Uzbekistan


Authors: Sabina Taktasheva and Feruza Abdullaeva

Contact:

Sabina Taktasheva, Junior Associate in Azizov&Partners Firm of Advocates (sabina.taktasheva@azizovpartners.uz)

Feruza Abdullaeva, Junior Associate in Azizov&Partners Firm of Advocates (feruza.abdullaeva@azizovpartners.uz )

Overview of legal measures as of Sabina Taktasheva and Feruza Abdullaeva as response to the Corona virus. Please note: Due to the extraordinary situation, the legislation is in continuous evolution and may change very fast.

Introduction

The Corona virus infection that suddenly appeared in December of last year has radically changed the situation around the world and changed the trends of the world economy around the world. Already in March, it became clear that the Corona virus pandemic is not a short-term force majeure, but will have far-reaching negative economic and social consequences, which will have to be overcome for years. Uzbekistan has reacted very dynamically and quickly to the appearance of infection in the country. Preventive control measures were taken to limit the possibility of the virus entering the country. However, the virus was not avoided entirely. Thus, our state has taken a number of measures to reduce the risk of disease, support the population, business and individual sectors of the economy during the pandemic. We have described in detail what actions were taken by the state during the period of Corona virus infection as follows.




1. INTERVENTIONS AND RESTRICTIONS

1.1 Legal basis


In order to combat with the COVID-19 pandemic in Uzbekistan, several President and Cabinet Decrees were adopted. The latest legal basis for actions during the period of the COVID-19 pandemic in force is the Cabinet Decree No.176 of 23.03.2020. This Decree was governing all the measures against coronavirus up to July, 10th 2020. According to the President Decree No.5537 of 29.01.2020 Republican Commission for Combating the Coronavirus (hereinafter referred to as the Commission) was created. This Commission is responsible for implementing the measures prescribed by the Cabinet or President Decrees and is authorized to take additional measures established by the Decrees if the situation demands so. Therefore, due to the rapid increase of the number of people infected with coronavirus, the measures were strengthened by the Commission for the period of July, 10th – August, 10th 2020. The new measures were announced on the briefing held on July, 8th 2020 and are reflected in the Protocol of the gathering of the Commission No.33. Later, it was stated by the first Deputy Minister of health that if the situation of massive coronavirus spread will remain, the measures may be extended by the Commission after August, 1st 2020. It also has to be stated that in case of non-obedience the administrative punishment will be applied (article 54 of the Administrative responsibility Code of Uzbekistan). If the non-obedience will entail a massive spread of the virus, death of people then the criminal punishment is applied (article 2571 of the Criminal Code of Uzbekistan).



1.2 Boder


Since June, 15th the Commission has classified all countries into 3 categories:

· red zones – people from those countries are obliged to isolate for 14 days in specific territory;

· yellow zones – people from those countries are obliged to isolate for 14 days at home;

· green zones – people from those countries are not obliged to isolate.

Since July, 10th to August, 1st 2020 international flights will be reduced twice after the analysys of the epidemiological situation in foreign countries. Drivers of motor vehicles carrying out international cargo will pass testing for COVID-19 in the mandatory order.

Since July, 13th 2020 the air and rail transport on domestic routes has been suspended. The bus routes are also suspended. The Commission is responsible for scheduling the charter flights for returning the Uzbek citizens.



1.3 Visas


The visas of both foreign nationals and stateless people were extended until September, 1st 2020. Moreover, the citizens of foreign countries and stateless persons who have the right to enter Uzbekistan without the visa or with the electronic visa may also stay in Uzbekistan until September, 1st 2020. It was also decided that foreign professionals who came to Uzbekistan within the framework of investment projects during the lockdown from visa-free countries (no visa regime up to 30 days) are allowed, as an exception, to obtain a business visa without leaving the Uzbekistan.



1.4 Export control


The Cabinet Decree No.176 has allowed business entities to export the goods without providing a guarantee payment for existing overdue receivables that do not exceed 10 percent of the total export of goods for the reporting year. Due to a demand drop for cement as a result of the shutdown of work at many construction sites in the Republic in the context of the global spread of the coronavirus, and in order to support domestic producers, as well as to stabilize provision of medical products to Uzbekistan the Cabinet has enacted the Decree No.247 of 23.04.2020. According to this Decree the export of raw materials for the production of medical goods has been temporarily suspended from May, 1st to December, 31st 2020. Similar measures in respect to cement products were later cancelled by the Cabinet Decree No.309 of 22.05.2020. Moreover, on July, 3rd 2020 Agency for the development of the pharmaceutical industry of Uzbekistan has discussed with the British company Crown Agents the possibilities of export of the medicines, medical devices and medical equipment to the UK and other countries.


1.5 Prohibition of crowds


As the number of people infected with COVID-19 is rapidly increasing, since July, 10th 2020 it is prohibited to hold weddings and other family ceremonies, as well as public and entertainment events. It is forbidden to gather in groups of more than 3 people. Since July, 13th 2020 people over 65 years of age are to restrain themselves from being in public places.


1.6 Lockdown


Activities of the following businesses are suspended since July, 10th up to August, 1st 2020:

· markets and large stores

· fitness clubs, gyms, and swimming pools

· pre-school educational institutions and training courses

· public catering facilities

· sanatoriums, boarding houses and children's camps

· barbershops, beauty-salons (since July, 13th)

All religious places, recreation parks and other places of mass celebrations and recreation also suspend their activities.

On weekends (Saturdays and Sundays – July, 18-19 and July, 25-26 2020), it is also recommended not to involve employees of government agencies, business associations, or other organizations to work due to the fact that private transport (cars, bicycles, scooters etc.) and taxi are not allowed. The only exception is the transport with special allowance (stickers).

