Uzbekistan is now at the stage of active development, attracting foreign investors to start a business. The legislation of Uzbekistan provides number of benefits for foreign investors to conduct business here. Listed below are the types of companies that are often used for investment projects:
General information about LLC
A limited liability company (LLC) is a legal entity established by one or more individuals (or legal entities), the authorized capital of which is divided into shares. Individuals and legal entities can act as shareholders of a LLC, regardless of their citizenship and residence (country of registration).
The size of the charter capital for LLC is determined by the shareholder(s). The authorized capital may be formed with money, securities, property, property rights or other alienable rights with a monetary value. The authorized capital must be formed within 1 year from the date of registration of the LLC.
Registration of the LLC is done within 24 hours.
Joint venture (JV) and foreign entity (FE)
If LLC is established jointly by a resident and a non-resident of Uzbekistan, and the size of the authorized capital is at least 400,000,000 Uzbek soums (about $ 36,363 at the current exchange rate), of which at least 15% of the shares belong to a non-resident, such LLC will be considered a Joint Venture (JV LLC).
Accordingly, if an LLC with an authorized capital of at least 400,000,000 soums is established by a non-resident(s) on the basis of 100% foreign ownership, then it will be considered a Foreign Enterprise (FE LLC).
Registration procedures for Joint Venture or Foreign Enterprise are also quite comfortable, however state fee is significantly higher compared to simple LLC.
Tax benefits for Joint Ventures and Foreign Enterprise
Joint Ventures and Foreign Entities are considered as company with foreign investments. According to the legislation, enterprises attracting foreign direct investments (hereinafter – FDI) and specializing in the manufacturing (rendering services) that are members of Special Economic Zones (hereinafter — SEZ) are exempted from paying:
• land tax, income tax, property tax, social tax, as well as mandatory contributions to funds;
• customs payments (except for customs clearance fees) for equipment, raw materials, materials and components imported for own production needs as well as for construction materials not produced in Uzbekistan and imported as part of the implementation of projects;
On the other hand, companies with FDI enjoy tax benefits for certain period depending on the size of the investment:
• from 300 thousand USD to 3 million USD — for a period of 3 years;
• over 3 million USD to 10 million USD— for a period of 5 years;
• over 10 million USD — for a period of 7 years.
These tax incentives are available under the following conditions:
• the company shall be member of the SEZ;
• the company shall be located in the territory of Uzbekistan, but outside of Tashkent city and the Tashkent region;
• foreign investors shall make private FDI without a guarantee provided from the Republic of Uzbekistan;
• at least 33% of the share for foreign shareholders in the share capital of the enterprise;
• foreign investments shall be in the form of money or new modern technological equipment;
• the allocation of at least 50% of the income for reinvestment, for the purpose of further development of the enterprise.
In any case, for all legal entities with foreign investments of at least 33%, there are customs benefits for property imported for their own needs, which is valid within 2 years from the date of the company’s state registration.