Tax Guide for US Expats Living and Working in Uzbekistan
Who Is Liable For Income Taxes in Uzbekistan
Individuals are subject to tax in Uzbekistan based on their tax residency status. A resident is defined as an individual who is physically present in Uzbekistan for 183 days or more in any period up to 12 months ending in a calendar year. Individuals not meeting this test are considered to be nonresidents. Residents are taxed on their worldwide income. Non-residents are taxed only on their Uzbek-source income.
Income subject to tax. In general, all income and benefits-in-kind are taxable in Uzbekistan, unless they are specifically exempt. Income that is specifically exempt from tax includes alimony, severance pay (up to a maximum amount) and state pension income. The taxation of various types of income is described below.
Employment income. Employment income includes all cash and non-cash remuneration, allowances and benefits arising from employment.
Self-employment and business income. In general, self-employment and business income is included in an individual’s gross income and taxed at the general individual income tax rates.
However, a special tax regime applies to private entrepreneurs, who may be subject to tax at fixed rates, which vary depending on the activities of the entrepreneurs and the location of the activities. The fixed rates vary from 1 minimum wage (approximately US$30) to 13 minimum wages (approximately US$385) per month.
Directors’ fees. Directors’ fees are generally included in gross income and are subject to individual income tax at the general individual income tax rates.
Investment income. Dividends and interest income received from Uzbek companies are subject to withholding tax at a rate of 10%. Royalties and other investment income are generally taxable at the general individual income tax rates. However, interest income of individuals received from certificates of deposits, bank deposits and government securities is exempt from tax.
Taxation of employer-provided stock options. The Uzbek law does not provide any specific measures regarding the taxation of stock options.
Capital gains and losses. Capital gains are normally subject to tax at the general individual income tax rates. Capital gains derived from the sale of private nonbusiness property are exempt from tax. Capital losses are not deductible.
Deductions. No significant tax deductions are allowed for individuals.
Rates. The current monthly individual income tax rates are set forth in the table below. As of 1 April 2011, one minimum wage (MW) equals UZS 49,735 per month (approximately US$30).
Relief for losses. Losses may not be carried forward or back by individuals.
B. Other taxes
Wealth tax and net worth tax. Uzbekistan does not impose a wealth tax or net worth tax.
Property tax. Property tax is imposed on buildings and apartments of individuals. The rates vary from 0.75% to 1.13% of the cost of the property.
Inheritance, estate and gift taxes. Inheritances and gifts received from other individuals are not taxable. Gifts from an employer valued above 6 MWs per year are taxable at the general individual income tax rates.
Land tax. An individual granted permanent possession of a land plot may be subject to land tax at a fixed rate, depending on the location of the land. For example, in the city of Tashkent, the rates vary from UZS 77.4 to UZS 336.5 per square meter, depending on the location of the land plot.
Tax on consumption of gasoline, diesel fuel and liquid gas. The tax rates on the consumption of gasoline, diesel fuel and liquid or compressed gas by individuals are UZS 175 per liter of gasoline and diesel fuel, UZS 140 per liter of liquid gas, and UZS 175 per cubic meter of compressed gas. The tax is added to the retail price of fuel and collected at fuel stations.
C. Social security
Uzbek citizens (as well as foreign citizens permanently living in Uzbekistan) are subject to a pension fund contribution at a rate of 4.5% of their salaries. Employers make mandatory monthly contributions to individual accumulative pension accounts of citizens at a rate of 1% of salaries of employees, and the amounts of such contributions are subtracted from accrued individual income tax. Employers are subject to a unified social fund contribution on the payroll of employees at a rate of 25%.
E. Double tax relief and tax treaties
Uzbekistan has entered into double tax treaties with the following countries.
Austria
Indonesia
Poland
Azerbaijan
Iran
Romania
Bahrain
Israel
Russian Federation
Belarus
Italy
Belgium
Kazakhstan
Saudi Arabia
Bulgaria
Korea (South)
Singapore
Canada
Kuwait
Slovak
China
Kyrgyzstan Republic
Czech Republic
Latvia
Switzerland
Finland
Lithuania
Thailand
France
Luxembourg
Turkey
Georgia
Malaysia
Turkmenistan
Germany
Moldova
Ukraine
Greece
Netherlands
United Kingdom
Hungary
Oman
Vietnam
India
Pakistan
Uzbekistan also honors the double tax treaty between the former USSR and Japan.
To obtain treaty benefits, a written application for treaty relief must be submitted to the Uzbekistan tax authorities on specified forms. The application must be accompanied by certain documents including a certificate from the applicant’s home country tax authorities stating that the applicant is resident in that country.
To learn more about the history, culture, economy and other information about Ukbekistan
We have been preparing US income tax returns for US Citizens and permanent residents living in Uzbekistan for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Uzbekistan and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Uzbekistan.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a consultation by phone, skype or email