So you have a business idea for booming Uzbekistan (read this) that requires you to start a company locally? You might think it’s very Soviet, complicated, expensive, and that legal help is required. Some lawyers won’t hesitate to overcharge you.
Guess what, it’s really not that complicated.
Uzbekistan is one of the easiest places in the world to start a company
It ranks 8th in the world when it comes to starting a business in the “Ease of Doing Business 2019” report by the World Bank.
Non-resident foreigners should open a IP OOO, which is a special LLC for them. The main difference is that the starting capital must be a minimum of 400 million Uzbek Soms, which is about $42,000 (double check as the Uzbek Som fluctuates a lot).
It’s very easy. You need:
– your passport copy
– the shareholders agreement & the company charter. This is fairly standard, any local lawyer can organize this. You can hire an interpreter and go see a local lawyer, it’ll be much more affordable than going to the lawyers that offer service in English.
– about US50 for various fees
– a registered address (you can use your accountant’s)
You can do it either:
- Online at https://fo.birdarcha.uz/s/ru_landing
- In person at an office called “Одно окно“ (one window). There are multiple such offices across Tashkent. I went to the one near the Minor metro station on Osiyo street 4A and the service was quick & friendly. Once you hand in the documents and proof of fee payment, your company gets registered within……….30 minutes! If you don’t speak Russian, just hire an interpreter; it’ll be cheaper than paying a lawyer to go with you.
You can then head out to a little booth outside and get a company stamp done for about $1-6 depending on how rich you feel that day. You’ll need to wait overnight for your company to be fully loaded in the system, and the next day you can head out to the bank, with your stamp & registration documents, to open the company account. You then have one year to deposit the 400 million Uzbek Som.
Boom. You, as a foreigner, are now operating a company in Uzbekistan. Easy.
Can I get to live in Uzbekistan now that I have a company in Uzbekistan?
No. To get a residence permit, you can go through the same process, but the starting capital must be about 8500 minimum living wages which is about $200,000. That’ll give you a three year residence permit to operate your business. Read this article for more information.
Alternatively you can run your business from a distance, popping into Uzbekistan on a regular basis to see how things are going.
What about the taxes and operating costs of a company?
This is where is becomes more complicated. All accountants I spoke to were in panicky modes as the laws are being completely overhauled. They have changed recently, are changing, and will change again soon. Do understand that there is regulatory risk related to the current tax system.
Overall, a few non-exhaustive points, which you must verify before making a move as this is a make or break topic:
- Flat corporate tax rate of 12%.
- Dividend withholding of 10% for non residents.
- A full time accountant will probably set you back $500-$600 per month. But you can also hire one part time depending on your workload. You can find people from USD50 per month for low workloads.
- You’ll need to pay your director a minimum monthly salary of about 600,000 Soms (+-$65) & the associated taxes and socials contributions.
- There is a simplified tax regime for companies that have less than 1 billion Soms of turnover. ($105,000). In such cases you get charged a 4% tax on turnover.
- A VAT rate that was recently cut to 15%. A company under the simplified tax regime does not have to register for VAT. But beware, the VAT regime is very uncertain and keeps changing.
- Capital gains are typically taxable at the corporate tax rate.
What is a company in Uzbekistan good for?
Though the tax regime is attractive, do not go to Uzbekistan to start a company to be used as an offshore entity. It might look fine on paper, but in reality your main stumbling block will be banking, as the banking system is still not quite there yet. Wiring money in & out of the country, though completely legal & possible, is bureaucratic, and e-banking is barely existent.
An Uzbek company is currently just good for doing business in Uzbekistan. That said, things will change as the government liberalizes the economy and the banking sector moves forward.
*a consulting session is a discussion about your portfolio and objectives. It does not constitute legal, financial, tax or investment advice.