On weekdays (July,10th – August, 1st 2020) private transport is allowed to be used only from 7-10 AM and 5-8 PM. Taxis, transports with special allowance (stickers), transport of officials, employees of state-owned companies, public utilities, media, diplomats and other vehicles enlisted in the Commission’s decision may be used at any time of the day.

It is recommended that the personnel of state bodies, companies and other organizations should either take ordinary leave or work from distance.


1.7 Open Businesses, Industries and allowed Gatherings

Industrial and large-scale construction facilities are allowed to continue their activities on the following conditions:

· the territory of the corresponding objects is fully isolated;

· on the territory of the facilities the compliance with sanitary and hygienic rules is ensured;

· sanitary and hygienic measures are carried out in the relevant facilities together with the sanitary and epidemiological Centers;

· set up pyrometers and antiseptic means, disinfection "beds" at the entrance-exit places of the facilities;

· the personnel strongly comply with the social distance (2 meters).

All other organizations which are not suspended due to the Commission’s decision are recommended to follow special measures in order to prevent the spread of the COVID-19 in organization’s personnel.



1.8 Shareholder's meetings and other meetings of companies

Any gatherings of companies and organizations are prohibited from July, 10th to August, 1st 2020 according to para.1 of the Protocol of the gathering of the Commission No.33. If there’s a need of holding such meetings and gatherings they have to be conducted through video-conference platforms.


1.9 Supply of essential medical goods

According to the President Decree No.4662 of 27.03.2020 has been taken the following measures in order to ensure the supply of medical goods to the population of Uzbekistan:

· customs duties are not levied on necessary medicines, medical devices, medical equipment, as well as raw materials, materials and substances used in their production, transported across the customs border according to the list provided by the Ministry of health of Uzbekistan and the Agency for the development of the pharmaceutical industry;

· the State tax Committee, the State customs Committee and the Antimonopoly Committee should ensure daily monitoring of prices for medicines, medical devices, medical equipment, materials and substances used in their production and essential goods, as well as establish strict control over artificially inflated prices, preventing the formation of artificial shortages and increased demand for these goods.

Moreover, the Republican Commission for Combating the Coronavirus has the right to:

· make a decision on the validity for a period of up to three months of the VAT exemption for certain ready-made medicines and medical devices included in the List of medicines and medical devices, the import of which is not subject to the VAT exemption;

· reduce to 0 percent the rates of customs duties and excise tax for a period of up to three months when importing certain types of essential goods with the formation of their list.

Similar measures has been also reflected in the Cabinet Decree No.176:

· the State customs Committee organizes "green" corridors for the necessary medicines, medical products, medical equipment, materials used for their production and substations carried out through the customs border, and customs duties are not levied on these goods;

· for medicines, medical products, medical equipment, materials and substations used for their production, as an exception, it is allowed to enter into direct contracts by selecting the best offers without tenders or competitive bidding.

World Bank and Asian Development Bank also assist Uzbekistan in supply of medical goods.



2. STATE COMMISSIONS AND FUNDS

2.1 Republican Commission for Combating the Coronavirus

As early as January 2020, our state took measures to combat Coronavirus infection. Specifically, by the Order of the President dated 29.01.20 No. 5537 "On the Formation of a Special Republican Commission for the Preparation of a Program of Measures to Prevent the Import and Spread of a New Type of Coronavirus in the Republic of Uzbekistan", the Republican Commission for combating the Coronavirus was established. The main tasks of this Commission include:

· continuous analysis and monitoring of the global and regional situation on the issue of the epidemic, as well as the forecast of trends in the spread of the disease;

· interaction and exchange of information with the relevant state structures of the PRC and other interested countries, as well as with international organizations in order to coordinate actions to combat infection;

· development and implementation of effective methods of prevention, diagnosis and treatment of this infection;

· formation of a reserve and timely provision of specialized healthcare institutions and the population with antiviral drugs and personal protective equipment;

· timely identification of signs of possible deterioration of the epidemic situation in the country, as well as a set of measures to reduce the risk of disease and provision of qualified assistance;

· organization of effective notification of the population to explain the causes and conditions that contribute to the occurrence of the disease, as well as methods of its prevention.


2.2 Republican Anti-crisis Commission and Fund

The Republican Anti-crisis Commission was created by the Decree of the President of the Republic of Uzbekistan dated 19.03.20 No. 5969 "On Priority Measures to Mitigate the Negative Impact on the Economy of the Corona virus Pandemic and Global Crisis Phenomena". The main tasks of the Commission were to promptly resolve the problematic issues and develop additional measures to ensure the smooth operation of industries and sectors of the economy, as well as issues of social support for the population during the pandemic.

Also, in accordance with the Decree of the President of the Republic of Uzbekistan dated 19.03.20 No. 5969, an Anti-crisis Fund was created under the Ministry of Finance of the Republic in the amount of 10 trillion Soums. The main directions of using this Fund are:

· Funding for pandemic response activities, such as:

- provision of medicines and appropriate medical equipment to hospitals necessary to fight infection;

- covering the expenses of quarantined persons;

- allocation of additional funds for material incentives for employees;

- construction, repair, reconstruction and equipping of medical and other institutions.

· Support for entrepreneurship and employment through:

- expanding the provision of business support by the State Fund;

- implementation of additional projects aimed at expanding the economic activity of employment.

· The expansion of social support of the population by strengthening measures to support low-income families;

· Ensuring the sustainable functioning of economic sectors by:

- state support for strategic enterprises;

- compensation of part of transport expenses of business entities for foreign trade activities;

- provision of additional measures to support sectors of the economy;

- replenishment of the budget revenues of the regions and the city of Tashkent.


