On October 6, 2021, the President of Uzbekistan signed Decree No. УП-6319 "[o]n measures for further stimulation of geological exploration and improvement of taxation in respect of subsoil users" (the "Decree").
The declared purpose of the Decree is to provide for additional steps to (i) accelerate industrial development of mineral deposits attracting foreign investments, (ii) stimulate geological exploration using modern methods and technologies, and (iii) further develop taxation in respect of subsoil users.
Starting from 1 January 2022:
- A special bidding procedure will be introduced in respect of
subsoil use rights for geological exploration or extraction on
previously explored subsoil plots of hydrocarbons, precious,
nonferrous, rare and radioactive metals, as well as other types of
mineral resources with commercial potential, encompassing the
- Sales amount will be considered as a bonus sum for the right to use a subsoil plot, while the commercial discovery bonus and subscription bonus currently provided for by legislation will be cancelled; and
- Bidders or organizers of bidding will have the right to propose an increased tax rates in respect of certain types of taxes for extraction of mineral resources.
- Land plots allocated for exploration and/or survey works will not be subjected to land tax; and
- An annual license fee will be introduced for use of subsoil for geological exploration, to be calculated based on the allocated area and types of mineral resources.
Starting from 1 October 2021:
- Export of natural gas will be subject to the excise tax rate set at zero percent; and
- Import of natural gas to the territory of Uzbekistan by legal entities will be exempt from customs duties.
The Decree exempts legal entities involved in geological exploration, as well as their contractors and subcontracts, from the payment of:
- Periodic customs duties for temporary import of special equipment required to conduct geological exploration, for a period of search, geological exploration, and development of deposits; and
- Customs duties for importing of equipment, materials and special equipment not produced in the Republic of Uzbekistan and required to conduct search, geological exploration, and development of deposits.
The Decree further provides that the incentives (on customs duties) set forth by paragraph 3 of clause 4 of the Presidential Decree No.УП-2598 dated 28 April 2000 originally designed to cover foreign companies shall start to apply to domestic enterprises engaged in search and exploration of hydrocarbon deposits in Uzbekistan by exempting them from the customs payments (except for value-added tax and customs clearance fees) when importing equipment, materials and technical resources, and services required for conducting prospecting, exploration, and other related works.
The Decree instructs the Ministry of Finance, State Tax Committee, State Committee on Geology and Mineral Resources to submit to the Cabinet of Ministers by 1 December 2021 a draft law "[o]n introducing amendments and additions to the Tax Code of the Republic of Uzbekistan" providing for the following changes from 1 January 2022:
- Reductions in subsoil tax rates for (i) oil and natural gas – to 10%, (ii) gold and copper - to 7%, (iii) tungsten - to 2.7%, and (iv) uranium - to 8%;
- Introduction of rental income tax in respect of subsoil users engaged in extraction of oil, natural gas, gas condensate, precious metals, nonferrous metals, and radioactive metals on new deposits;
- Exemption from corporate property tax in respect of new oil and gas wells in the first two years from their commissioning, and for the following three years – application of a reduced (by 50%) corporate property tax;
- Companies with foreign investments paying rental income tax will be entitled to perform their tax accounting in USD; and
- The tax rates for subsoil use in respect of non-metallic minerals to be unified.
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