz, and his capital was Samarkand, which became a center of knowledge under the authority of Ulugh Beg, giving rise to the Timurid Renaissance. The Timurid dynasty's domains were overrun by Uzbek Shaybanids in the 16th century, shifting the center of power to Bukhara. The territory was divided into three states: Khiva Khanate, Kokand Khanate, and Bukhara Emirate. Emperor Babur's conquests in the east led to the establishment of India's most recent invaders as the Mughal Empire. Throughout the nineteenth century, the Russian Empire steadily absorbed all of Central Asia, with Tashkent serving as the political headquarters of Russian Turkestan. National delimitation established the Uzbek Soviet Socialist Republic as a separate republic inside the Soviet Union in 1924. On August 31, 1991, with the fall of the Soviet Union, it proclaimed independence as the Republic of Uzbekistan.
Uzbekistan is a secular state governed by a presidential constitutional government. Uzbekistan is divided into 12 regions (vilayats), as well as Tashkent City and one autonomous republic, Karakalpakstan. While non-governmental human rights organizations have labeled Uzbekistan as "an authoritarian state with restricted civil liberties," considerable changes have been implemented during Uzbekistan's second president's administration after the death of the country's first president, Islam Karimov. Relations with neighboring nations Kyrgyzstan, Tajikistan, and Afghanistan have greatly improved as a result of these changes. A 2020 United Nations report found significant progress toward the UN's Sustainable Development Goals.
The Uzbek economy is gradually transitioning to a market economy, with an import substitution-based international trade strategy. In September 2017, the country's currency became fully convertible at market values. Uzbekistan is a significant cotton grower and exporter. Uzbekistan has become the greatest electricity generator in Central Asia, thanks to massive power-generation infrastructure from the Soviet period and an abundant supply of natural gas. Standard and Poor's (S&P) and Fitch both assigned the republic a BB- rating from 2018 to 2021. According to the Brookings Institution, Uzbekistan has huge liquid assets, fast economic growth, and minimal governmental debt. The republic's low GDP per capita is one of the constraints holding it back. Uzbekistan is a member of the CIS, the United Nations, and the Shanghai Cooperation Organization.
Employees are entitled to a minimum of 15 days of paid vacation per year after six months of employment. Employees under the age of 18, those with certain types of impairments, those who work in exceptionally tough or dangerous occupations, and others are all eligible to supplementary leave.
Uzbekistan recognizes 20 national public holidays.
Employees in Uzbekistan do not have a defined amount of sick days. Those who need to care for a sick family member, as well as employees who are unwell themselves, are usually eligible for paid sick leave.
Maternity leave is granted to female employees for a total of 126 days. Mothers-to-be are entitled to 70 days of maternity leave before the due date and 56 days after the due date (70 days if the birth has complications or if it is a multiple birth). The mother may be eligible for a social security benefit while on maternity leave.
There is no statutory paternity leave.
Apart from maternity leave, there are no provisions in the law in Uzbekistan regarding parental leave.
Employers may fire an employee only for a legal reason, which may include company changes or personnel-related difficulties. In certain cases, a collective bargaining agreement may compel the employee's union or employee representatives to approve to the termination.
Employees are entitled to receive written notice of their termination. Two weeks or two months' notice is required, depending on the reason for dismissal. If an employee is entitled to severance, it is calculated as one month's salary for every two years of employment.
The duration of the notice period is determined by the reason for termination. If the reason for termination is redundancy, there must be a two-month notice period. If an employee's ability to perform their duties is harmed by a lack of qualification or a health condition, the notice period must be at least two weeks. If the reason for the notice is a change in ownership of the business, the notice must be at least two months. If the reason for termination is gross misconduct or performance, the notice period is reduced to three days. It is permissible to make a payment in lieu of notice.
There is no statutory probationary period in Uzbekistan but an employee and their employer may agree on it and must be stated in the employment agreement.
Severance pay is not statutory in Uzbekistan.
A typical workweek consists of 40 hours spread over five or six days. The typical workday is eight hours if the employee works five days a week and seven hours if the employee works six days a week. Younger employees, as well as those with particularly difficult, dangerous, or stressful jobs, and those with certain types of disabilities, have their work hours reduced.
Overtime is permitted, subject to certain restrictions. Overtime employees are entitled to additional compensation. Overtime and work performed on a rest day are compensated at 200 percent of the regular rate of pay.
The monthly minimum wage in Uzbekistan is 747,300 UZS.
Uzbekistan offers universal health care, although many expenses are borne by the patient. There are just a few private medical providers.
Mandatory benefits postulated by law include a probationary period, pay on annual leaves, public holidays, sick leaves, maternity leave, paternity leave, and overtime pay. Statutory benefits also include social security benefits.
Resident companies pay CIT on their global revenue, while non-residents (i.e. foreign legal entities with a PE in Uzbekistan or income from sources in Uzbekistan that is not connected with a PE) pay CIT on income generated in Uzbekistan.