4. SUPPORT OF SPECIFIC SECTORS

4.1 Legal basis

Tourism:

1. Decree of the President of the Republic of Uzbekistan dated 03.04.2020 No. UP-5978 “on Additional Measures to Support the Population, Economic Sectors and Business Entities during the Coronavirus Pandemic”;

2. Decree of the President of the Republic of Uzbekistan dated 18.05.2020 No. UP-5995 “on Additional Measures to Ensure Compliance of Quality and Safety Indicators of Agricultural Products with International Standards”;

3. Decree of the President of the Republic of Uzbekistan dated 28.05.2020 No. UP-6002 “on Urgent Measures to Support the Tourism Sector to Reduce the Negative Impact of the Coronavirus Pandemic”.

Crop production:

1. Resolution of the Cabinet of Ministers dated 15.06.20 No. 378 “On Measures for the Organization of Timely and High-Quality Harvesting of Grain Ears of The Crop of 2020”

2. Decree of the President of the Republic of Uzbekistan dated 03.04.20 No. -5978 “On Additional Measures to Support the Population, Economic Sectors and Business Entities during the Corona Virus Pandemic"

Catering:

1. Decree of the President dated 19.03.20 No. 5969 “On Priority Measures to Mitigate the Negative Impact on the Economy of the Corona virus Pandemic and Global Crisis Phenomena”;

2. Decree of the President of the Republic of Uzbekistan dated 18.05.2020 No. -5996 "On the Next Measures to Support the Population and Business Entities during the Corona virus Pandemic";

3. Decree of the President of the Republic of Uzbekistan dated 20.07.2020 No. -6029 "On Additional Measures to Support the Population, Business Entities, Public Catering, Trade and Services to Reduce the Negative Impact of the Corona virus Pandemic".

Construction:

1. PD-4718. dated 19.05.2020 “On measures of acceleration of the multi-storey buildings construction in the regions”

2. Cabinet resolution No. 450 dated 23.07.2020 "On measures of simplifying the procedure of cement import and providing the domestic market with high-quality cement"







4.2 Support measures

Tourism

Since March 2020, there have been some changes in the legislation in the field of tourism. Namely, by the Decree of the President dated 03.04.2020 No.5978, it was established that companies in the field of tourism, JSC "Uzbekistan Airways", JSC "Uzbekistan Airports" and "Center "Uzaeronavigation" are exempt from paying land tax and property tax, as well as pay social tax at a reduced rate of 1%. Moreover, it was established that some VAT payers have the right to calculate and pay VAT on a quarterly basis. In addition, it was decided to suspend the application of increased rates of property tax and land tax in respect of unused production areas, non-residential buildings.

Further, the Presidential Decree dated 18.05.2020 No.5995 approved a plan of measures to create organic markets and restaurants to further increase the attractiveness of agroecotourism.

Moreover, the Decree of the President dated 28.05.2020 No.6002 was issued, according to which from June 1, 2020, domestic tourism is resumed with the beginning of the activities of tourist companies in the regions of the "green" and "yellow" categories. In addition, incoming tourism is resumed with the definition of the list of countries whose citizens are allowed to enter Uzbekistan. By the same decree, it was determined that for tour operators and travel agents, the income tax rates are reduced by 50% of the established rates, the right to transfer losses is granted, and the accrual and payment of tourist tax is temporarily suspended. Furthermore, additional support from the state is being introduced, namely, the allocation of a targeted interest-free loan, partial subsidies for start-up projects and the allocation of grants for the development and promotion of new tourist products and routes to guides. In addition, this Decree provides for additional state support at the expense of the State Fund for business support through subsidies. A partial subsidy of 30% of the cost of air and train tickets is provided to tour operators. In addition, the hotel's repair costs are compensated, and the main debt payment is extended for early loans issued by commercial banks for the construction of accommodation facilities. This Decree also exempts legal entities from paying customs duties for equipment imported to the territory of the Republic of Uzbekistan for disinfection works, contactless controlled (sensor) equipment for construction, as well as odorless disinfectants until January 1, 2022.

In addition to the above mentioned, it is planned to introduce a system of sanitary and epidemiological safety for tourists "Uzbekistan. GUARANTEED safe travel", which will be introduced at the facilities that serve foreign tourists. Besides, a proposal to liberalize the visa regime for foreign citizens is being considered, which provides for attracting people with significant capital and a high level of academic knowledge to permanent residence in the Republic of Uzbekistan.

Crop production

In accordance with the Resolution of the President dated 06.03.20 No. 4634 “On Measures for the Broad Implementation of Market Principles in the Production, Purchase and Sale of Grain” the following normative legal acts were adopted:

· Provision on the order of storage of grain ears purchased from grain producers. The document provides for the allocation of areas for receiving and storing grain, requirements for warehouses and other containers, the mechanism for receiving, staffing and storing grain shipments, quality control, compliance with sanitary standards and industrial safety requirements;

· Provision on the procedure for issuing an opinion on grain storage tanks. The document defines the General requirements for receiving and storing areas for cereals, warehouses and other containers.

According to the Resolution of the Cabinet of Ministers dated 15.06.20 No. 378 “On Measures for the Organization of Timely and High-Quality Harvesting of Grain Ears of The Crop of 2020” the purchase prices for grain are as follows:

- q of class I - 2,543,180 Soums;

- q class II - 2 242 990 Soums;

- q class III - 2 040 570 Soums;

- q of class IV - 1,550,000 Soums.

Regardless of the organizational and legal form, all procurement companies and grain-growing clusters purchase additional volumes of grain from farms at contractual prices based on contracts.

