Regulatory update: VAT and indirect taxes in Uzbekistan under the double tax treaty network

Uzbekistan's VAT and indirect tax framework has undergone meaningful revision in recent years, and for foreign companies operating in or supplying into the country, the interaction between domestic tax legislation and Uzbekistan's expanding network of double tax treaties now materially affects structuring decisions. As Uzbekistan deepens its integration into regional trade flows — including substantial cross-border transactions with Russia and other CIS members — the question of how indirect taxes are allocated, exempted, or withheld under the applicable treaty network has moved from a technical footnote to a front-line compliance concern for in-house counsel and their regional advisers.

Uzbekistan's general VAT rate applies broadly to the supply of goods and services within the country, and foreign entities providing services to Uzbek recipients have, in a number of scenarios, become subject to VAT obligations even in the absence of a permanent establishment. This shift — sometimes described as a "VAT on electronic and digital services" expansion — brings Uzbekistan's approach closer to the OECD-aligned model familiar from European and CIS jurisdictions that adopted similar rules in earlier reform cycles.

The practical implication for foreign suppliers is significant. Where a non-resident entity supplies digital services, software licences, or other qualifying intangible services to Uzbek business clients or consumers, the Uzbek party may be required to self-assess and remit VAT as a tax agent — or, in some structures, the non-resident may be required to register for VAT purposes in Uzbekistan directly. The precise trigger depends on the nature of the supply, the residency status of the recipient, and — critically — the terms of the applicable double tax treaty.

Here the treaty network becomes directly relevant. Uzbekistan has concluded double tax agreements with a substantial number of jurisdictions, including Russia, Germany, France, South Korea, China, and the United Kingdom, among others. These treaties primarily address income taxes rather than VAT, but their characterisation provisions — particularly the distinction between business profits, royalties, and services — influence how the underlying transaction is classified under Uzbek domestic tax law. A payment that a treaty characterises as a royalty may be subject to withholding tax at a reduced treaty rate; the same payment, if recharacterised under domestic rules, could attract VAT obligations at the full standard rate through the tax-agent mechanism.

This interaction between withholding tax treatment under the treaty and VAT obligations under domestic law is not always symmetrical. Foreign companies entering Uzbekistan for the first time — or reviewing existing supply arrangements — need to assess both layers simultaneously rather than assuming that treaty protection on income taxes translates automatically into VAT relief.

"The double tax treaty network provides meaningful protection for cross-border income flows into Uzbekistan, but it was designed for direct taxes. Foreign suppliers treating a treaty exemption as a complete shield against Uzbek indirect tax exposure are taking a position that the tax administration is increasingly inclined to contest." — Nodira Yusupova, Contributing Regional Analyst — Uzbekistan, Vetrov & Partners

[CTA: If you are reviewing the Uzbek tax position of a cross-border supply arrangement or digital services structure, make an enquiry: info@vetrovpartners.com | WhatsApp/Telegram: +7 (983) 510-38-76]

The entities facing the sharpest exposure under the current framework fall broadly into three categories, though the analysis is fact-specific and circuit-level guidance from Uzbek tax authorities continues to develop.

The first category comprises non-resident service providers — software companies, consulting practices, data-platform operators, and financial data vendors — supplying intangible or digital services to Uzbek corporate clients. For this group, the tax-agent mechanism is the primary risk: the Uzbek client withholds and remits VAT, which is manageable operationally but directly affects the economics of the arrangement if the contract price was agreed on a gross basis without accounting for the Uzbek tax liability.

The second category is companies with a holding or licensing structure that routes intellectual property through a treaty-favoured jurisdiction. The Uzbek tax administration has indicated an interest in substance requirements: a holding company in a treaty partner jurisdiction that lacks genuine economic activity may find that treaty benefits are denied, exposing both the licence payments and any associated service fees to higher withholding tax rates and potential VAT reclassification.