Non-resident companies are taxed either directly at the level of its Uzbek PE, if one exists, or indirectly via withholding tax (WHT) at the point of payment of Uzbek-source revenue.
CIT is levied on taxable profit, which is determined as the difference between gross income and deductible expenditures less any relevant tax breaks, legislation, or presidential decrees.
The CIT rate is determined by the Tax Code (previously, annually by presidential decree). In 2021, businesses (i.e. legal entities) will be subject to CIT at a rate of 15%. Commercial banks, cement (clinker) and polyethylene granules manufacturers, mobile service providers, and markets/shopping malls are subject to CIT at a rate of 20%.
In Uzbekistan, both citizens and non-residents are taxed. Residents are taxed on their global income, while non-residents are taxed only on income earned in Uzbekistan.
The PIT rates are as follows:
Employment income, rent income, and capital gains are imposed a tax rate of 12 percent.
Dividends and interest for residents are imposed a tax rate of 5 percent.
Personal income of non-resident individuals from sources in Uzbekistan is taxed at the following withholding rates:
Dividends and interest are imposed a tax rate of 10 percent.
Transportation (freight) services are imposed a tax rate 6 percent.
Other income (including royalty, employment income, etc.) is imposed a tax rate of 20 percent.
VAT, which is levied on the sale of goods and services, is levied on legal companies. The selling price of provided goods/services is used to calculate the taxable basis.
Taxable turnover is calculated at a rate of 15%. This rate also applies to taxable imports, where the tax base is calculated by adding the customs value to import taxes and excise tax (on excise-liable goods). Goods exports are usually zero-rated. Insurance and the majority of financial services are VAT-free.
VAT payers include any businesses with a revenue more than UZS 1 billion, as well as PEs of foreign legal entities. Legal companies that sell gas, diesel fuel, and gas to end customers via gas stations, as well as any commercial organizations that import goods and products, are considered VAT payers regardless of their yearly turnover.
Monthly reporting and tax payments are required.
Most nations need a B-1 Business Visa or a B-2 Business Visa to enter Uzbekistan to do business and must get one before traveling from an Uzbek Consulate or Embassy.
Foreign nationals arriving in Uzbekistan from countries without an Uzbek consulate or embassy may apply for a visa upon arrival at the airport, provided that a request for a visa upon arrival is included in a visa application form and approved by the Consulate Department of Uzbekistan's Ministry of Foreign Affairs.
Except for Turkmenistan and Tajikistan, citizens of the Commonwealth of Independent States (CIS) do not need a business visa to enter Uzbekistan and do business.
The necessity for a work permit in Uzbekistan is mainly decided by the type of the job assignment. With a Business Visa, an employee may engage in most unpaid activities on a short-term basis. However, before traveling to Uzbekistan, it is best to consult with a lawyer.
The need for a work permit is determined by the degree of credentials, the employer entity, and the nature of the employment. A Work Permit is the most prevalent kind of Uzbek work authorisation (direct-hire work permit).
Employment contracts in Uzbekistan must be in written and signed in triplicate by both the employer and the employee. The following must be stated in the employment contract:
The workplace - if they are not the same, the contract should include both the employer's primary location and the employee's primary location.
The job function of the employee
The start date of the employee's employment.
The amount of the employee's pay as well as any further compensation
If the contract is for a certain period of time, the term
The employment contract may be for an unlimited period, a defined duration of no more than five years, or until certain requirements are met.
The procedure for establishing a subsidiary in Uzbekistan will differ based on your location and company. Distinct Uzbekistan subsidiary laws may exist in separate areas, cities, or states, much as different states in the United States have their own laws. If you are unfamiliar with the territories of Uzbekistan, you should seek the assistance of a consultant or other professional who can assist you in locating the appropriate place and complying with the necessary legislation.
You should also examine which sort of corporation would best suit your purposes, such as a limited liability company (LLC), joint stock company, or representative office. Many businesses choose to establish as an LLC because it shields the parent company from liabilities resulting from the subsidiary's conduct. If your firm just has a few operations in Uzbekistan, you may set up a representative office to meet your requirements.
The following actions are required to establish your Uzbekistan subsidiary as an LLC:
1. Nomination of directors and shareholders
2. Creating a minimum share capital
3. Opening a bank account in the nation and depositing funds
4. Creating fundamental documents/a business charter
5. Ensuring compliance with all state registration and taxes requirements
The subsidiary laws of Uzbekistan that apply to an LLC may vary from those that govern joint stock corporations and representative offices. Every LLC must have at least one director and one shareholder. Although they may be of any country, the director must be a resident of Uzbekistan. The minimum share capital required for LLCs is around $1,800, which must be contributed prior to formation.
All foreign-owned LLCs must comply with tax rules in the same way that domestic corporations do. However, if your original share capital exceeds $150,000, you may be eligible for tax benefits. Working with a tax expert or accountant that knows Uzbekistan subsidiary regulations will help you remain compliant and fulfill all Uzbekistan subsidiary rules.