The Fund for state support of agriculture under the Ministry of Finance is charged with ensuring timely payments for purchased grain for state resources.

The resolution approved the composition of the Republican working group on the organization of timely and high-quality grain harvesting without losses, organization of transportation, reception, ensuring a sufficient supply of fuel and lubricants, monitoring the implementation of contracts.

Zero rates of excise tax and customs duty until December 31, 2020 when imported to the territory of the Republic of Uzbekistan were set for grains processed by other methods, as well as for grain germs.

Catering

The catering sector has been particularly affected during the pandemic. Thus, there were a range of support measures implemented. Particularly, according to the Decree of the President dated 19.03.20 No. 5969 “On Priority Measures to Mitigate the Negative Impact on the Economy of the Corona virus Pandemic and Global Crisis Phenomena” the amount of fees for the right to carry out retail trade in alcoholic beverages for public catering enterprises is reduced by 25 percent of the established amount.

Moreover, pursuant to the Decree of the President of the Republic of Uzbekistan dated 18.05.2020 No. -5996 "On the Next Measures to Support the Population and Business Entities during the Corona virus Pandemic" from 1 June till 1 September 2020 (prolonged till 31 December 2020) public catering enterprises are exempt from paying property and land tax.

Besides, pursuant to the Decree of the President of the Republic of Uzbekistan dated 20.07.2020 No. -6029 "On Additional Measures to Support the Population, Business Entities, Public Catering, Trade and Services to Reduce the Negative Impact of the Corona virus Pandemic" from 1 July till 31 December 2020 public catering enterprises are exempt from paying turnover tax. Moreover, in the period from April 1, 2020 to December 31, 2020, public catering enterprises are exempt from paying the fee for the right to retail alcohol products. Besides, public catering enterprises are granted the right to sell alcoholic beverages with their delivery. Furthermore, it was decided to increase from July 1, 2020 the maximum average annual number of employees for public catering enterprises from 25 to 50 people to classify them as small businesses, with the extension of benefits and preferences granted to small businesses. Until July 1 2021 public catering enterprises as the quarantine restrictions are lifted have the right to place free of charge on adjacent vacant land plots and equip light structures for serving food to consumers. In addition, it was determined that the reduced social tax rate is applied by public catering enterprises regardless of the number of employees.

Construction

Uzbekistan takes many measures to support the sector of construction during the pandemic. For example, from the Anti-crisis Fund, 6.5 trillion Soums were allocated to solve the problems that arose in the context of the pandemic. During the lock down period, 1.5 trillion Soums (USD 147 million) were allocated from the anti-Crisis Fund for the construction of engineering and communication infrastructure, including 500 billion Soums (about USD 50 million) for 55 water projects and 1 trillion Soums (USD 98.5 million) for 1,547 road construction projects. The state has also created all conditions for increasing local budget revenues, in particular, generating funds for the construction of roads and other infrastructure facilities.

From July 1, 2020 until January 1, 2021 in accordance with PD-4718 of 19.05.2020 “On measures of acceleration of the multi-storey buildings construction in the regions”, the import of new construction equipment, vehicles for the carriage of goods is exempt from customs payments under the list, which is an appendix to the mentioned Decree.

From July 1, 2020 to July 1, 2023 the import of forms for casting concrete, machines for preparing concrete for the construction of apartment buildings according to the special list is exempt from customs payments. The procedure for the establishment this list has not yet been defined by law.

Payers of customs payments can get a delay of up to 120 days or installment payment of customs payments in the period from July 1, 2020 to July 1, 2023 for the import of machinery used in the construction industry, technological equipment, small-scale mechanization, devices, spare and component parts. In all cases, payers are not exempt from paying VAT and charges for customs registration.

The Cabinet also adopted resolution No. 450 dated 23.07.2020 "On measures of simplifying the procedure of cement import and providing the domestic market with high-quality cement". According to the document, when importing cement products, it can be released into free circulation within two days, instead of 28, as it was previously.

However, the document also prescribes responsibility for the following activities:

· import of cement that does not meet the requirements of regulatory documents on technical regulation;

· violations of legislation on consumer protection in the retail sale of cement products on the domestic market.

All these measures have undoubtedly borne fruit. President Mirziyoyev in his speech confirmed that in the first half of this year, 43 trillion Soums worth of construction work was completed in the country, which was more than 107 % compared to the same period last year. He said: "We are all witnessing that this year has become a real test and a very responsible period for the construction sector". Yet he further stated that despite the challenges, this sector keeps on giving its results: "In particular, dozens of structures were built in the shortest possible time, including a special multi-specialty hospital with 4,000 beds in the Zangiata district, a temporary detention complex in the Yukorichirchik district of the Tashkent region, and distribution centers. Today, such complexes, built even in the most remote areas of the country, play an invaluable role in containing the pandemic and saving the lives of thousands of our compatriots who are faced with this serious disease".







5. TENANCY AND LEASE

5.1 Legal basis

Tenancy and Lease relations are mainly regulated by the following laws and regulations:

1. The Law of the Republic of Uzbekistan of 19.11.91 No. 427-XII “On Tenancy”;

2. The Articles 535-599 of Civil Code of the Republic of Uzbekistan;

3. The Article 24 of Land Code of the Republic of Uzbekistan;

4. The Articles 86-95 Of Housing Code;

5. The Law of the Republic of Uzbekistan of 14.04.99 No. 756-I "On Lease";

6. Convention on Interstate Leasing (Moscow, November 25, 1998);

7. UNIDROIT Convention on International Financial Leasing (Ottawa, may 28, 1988, accession of the Republic of Uzbekistan in accordance with the decree of OM RU of may 26, 2000 N 84-II, entry into force for the Republic of Uzbekistan on February 1, 2001).