The third category — and one frequently overlooked by foreign law firms advising on Uzbek market entry — is the Russian or CIS-based trading company with a cross-border supply chain touching Uzbekistan. The Russia–Uzbekistan double tax treaty contains provisions that govern withholding on dividends, interest, and royalties, but does not eliminate Uzbek VAT on services rendered by a Russian entity to an Uzbek client. In practice, cross-border Uzbekistan–Russia supply arrangements are often structured with incomplete regard for the Uzbek indirect tax position, creating a compliance gap that surfaces during audits or when the Uzbek counterparty seeks a VAT credit for input tax it has remitted as agent.

The [Tax practice for Uzbekistan](/jurisdictions/uzbekistan/tax/) page provides an overview of the firm's advisory work on Uzbek inbound tax matters. For entities assessing entry into the market more broadly, the [Market Entry and Company Formation](/jurisdictions/uzbekistan/company-formation/) and [Corporate and Joint Ventures](/jurisdictions/uzbekistan/corporate-jv/) pages address the structural considerations that run in parallel with the tax analysis.

The starting point for any foreign company with existing or anticipated commercial activity in Uzbekistan is a VAT and withholding tax mapping exercise: an analysis of each cross-border payment flow to determine whether it is (a) subject to Uzbek VAT, (b) subject to withholding tax, or (c) potentially subject to both, and at what rate under the applicable treaty.

Several practical steps follow from that mapping. First, contract structures should be reviewed to ensure that the allocation of Uzbek tax risk is explicit — whether the contract price is gross or net of Uzbek withholding and VAT obligations is a material commercial term, not merely a tax administration detail. Second, companies relying on treaty benefits should conduct a substance review of the treaty-resident entity: if the entity would not withstand scrutiny from the Uzbek tax administration under a principal purpose test or an anti-avoidance provision, the treaty benefit is at risk. Third, where VAT registration or tax-agent compliance is required, the procedural steps in Uzbekistan are distinct from those in Russia and from those in EAEU member states — Uzbekistan is not a member of the Eurasian Economic Union, and the EAEU indirect tax protocols that govern Russian cross-border VAT allocation do not apply.

Several questions remain open in Uzbek practice. The precise scope of digital services subject to the VAT expansion is subject to ongoing administrative interpretation. The conditions under which a non-resident supplier must register directly for Uzbek VAT — as opposed to relying on the tax-agent mechanism — are not yet settled by published guidance that is consistent across all sectors. Treaty characterisation disputes, particularly between royalty and service-fee classification, have not yet generated a body of Uzbek judicial decisions extensive enough to provide reliable predictability. Foreign companies and their advisers should treat these areas as requiring active monitoring rather than one-time compliance.

For companies already structured through a Russian entity or holding company that interacts commercially with Uzbekistan, the cross-border dimension adds a further layer. The Russia–Uzbekistan tax treaty is among the more frequently invoked in practice, and the interaction between its provisions and Uzbekistan's domestic VAT framework deserves careful attention whenever a new product line, licensing arrangement, or intercompany service agreement is put in place. Counsel experienced in both jurisdictions — rather than purely in Uzbek domestic law or purely in Russian cross-border tax — is better placed to identify the full scope of the exposure.

For broader regional context, the firm's pages on [Kazakhstan Tax](/jurisdictions/kazakhstan/tax/), [Georgia Tax](/jurisdictions/georgia/tax/), and [Armenia Tax](/jurisdictions/armenia/tax/) address analogous questions in neighbouring jurisdictions where double tax treaty networks interact with domestic indirect tax rules in structurally similar ways.

[CTA: To request a structured review of your Uzbekistan indirect tax position, make an enquiry: info@vetrovpartners.com | WhatsApp/Telegram: +7 (983) 510-38-76]

• [Inbound investment and company formation in Uzbekistan](/jurisdictions/uzbekistan/company-formation/)
• [Corporate structuring and joint ventures in Uzbekistan](/jurisdictions/uzbekistan/corporate-jv/)
• [Regulatory and licensing requirements for foreign companies in Uzbekistan](/jurisdictions/uzbekistan/regulatory-licensing/)

Q: What specifically changed in Uzbekistan's VAT framework for foreign companies, and when did the change take effect?

