IFormation of a permanent establishment
According to Article 36 of the Tax Code of the Republic of Uzbekistan (‘Tax Code’), the full or partial conduct of business activities by a foreign entity in the territory of the Republic of Uzbekistan (‘RUz’) leads to the formation of a permanent establishment (‘PE’). For this purpose, a foreign company needs to register PE in RUz.
It should be noted that the PE status does not imply the existence of the organisational-legal form and legal presence of the foreign company in RUz. Nevertheless, the status of the PE gives such basic opportunities as conducting business activities (except for licensed activities), hiring employees, opening bank accounts, having a legal address and etc.

Criteria for the PE formation
The Uzbek Tax Code lists specific activities/criteria that fall under the concept of a PE, including any place of management, place of production, place used as a retail outlet, oil or gas wells, places of extraction of natural resources, construction sites, etc.
Furthermore, the PE may also include (1) the provision of services (e.g. consulting services) in Uzbekistan and (2) a construction site, installation or assembly facility, or related supervisory (control) activities that are performed for a period of 183 days or more in any consecutive 12-month period (double tax treaties concluded by the Republic of Uzbekistan and other countries may contain extended time periods for the establishment of the PE). 
It should be borne in mind that some activities, including those of a solely preparatory or auxiliary nature, do not constitute the formation of the PE.

The period of the PE’s formation
The date of commencement of the foreign company’s activities in RUz can be, among others: (1) the date of conclusion of a contract (e.g., for services, purchase of goods/services) (2) the date of conclusion of the first labour contract for the purpose of carrying out activities in RUz; (3) date of arrival of a non-resident, hiring of an employee or other personnel by a foreign company to fulfil the terms of the contract.

Place of management
Since one of the criteria for the occurrence of a PE is ‘any place of management’, the following factors may influence its determination:

• presence of the director of the foreign organisation in Uzbekistan;
• making management decisions in Uzbekistan, e.g. approving transactions carried out by the foreign entity, either by formally signing the relevant documents or by transmitting the approval for further processing by the foreign entity;
• storage of documents related to the foreign organisation’s activities in Uzbekistan;
• other similar factors.

Submission of application for PE registration
The registration procedure of a PE is carried out online by submitting an application containing details of the foreign company and the PE’s activity through the electronic system of the Tax Committee of RUz (link to PE registration)
In addition to general information about the PE itself (name, address, type of activity, information about the head), the system also requests the following:

• registration certificate of the foreign company, translated into Uzbek or Russian and notarised,
• power of attorney for the authorised representative (Director of the PE), including his/her passport details,
• details of the contract to be concluded leading to the formation of the PE, namely the TIN of the counterparty, the terms and amount of the contract.

It should be noted that if the authorised representative (‘Director of the PE’) is a citizen of a foreign country, he/she should obtain a Personal Identification Number of Physical Person (PINFL) of RUz at the State Services Centre.
The application review and approval process takes 2-3 days, and the relevant certificate of tax registration of the PE is sent electronically to the mailing address of the director of the PE.

VAT payer
A PE in Uzbekistan is also subject to the payment of VAT, thus in addition to the separate registration of the PE, it is also required to be registered as a VAT payer. The registration procedure itself is straightforward and is carried out on the website of the Tax Committee of RUz through the personal cabinet. The certificate of registration as a VAT payer is issued automatically after the tax authorities verify the actual location of the PE at the registered address.

Taxation
The PE is vested with all the rights and obligations of the RUz taxpayer. In case of establishment of PE, the foreign company will generally have to pay a number of taxes related to the PE’s activities, including 15% profit tax, 10% net profit tax (as net profit is equivalent to dividends), as well as 12% VAT and 12% social tax.

Disclaimer!
The information provided on our website is of a general nature only and is intended to familiarize you with the matters of your interest.
The effect and application of laws may vary depending on the specifics of your particular situation.
Due to the changing nature of laws, regulations and norms, you should not rely, for legal advice, on statements or representations made within the Website. If you need legal advice upon which you intend to rely during your legal affairs, please consult us.
 
Faringiz Karimova