Moreover, tenancy and lease issues during the corona virus pandemic were considered by the following acts:

1. Decree of the President of the Republic of Uzbekistan dated 03.04.20 No-5978 “On Additional Measures to Support the Population, Economic Sectors and Business Entities during the Corona Virus Pandemic";

2. Decree of the President of the Republic of Uzbekistan dated 27.04.2020 No-5986 “On Additional Measures to Support the Population and Business Entities during the Corona Virus Pandemic";

3. Resolution of the Plenary of the Supreme Court of the Republic of Uzbekistan dated 28.04.20 08-son “On Certain Issues of Application of Legislation by Courts in Connection with the Introduction of Measures to Prevent the Spread of Corona virus Infection (COVID-19) on the Territory of the Republic of Uzbekistan”;

4. Resolution of the Board of the Central Bank of the Republic of Uzbekistan dated 16.03.20 No. 1648 “On Amendments to the Regulations on the Procedure for Conducting Leasing Operations and Their Accounting in Commercial Banks”;

5. Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated 16.06.20 No. 384 “On Amendments and Invalidation of Certain Decisions of the Government of the Republic of Uzbekistan (Law of the Republic of Uzbekistan ‘On State Duty’";

6. Decree of the President of the Republic of Uzbekistan dated 20.07.20 No.6029 "On Additional Measures to Support the Population, Businesses, Public Catering, Trade and Services to Reduce the Negative Impact of the Corona virus Pandemic".


5.2 Measures

[Normal text bold for Title]

During the period of the corona virus pandemic, the State provided a number of measures to support the population and business entities in matters of tenancy an lease. Namely, the Presidential Decree of 03.04.20 No-5978 determined that business entities whose activities were forcibly suspended for the period of quarantine measures are exempt from paying for tenancy of state property from March 24, 2020. This information was also provided by the press service of the Agency for State Asset Management.

Moreover, according to the Presidential Decree of 27.04.20 No-5986, it is established that from April 1 to October 1, 2020, the amount of interest income accrued and deferred by leasing companies on leasing is not included in the total income when calculating profit tax during the period of the granted deferral. "For example, if a leasing company granted someone a deferral on the payment of lease payments until October 1, then, accordingly, during this deferral, profit tax will not be charged on the amount of interest income owed to the leasing company," - said Deputy Finance Minister Dilshod Sultanov.

In addition to the mentioned supra, by the Resolution of the Plenum of the Supreme Court of 28.04.20 08-son, the economic Courts were explained that when they consider the claims of the centers for the transfer of state property to tenancy for the collection of arrears on tenancy payments, the period for which the debt was formed should be set. In addition, Economic Courts should take into account the fact that from March 24, 2020 until the end of the quarantine, tenancy payments are not accrued if the tenant has suspended activities for the period of quarantine measures.

Moreover, the Resolution Of the Board of the Central Bank of the Republic of Uzbekistan dated 16.03.20 No. 1648 amended the Resolution Of the Board of the Central Bank of the Republic of Uzbekistan dated 27.12.06 No. 1648 "On Approval of the Regulations on the Procedure for Conducting Leasing Operations and Their Accounting in Commercial Banks". According to these changes, microleasing is now characterized as leasing, which is issued to business entities in the amount not exceeding 600 million sums. Furthermore, it was established that the lease agreement must be notarized in cases where the law prescribes notarization of agreements on leasing property, with the exception of leasing contracts for the purchase of real estate or transport from primary market. In addition, according to the changes, the expiration date of the leasing object is now determined based on Article 306 the sixth part of Tax Code of the Republic of Uzbekistan.

In addition, the Decree of the Cabinet of Ministers of the Republic of Uzbekistan dated 16.06.20 No. 384 invalidated Section I of the Annex to the Decree of the Cabinet of Ministers dated 25.10.04 No. 199 “On Measures for the Further Development of Leasing Services".

According to the Decree of the President dated 20.07.20 No.6029 starting from July 1, 2020 landlords are encouraged to review their rents in order to reduce them.



6. LEGAL PROCEEDINGS

6.1 Legal basis

The issues of legal proceedings are mainly regulated by the following laws and regulations:

1. Code of the Republic of Uzbekistan on Administrative Proceedings (Approved by the Law of the Republic of Uzbekistan of 25.01.2018 No.462);

2. Resolution of the Plenary of the Supreme Court of the Republic of Uzbekistan dated 25.05.2012 N 06 "On Certain Issues of International Cooperation in Civil and Criminal Proceedings";

3. Law of the Republic of Uzbekistan of 10.03.2020 No.607 "On Amendments and Additions to Certain Legislative Acts of the Republic of Uzbekistan in Connection with Improving the Procedure for Conducting Cases in Courts" (Adopted by the Legislative chamber on 18.02.2020, approved by the Senate on 28.02.2020);

4. Resolution of the Plenary of the Supreme Court of the Republic of Uzbekistan dated 28.04.20 08-son “On Certain Issues of Application of Legislation by Courts in Connection with the Introduction of Measures to Prevent the Spread of Corona virus Infection (COVID-19) on the Territory of the Republic of Uzbekistan”.



6.2 Measures


The Supreme Court of the Republic of Uzbekistan has taken a number of measures to switch to a new format of legal proceedings during the corona virus pandemic. Namely, the Presidium of the Supreme Court of the Republic of Uzbekistan adopted the Resolution on March 20, 2020, which reflected recommendations and instructions on the procedure of the courts. In particular, paragraph 2 of the Decree specified the categories of cases that should be considered during the pandemic, namely:

· categories of urgent cases;

· cases considered in the order of writ proceedings;

· cases for recognition incapacitated in the prescribed manner.