A: Uzbekistan expanded the scope of its VAT rules to capture non-resident suppliers of digital and electronic services to Uzbek recipients — a reform that aligns with approaches adopted across a number of CIS and OECD-influenced jurisdictions. The change introduced a tax-agent mechanism under which the Uzbek recipient remits VAT on behalf of the foreign supplier, and in certain cases created a direct VAT registration obligation for non-residents. The reform did not take effect as a single legislative event; it developed through a sequence of legislative amendments and administrative clarifications. Foreign companies supplying software, licences, data services, consulting, or other intangible services should treat Uzbek VAT exposure as a live compliance question regardless of when their supply arrangement was originally structured.

Q: Which foreign companies are most directly affected by the interaction between the Uzbek double tax treaty network and VAT obligations?

A: The clearest exposure falls on non-resident service providers supplying digital or intangible services to Uzbek corporate or consumer recipients — particularly where those providers had assumed that a double tax treaty exemption on income tax also eliminated Uzbek indirect tax liability. That assumption is incorrect: the treaty network governs withholding on income flows (dividends, interest, royalties), not VAT on the supply of services. Companies using holding or licensing structures routed through a treaty-favoured jurisdiction face additional risk if the Uzbek tax administration applies a substance or principal-purpose analysis. Russian or CIS-based entities with cross-border supply chains into Uzbekistan are also frequently affected, as the Russia–Uzbekistan treaty does not override Uzbek VAT on services rendered by a Russian entity.

Q: What immediate steps should in-house counsel take to assess their company's Uzbekistan indirect tax position?

A: The practical starting point is a transaction-by-transaction mapping of cross-border payment flows to determine whether each is subject to Uzbek VAT, Uzbek withholding tax, or both. This mapping should be conducted against both the applicable double tax treaty and current Uzbek domestic tax legislation — the two analyses run in parallel and do not produce the same answer. Contract terms should be reviewed to confirm how Uzbek tax obligations are allocated between the parties. Any entity relying on treaty benefits should assess whether the treaty-resident entity meets the substance requirements likely to be applied by Uzbek tax authorities. Given that several aspects of Uzbek VAT practice for non-residents remain subject to ongoing administrative development, establishing a monitoring arrangement with counsel familiar with both Uzbek and cross-border CIS tax practice is advisable. Make an enquiry at info@vetrovpartners.com to discuss the specifics of your situation.

Vetrov & Partners is a Russian boutique law firm established in 2009, recognised by Pravo-300 for eight consecutive years. The firm advises foreign companies and institutional investors on cross-border matters involving Russia and the broader CIS region, including inbound tax structuring, treaty analysis, and regulatory compliance.

The firm's regional advisory network extends to Uzbekistan and other CIS jurisdictions through contributing regional analysts and trusted local counsel. For matters governed by Uzbek law, the firm collaborates with qualified Uzbek practitioners to ensure that advice on cross-border structures reflects both the Russian and the Uzbek regulatory position accurately.

Enquiries: info@vetrovpartners.com | WhatsApp / Telegram: +7 (983) 510-38-76 | t.me/vitvetcom

This publication is provided for informational purposes only and does not constitute legal advice under Russian or any other applicable law. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Vetrov & Partners is a Russian-qualified law firm. For matters governed by foreign law or requiring local admission in another jurisdiction, we collaborate with trusted counsel in the relevant jurisdiction. For advice regarding your particular situation, please contact info@vetrovpartners.com.

— Nodira Yusupova Contributing Regional Analyst — Uzbekistan, Vetrov & Partners vetrovpartners.com/contributions/