Practical points on VAT and indirect taxes in Uzbekistan under the double tax treaty network

The double tax treaty network that Uzbekistan maintains with over 50 counterpart states does not extend to value added tax or other indirect levies. That structural gap is the single point foreign counsel most frequently underestimate when advising clients on inbound arrangements into Uzbekistan. For a foreign entity supplying services, licensing intellectual property, or participating in a joint venture in Uzbekistan, the treaty framework will protect against double taxation of profits and, in some cases, moderate withholding rates on dividends, interest, and royalties — but it will not resolve whether the Uzbek indirect tax system creates an independent registration or payment obligation. Counsel advising foreign companies on Uzbekistan market entry or ongoing cross-border transactions should treat the indirect tax analysis as a parallel workstream, not a corollary of the treaty review.

Uzbekistan operates a VAT regime under its tax code. The tax applies to the supply of goods and services within the territory of Uzbekistan, with certain supplies from abroad treated as taxable where the place of supply rules locate the transaction in Uzbekistan. For foreign entities without a permanent establishment in Uzbekistan, the critical operative question is whether Uzbek place-of-supply rules bring particular cross-border service arrangements within scope — and, if they do, who bears the obligation. The general position for B2B transactions is that the Uzbek resident counterparty accounts for VAT on a reverse-charge basis. For B2C or certain B2B structures where the foreign entity is the direct supplier to end-users, the position differs and may create a direct registration or payment obligation for the foreign entity.

Indirect taxes beyond VAT also merit attention. Excise duty applies to specified categories of goods, and the customs union membership arrangements that apply under the CIS framework affect tariff treatment on goods crossing the Uzbek border — though Uzbekistan is not an EAEU member, and so the EAEU single customs territory rules do not apply. This distinction is frequently overlooked by counsel whose regional experience is built primarily on EAEU jurisdictions such as Kazakhstan or Russia.

Note: Uzbekistan is not a member of the EAEU. The simplified customs, tariff, and indirect tax co-ordination rules applicable between EAEU member states do not extend to Uzbekistan. A foreign company that has navigated inbound tax structuring for a Kazakhstan market entry cannot assume the same VAT and customs analysis applies to an Uzbekistan transaction. Separate analysis is required in each case.

Several practical patterns arise with regularity in cross-border arrangements into Uzbekistan.

Digital and software services. Where a foreign entity supplies software licences or digital services to Uzbek counterparties, the place-of-supply rules for electronic services are distinct from the general services rules. The Uzbek tax authorities have progressively tightened the position on foreign digital suppliers in recent years, and the reverse-charge mechanism — while the default for B2B — may not fully shelter the foreign supplier depending on the contractual structure and the classification of the service.

Royalties and licensing. Treaty provisions on royalties address withholding tax at source on the gross payment. They do not address whether the outbound royalty from the Uzbek payer is also subject to VAT at the Uzbek end. In practice, royalty payments from an Uzbek entity to a foreign IP owner can attract VAT treatment in addition to withholding, with the Uzbek payer obligated to account for both. Foreign IP owners relying on treaty protection for the withholding element sometimes overlook the indirect tax overlay entirely.

Goods supplied under cross-border contracts. Import VAT and customs duties are assessed at the point of entry. The treaty network has no bearing on these charges. Where a foreign seller retains title to goods during transit or under a consignment structure, questions may arise as to whether the foreign entity has created a taxable presence in Uzbekistan that engages broader VAT obligations. These questions turn on the specific terms of the commercial arrangement and the characterisation applied by the Uzbek tax authorities.

Permanent establishment risk and indirect taxes. Where a foreign entity's activities in Uzbekistan rise to the level of a permanent establishment under the applicable treaty, the indirect tax consequences multiply. A permanent establishment that is treated as a separate tax subject for profit-tax purposes will typically also be within scope for VAT registration and local compliance obligations. The threshold between a preparatory and auxiliary activity and a full PE for treaty purposes is a fact-specific assessment, but once crossed, the indirect tax position should be reviewed in parallel with the corporate tax analysis.

Practical priority for counsel. When instructed on an inbound Uzbekistan matter — whether market entry, a distribution arrangement, a licensing transaction, or a joint venture — the indirect tax position should be assessed at the structuring stage. Retrospective correction of an indirect tax position in Uzbekistan is more cumbersome than initial compliance, and the Uzbek tax authorities have shown increased administrative capacity in identifying and pursuing foreign entities with indirect tax obligations that have not been addressed.

For counsel advising foreign companies on Uzbekistan arrangements, we work with a Contributing Regional Analyst with direct Uzbekistan law experience. Initial consultations are available to discuss the indirect tax position alongside the broader inbound structuring analysis.

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• Market entry and company formation in Uzbekistan (/jurisdictions/uzbekistan/company-formation/)
• Tax structuring for foreign investors in Uzbekistan (/jurisdictions/uzbekistan/tax/)
• Cross-border disputes and enforcement in Uzbekistan (/jurisdictions/uzbekistan/disputes/)

Vetrov & Partners is a boutique law firm established in 2009, recognised by Pravo-300 for eight consecutive years and listed as a trusted adviser by the German Consulate General in Novosibirsk. The firm advises foreign companies and creditors on Russian and CIS-related legal matters, working with a network of regional analysts and local counsel across Central Asia and the former Soviet states.

For Uzbekistan tax and inbound structuring matters, the firm collaborates with Nodira Yusupova, Contributing Regional Analyst, whose practice focuses on foreign investment and market entry under Uzbekistan law.

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/