Within the category of "immediate effect" the following cases are included:

· on election, renewal, cancellation or change of a preventive measure;

· administrative detention;

· some cases of administrative violations.

In addition, in the context of the pandemic, personal reception of citizens in the courts was suspended. Thus, it is recommended to submit procedural documents in electronic form.

Regarding the submission of documents in electronic form, a joint project of the Supreme Court of the Republic of Uzbekistan, USAID and UNDP "Partnership in the Field of the Rule of Law In Uzbekistan" was launched in 2014. Due to this project, the e-SUD system of electronic legal proceedings was launched in all-89 Civil Courts in Uzbekistan. Moreover, the system was also integrated with the broader E-x SUD information system of Economic, Administrative and Criminal courts, which contributed to the creation of a unified electronic judicial system in Uzbekistan. This unified e-justice system has become a vital tool to support the functioning of the national judicial system during quarantine. Detailed information is available on the USAID website.

Due to the above-mentioned measures and recommendations, the Administrative Courts of the Tashkent region were able to consider more than 914 cases in regard to 1,121 persons in the period from March 20 to May 1 this year.

In addition to the above mentioned, the Resolution No. 08 of the Plenary of the Supreme Court dated 28.04.2020 establishes the following requirements for Courts during the corona virus pandemic:

· during the period of quarantine, the Statute of limitations is suspended on the basis of paragraphs 1 and 2 of part one of Article 156 of Civil code of the Republic of Uzbekistan. However, please note that the Statute of limitations is suspended if the quarantine was introduced or continued to operate in the last six months of the Statute of limitations;

· when deciding on the question of liability for non-performance or improper performance of obligations (penalty, damages, termination, etc.) courts should establish the causes of default and in case of determining that the performance or proper performance of the obligation was impossible due to the introduction of quarantine the courts should refuse satisfaction of requirements;

· persons participating in criminal, civil, administrative, or economic proceedings lose the right to perform certain procedural actions after the expiration of the procedural terms established by law or appointed by the court;

· if it is impossible to carry out procedural actions during the quarantine period, the courts should decide whether to restore any procedural deadlines as missed for good reasons;

· the introduction of a quarantine does not suspend the period of detention, or house arrest established by law, as well as the period of application of conditional early release from punishment and commutation of punishment with a more lenient punishment;

· since the grounds for suspending proceedings in civil, criminal, administrative, or economic cases provided for by the relevant procedural law are exhaustive, the courts are not entitled to suspend proceedings in these cases due to the introduction of quarantine and must take measures to review them in a timely manner;

· if there are circumstances provided for in paragraph 2 of article 117 of Civil Code of the Republic of Uzbekistan, the proceedings may be suspended by the court;

· sentences, rulings, and court orders for release from custody and house arrest must be immediately enforced;

· court decisions that did not enter into legal force before the introduction of the quarantine, as well as court decisions made during the quarantine period, and not appealed in the appeal procedure in connection with the introduction of the quarantine, are applied for execution after the termination of the quarantine;

· if applications for the application of penalties to exporters (importers) who have allowed a delay in the receipt of foreign currency earnings from abroad are received during the period from the introduction of the quarantine until October 1, 2020, the courts should refuse to accept such applications for court proceedings, and if the application is accepted for production, the courts should stop the proceedings;

· take into account the Decree Of the President of the Republic of Uzbekistan dated 03.04.20 No. 5978 when considering:

- disputes between economic entities and customs authorities;

- statements of claim from tax authorities for compulsory collection of tax arrears;

- applications for initiation of bankruptcy proceedings of the debtor;

- claims of state-owned enterprises-centers for the transfer of state property for lease on the recovery of arrears on lease payments;

· if during the review of debt collection cases before October 1, 2020, it is found that the borrower is overdue for payment of the loan due to financial difficulties that occurred during the quarantine period and for this reason the borrower is entitled to a delay, the claim should be refused. The same decision is made on claims for the collection of penalties and foreclosure on collateral for overdue loans of borrowers, when establishing the negative impact of the introduced quarantine regime on the activities of the borrower.



7. DEBT COLLECTION

7.1 Preferential terms for the payment of loans


According to the Decree of the President of the Republic of Uzbekistan dated 06.03.2020 No.4633 "On Measures for Wide Introduction of Market Principles in the Sphere of Cotton Production" since March 15, 2020, the commercial banks allocated loans for the financing costs of the farmers, cotton-textile cluster and co-operatives and elite seed farms for seed production, production of raw cotton up to 12 months. At the same time, the subjects to whom the loan is granted, independently dispose of credit funds and choose suppliers of material resources. Moreover, the state support Fund for entrepreneurship provides compensation for the following:

· part of the interest rate on commercial loans;

· a portion of up to 30 % of the interest rate set by commercial banks on loans issued in foreign currency.

In addition, the Decree of the President of the Republic of Uzbekistan dated 19.03.20 No. 5969 "On Priority Measures to Mitigate the Negative Impact on the Economy of the Corona virus Pandemic and Global Crisis Phenomena" created an anti-Crisis Fund under the Ministry of Finance of the Republic of Uzbekistan and determined its main directions of using funds to support entrepreneurship and employment by compensating for interest expenses on loans issued primarily for the production, purchase and sale of socially important consumer goods. Another direction provides for ensuring the sustainable functioning of economic sectors through the allocation of interest-free loans for the repayment of loans attracted under state guarantees, as well as for the implementation of priority expenditures. Moreover, it was agreed that commercial banks will provide a total of 5 trillion Soums of deferrals for the payment of debts on loans issued to tourist operators, hotel business entities, transport and logistics companies and other businesses in the tourism industry, as well as economic entities that have faced financial difficulties due to the introduction of restrictions on foreign trade operations.

