How to Invest in Uzbekistan: Setting Up a Business
Understand the full journey of establishing and managing a foreign-owned business in Uzbekistan, from legalities to operations.
Uzbekistan has been transforming its economy to be more open and welcoming to foreign capital. Since 2017, this shift aims to foster a market-oriented environment, increasing its attractiveness for investors. The government is dedicated to attracting foreign investment as a key driver for economic growth.
Legal Framework for Foreign Investment
Uzbekistan’s commitment to foreign investment is underpinned by a robust legal framework, primarily articulated in the Law on Investments and Investment Activities, effective January 2020. This comprehensive law consolidates previous acts, establishing a clear regime for investment protection. It ensures national treatment, giving foreign investors the same protections as local investors.
The law guarantees against nationalization or requisition of investments, except in extraordinary circumstances with compensation. The Ministry of Investment, Industry and Trade (MIIT) is the authorized state body. It implements investment policy, attracts foreign investments, and supports investors through a “one-stop shop” service. This streamlines interactions and provides assistance.
Choosing an Investment Vehicle
Foreign investors can select from various legal forms to establish their business presence, each with distinct characteristics. The Limited Liability Company (LLC) is a popular choice due to its flexibility and limited liability for its members; their obligations are confined to their contributions. An LLC requires at least one shareholder and director. Contributions usually need to be paid within one year of registration. It suits various commercial activities and allows for expansion.
The Joint Stock Company (JSC) is chosen for larger enterprises or public share issuance. A JSC requires at least one shareholder, who can be a non-resident, and a significantly higher minimum share capital, potentially around $400,000, deposited within one year. JSCs have a more complex structure, often involving a board of directors and a supervisory board.
For companies not immediately engaging in income-generating activities, a Branch or Representative Office can serve as an initial entry point. A Representative Office generally focuses on promotional activities and does not conduct commercial operations. A Branch Office may engage in commercial activities if registered as a permanent establishment for tax purposes.
Registering a Business Entity
Registering a business entity in Uzbekistan involves several steps, often facilitated through government services. Registration can be initiated online or through Public Services Centers. A preliminary step is choosing and reserving a company name, which requires approval.
After name reservation, foundational documents like the constituent agreement and company charter must be prepared, often requiring notarization. These documents outline the company’s structure and operations. Following submission and approval, the entity undergoes state registration, formally establishing its legal existence.
The business must then complete tax registration, obtaining a taxpayer identification number and fulfilling other fiscal requirements. Obtaining a company seal and opening a corporate bank account are also essential. Banks may require a director’s physical presence for account opening. Additional licenses or permits may be required depending on the business nature. The entire process typically takes 4 to 6 weeks, varying by business complexity.
Navigating Investment Regulations
After establishing a business entity, investors must navigate Uzbekistan’s regulatory environment, including currency exchange, labor laws, and tax obligations. Uzbekistan has liberalized currency regulations, guaranteeing free transfer of funds, including profit repatriation, in foreign currencies, provided all taxes are met. Investors can convert local currency to foreign currency and transfer profits without undue restrictions. The Central Bank’s foreign exchange policy is market-based, providing stability and flexibility.
Labor laws are primarily governed by the Labor Code of Uzbekistan, mandating written employment contracts specifying job position, wages, and working conditions. The standard workweek is 40 hours, spread over five days, with provisions for overtime compensation. Employers apply for work permits for foreign nationals, valid for one year and renewable. Employers also contribute to social security, with a combined employer contribution rate around 12.10%.
Uzbekistan levies several key taxes on businesses. The standard corporate income tax (CIT) rate is 15%, though foreign companies might pay 20% on income sourced from Uzbekistan. Corporate tax and Value Added Tax (VAT) rates are frozen until January 1, 2028.
The standard VAT rate is 12%, applied to goods and services turnover, with mandatory registration for entities exceeding UZS 1 billion (approximately $89,000) in annual turnover. Property tax rates vary from 0.31% to 1.5% of the property’s value. Beyond these, certain sectors may require specific licenses or permits.