Uzbekistan VAT Reform for Small Businesses

After reviewing the proposed amendments to the VAT rules and regulations, the President of Uzbekistan signed a decree introducing a new package of tax reforms for small businesses. These measures are designed to support the growth of over 600,000 small businesses by creating a more transparent and efficient tax environment. They are projected to generate an additional UZS 2 trillion (approximately USD 167 million) in annual budget revenue by broadening the tax base through improved compliance and visibility

New VAT Rules for Small Businesses

One of the key issues addressed with proposed changes is the threshold for switching from a simplified tax regime to the general regime, which is currently set at UZS 1 billion (around USD 78,000) and was last updated in 2019. Given that prices and business turnover have increased significantly since then, this low threshold is seen as encouraging harmful practices such as underreporting income, artificially splitting businesses, or avoiding the issuance of receipts. 

The proposed measures seek to raise the threshold to UZS 5 billion (approximately USD 390,000) effective June 1, 2025. This would allow more businesses to remain under the simplified regime for longer. Additionally, the proposed measures target specific sectors, including catering, trade, and services, by introducing an optional simplified VAT system where businesses could choose to pay a 6% VAT rate and be exempt from income tax, or continue under the standard tax regime.

Furthermore, the tax reform aims to improve VAT administration by implementing automatic VAT refunds for low-risk taxable persons, removing the suspension of VAT registration certificates, rethinking mandatory VAT triggers on imports, and automating business banking processes. Notably, in 2025, 77% of taxable persons reported VAT with errors, highlighting the urgency of these reforms

Also, additional relief is planned for hospitality and retail sectors, including simplified rules for alcohol and tobacco sales in cash transactions and easing VAT refund conditions related to cashless payment requirements.

Conclusion

Under the signed decree, most of the new rules come into effect on June 1, 2026. However, several measures will come into effect on January 1, 2027, January 1, 2028, and January 1, 2030. Therefore, taxable persons should carefully review the Presidential decree to understand how the reformed VAT rules apply to their specific circumstances and plan accordingly.

Source: President of the Republic of Uzbekistan, Decree of the President of the Republic of Uzbekistan