Moreover, according to the Decree of the President of the Republic of Uzbekistan dated 03.04.20 No-5978 “On Additional Measures to Support the Population, Economic Sectors and Business Entities during the Corona Virus Pandemic", as part of the implementation of presidential Decree No.5969, the debt on loans of legal entities in the amount of 7.9 trillion Soums was deferred. This decree also established that the Central Bank should take measures to create conditions and simplify procedures for providing commercial banks with the above-mentioned loans. In addition, it was determined that in the period up to October 1, 2020, the State Fund for business support will provide:

· guarantee on loans issued to business entities with a positive credit history for replenishment of working capital, up to 75% inclusive of the loan amount, but no more than 10 billion soums, regardless of the number of projects;

· compensation for interest expenses on loans issued to business entities in the national currency for working capital replenishment with an interest rate not exceeding 1.75 times The Central Bank's basic rate, while maintaining the established compensation amounts.

In addition, the Decree of the President of the Republic of Uzbekistan dated 27.04.2020 No-5986 “On Additional Measures to Support the Population and Business Entities during the Corona Virus Pandemic" established that from April 1, 2020 to October 1, 2020, the procedure for compensation by the State Fund for business support for interest expenses on loans from commercial banks also applies to existing credit agreements of business entities.

Besides, pursuant to Resolution of the Plenary of the Supreme Court of the Republic of Uzbekistan dated 28.04.20 08-son “On Certain Issues of Application of Legislation by Courts in Connection with the Introduction of Measures to Prevent the Spread of Corona virus Infection (COVID-19) on the Territory of the Republic of Uzbekistan” it was established that if during the review of debt collection cases before October 1, 2020, it is found that the borrower is overdue for payment of the loan due to financial difficulties that occurred during the quarantine period and for this reason the borrower is entitled to a delay, the claim should be refused. The same decision is made on claims for the collection of penalties and foreclosure on collateral for overdue loans of borrowers, when establishing the negative impact of the introduced quarantine regime on the activities of the borrower.


7.2 Suspension of public utilities debt collection

According to the Decree of the President of the Republic of Uzbekistan dated 03.04.2020 No. -5978 “on Additional Measures to Support the Population, Economic Sectors and Business Entities during the Coronavirus Pandemic” from April 1 2020 the mandatory requirement for legal entities to make prepayment for gas and electricity is reduced to 30%.

JSC "Regional Electric Networks" reported on its website that consumers who have debts in payment for electricity will be provided with uninterrupted power supply during the quarantine period.

Moreover, Deputy Minister of housing and communal services Nazirjon Nazirov said that in order to support the population, fines and penalties will not be charged for late payment of services of water and heat supply organizations, as well as waste water treatment enterprises. Debtors will not be sued and will not be disconnected from the water supply for the period of restrictive measures, will not be disconnected from utilities for debts.

According to the Decree of the Cabinet of Ministers of the Republic of Uzbekistan dated 23.03.20 No. 176 "On Additional Measures to Prevent the Spread of Corona virus Infection", citizens were not disconnected from Internet and telephone services for two months during the quarantine period.

1. Decree of the President of the Republic of Uzbekistan dated 03.04.2020 No. UP-5978 “on Additional Measures to Support the Population, Economic Sectors and Business Entities during the Coronavirus Pandemic”;

2. Decree of the President of the Republic of Uzbekistan dated 18.05.2020 No. UP-5995 “on Additional Measures to Ensure Compliance of Quality and Safety Indicators of Agricultural Products with International Standards”;

3. Decree of the President of the Republic of Uzbekistan dated 28.05.2020 No. UP-6002 “on Urgent Measures to Support the Tourism Sector to Reduce the Negative Impact of the Coronavirus Pandemic”.



8. TAX AND CUSTOMS BENEFITS

8.1 Legal basis

1. Decree of the President of the Republic of Uzbekistan dated 19.03.20 No. 5969 "On Priority Measures to Mitigate the Negative Impact on the Economy of the Corona virus Pandemic and Global Crisis Phenomena"

2. Decree of the President of the Republic of Uzbekistan dated 03.04.20 No. -5978 “On Additional Measures to Support the Population, Economic Sectors and Business Entities during the Corona Virus Pandemic";

3. Decree of the President of the Republic of Uzbekistan dated 27.04.2020 No. -5986 “On Additional Measures to Support the Population and Business Entities during the Corona Virus Pandemic";

4. Decree of the President of the Republic of Uzbekistan dated 18.05.2020 No. -5996 "On the Next Measures to Support the Population and Business Entities during the Coronavirus Pandemic";

5. Resolution of the President of the Republic of Uzbekistan dated 02.07.2020 No. -4772 "On Measures to Implement the Project ‘Taking Urgent Measures to Counteract COVID-19 Coronavirus Infection in Uzbekistan’ with the Participation of the World Bank"

6. Decree of the President of the Republic of Uzbekistan dated 20.07.2020 No. -6029 "On Additional Measures to Support the Population, Business Entities, Public Catering, Trade and Services to Reduce the Negative Impact of the Coronavirus Pandemic"


8.2 Measures

Tax and customs benefits for entrepreneurs

According to the Decree of the President dated 19.03.20 No. 5969 in the period from April 1 to October 1, 2020, it was established that:

· The amount of social tax for individual entrepreneurs is reduced to 50% of the basic calculated amount per month;

· The amount of deduction for alcohol wholesale companies is reduced from 5 to 3% (in the period from April 1 to December 31);

· The amount of fees for the right to retail alcohol by public catering companies is reduced by 25%.

Moreover, it was determined that from April 1 to July 1, 2020, the accrual and payment of tourist tax will be suspended.

In addition, tax rates for the use of water resources will be reduced by 50% in 2020.

Local government authorities were instructed to grant business entities a 6-month grace period for paying property tax, land tax, and water use tax without charging interest. Also, until October 1, 2020, the tax authorities must suspend the accrual of penalties for these taxes and do not take measures to forcibly recover tax arrears for business entities experiencing temporary difficulties.

It was instructed to create headquarters to ensure the accelerated passage of goods, their customs clearance and issuance of export and import permits through border customs posts. Also, from April 1, a mechanism for accelerated customs clearance of food imports should be introduced.

Further, in accordance with the Decree of the President dated 03.04.20 No. 5978 until December 31, 2020, zero rates of customs duty and excise tax were established for the import of goods.

It was established from April 1 to December 31, 2020:

· tour operators, travel agents and tourism entities, JSC "Uzbekistan Airways", JSC" Uzbekistan Airports "and "Uzaeronavigation Center" are exempt from paying land tax and property tax. Also, these subjects now pay social tax at a reduced rate of 1%;

· conditional VAT payers are entitled to calculate and pay VAT on a quarterly basis;

· the application of increased rates of property tax and land tax in respect of unused production areas, non-residential structures, the accrual of penalties and the enforcement of debt on them is suspended.

Also, under this Decree it was decided to suspend the accrual of a fixed amount of social tax for individual entrepreneurs who were forced to suspend their activities during the pandemic.

Moreover, until December 31, 2020, micro firms, small businesses and individual entrepreneurs who suspended their activities during the pandemic were granted the right to an interest-free postponement of:

· turnover tax, property tax, land tax and water use tax-with subsequent payment of equal shares within 12 months;

· social tax – with subsequent payment in equal shares within 6 months.

In addition, it was decided to maintain until the end of 2020 the current rates of excise tax on alcohol, alcohol, excise tax when selling gasoline, diesel fuel and gas to the final consumer.

It was also established that income tax payers can submit a certificate on the amount of advance payments for this tax and thus will be exempt from its calculation.

In addition to the above, it was determined that construction materials needed for the construction of medical and quarantine facilities and goods for their operation are exempt from customs payments and VAT until December 31, 2020. Also, Express tests for detecting corona virus are not charged for customs clearance.

According to the Decree of the President dated 27.04.2020 No. 5986 it is established that from April 1 to October 1, 2020:

· gratuitous transfer of funds and goods to certain charitable foundations in Uzbekistan is considered as deductible expenses when calculating income tax. In addition, such gratuitous transfer of goods is exempt from VAT and is not subject to turnover tax (from April 1 to December 31, 2020);

· the amount of accrued and deferred lease interest income is not included in total income when calculating income tax during the deferred period.

In accordance with the Decree of the President dated 18.05.2020 No. 5996 in the period from June 1 to December 31 (extended) 2020, small businesses, markets and shopping complexes, cinemas, catering and public transport enterprises, sports and recreation institutions, legal entities engaged in passenger transportation, provision of household services, provision of premises for rent are exempt from property tax and land tax.

It was also determined that the amount of property tax and land tax for April and may 2020, as well as the amount of penalties for land tax and property tax will be deducted.

Moreover, it was established that business entities have the right to receive a 120-day deferred payment of VAT when importing goods. Also, micro firms and small enterprises engaged in foreign economic activity are granted the right to apply a deferral until July 1, 2020 for the payment of customs duty and excise tax on the import of goods, followed by payment in equal shares within 120 days.

Also, it was found that from May 1 to December 31 2020 (extended), the social tax rate is reduced to 1% for micro firms and small businesses.

Moreover, the collection of tax arrears, penalties and fines for violation of tax legislation from micro-firms and small businesses as of May 15, 2020 is suspended.

According to the Resolution of the President dated 02.07.2020 No. 4772, goods imported to the Republic at the expense of loans from international financial institutions and international loans from government organizations are exempt from customs payments, as well as goods purchased at their expense - from VAT. It was noted that the project conducted by the World Bank provides benefits for tax and customs payments in the amount of 6.88 million dollars.

According to the Decree of the President dated 20.07.2020 No. 6029 from July 1 to December 31, 2020, catering companies and enterprises specializing in providing premises for rent are exempt from paying turnover tax.

Also, in the period from April 1 to December 31, 2020, public catering companies are exempt from paying the fee for the right to trade alcohol.

It is established that in 2020, no penalty will be imposed for failure to submit tax reports on time, if no more than five days have passed from the established deadline for submitting tax reports.

Tax benefits for individuals

According to the Decree of the President dated 19.03.20 No. 5969, the submission of the Declaration on the total annual income of individuals for 2019 is extended until August 1, 2020. In addition, for individuals, the deadline for paying property tax and land tax is extended until October 15, 2020.

In accordance with the Decree of the President dated 03.04.20 No. 5978, the collection of a fixed amount of personal income tax is suspended.

According to the Decree of the President dated 27.04.2020 No. 5986, individuals from April 1 to October 1, 2020 are entitled to an interest-free deferred payment of tax on personal income received from rental payments for leasing real estate. It is stipulated that this tax will be paid in equal shares until April 1, 2021.

By the Decree of the President dated 20.07.2020 No. 6029 it is established that from July 1 to December 31, individuals are exempt from paying tax on income received from rental payments. It was also found that benefits to families with children under 14 years of age and benefits to mothers for child care are not included in the total income when calculating personal income tax.