Features of regulation of production facilities’ use

  Problems related to property law have become in recent years probably the most pressing issues for our compatriots, as well as foreign investors.

These cover also the procedure for legal regulation of the use of production facilities by entrepreneurs.

Practice has it that owners of non-residential sites often do not attach much importance to specifics peculiarities of regulating the rights of the owner in the Republic of Uzbekistan, which results in serious legal consequences.

   This issue is dealt with by the following Resolutions of the President of the Republic of Uzbekistan:

  • № ПП-2796 dated February 23, 2017 «On Measures on Further Stimulation of the use of production facilities by entrepreneurs»;
  • № ПП-3541 dated February 19, 2018 «On Additional Measures to strengthen control over the rational, targeted and efficient use of unused production facilities by the owners»
  • № ПП-3928 dated September 04, 2018 «On Additional Measures on raising the efficiency of the use of production facilities».

The aforementioned Resolutions had been complemented with the following regulations for the period from July 6, 2017 till December 18, 2018:

– by Decree of the President of the Republic of Uzbekistan № УП-5111dated July 6, 2017;

– by Decree of the President of the Republic of Uzbekistan № УП-5204 dated October 10, 2017;

– by Resolution of the President of the Republic of Uzbekistan № ПП-3541 dated February 2, 2018;

– by Decree of the President of the Republic of Uzbekistan № УП-5483 dated July 18, 2018;

– by Resolution of the President of the Republic of Uzbekistan № ПП-3928 dated September 4, 2018;

– by Resolution of the President of the Republic of Uzbekistan № ПП-4064 dated December 12, 2018.

Thus, there is in force in Uzbekistan today a «mechanism on accelerated involvement of previously privatized objects (hereinafter referred to as «unused objects)», the essence of which is as follows:

  1. Interdepartmental commissions (in the Republic of Karakalpakstan, provinces and the city of Tashkent) and working groups (in districts (towns)) were established, which:

– identify unused objects on the relevant territory with the compilation of their list based on the results of ongoing monitoring;

– jointly with the owners, they develop «road maps» and investment projects to restore the activity of «unused facilities», organize production and create new jobs, and also approve them;

– draw up conclusions on the application of “measures of influence” stipulated for by the legislation in regard to owners of unused objects who have not submitted proposals on the restoration of their activities or do not implement the approved «road maps».

  1. “Unused objects” include:

– previously privatized buildings, non-residential facilities and unfinished construction of real estate objects, which include real estate sites transferred by the state to private ownership (including those handed over to the Registered capital, for sale and/or disposal by such other means), irrespective of subsequent change of owners;

– idling sites and unused production areas (those recognized as such objects where production areas and non-residential premises, more than 50 percent of the total area of which (within the contour of one building or non-residential facility) were not involved in the production of goods (works, services) at the time of stock-taking (excluding enterprises engaged in activities of seasonal nature);

– incomplete construction projects, which include real estate objects, the construction of which was not completed within the regulatory period established by the design and estimate documentation; and, on condition of absence of a specified regulatory construction period – within 24 months from the start of construction.

  1.  A procedure has been established in compliance with which:

a) unused objects owned by the state shall be subject for sale within the established procedure, transfer on the basis of public-private partnerships, including transfer of the lease;

b) the following measures shall be applied to private owners of unused objects:

– to legal entities – transition from a simplified taxation procedure to payment of taxes and such other compulsory payments within the generally established order;

– to legal entities and physical persons – payment of double property and land tax; after 6 months – five times, after 12 months and thereafter – ten times the amount of established rates;

– suspension of benefits and preferences for taxes provided for by legislation.

  The analysis of introduced changes that had been made, as mentioned above from July 6, 2017 till December 18, 2018, concludes that, basically, changes underwent the provisions related to the concept of “unused objects” and measures of influence, applied to the owners of such objects.

At the time of preparation of this publication the Cabinet of Ministers of the Republic of Uzbekistan issued a new Resolution No. 666 dated August 08, 2019 «On measures on Raising the Efficiency of use of production facilities», according to which the following are referred to as “idling facilities” and “unused production facilities”:

– sites with unfinished construction within the established deadlines by the time of conducting stock-taking;

– empty buildings, non-residential structrues, as well as sites the unused production areas of which make up more than 50% of their total area (within the contour of a single building or non-residential facility), not involved in the production of goods, works or services. Exception is made for sites used for seasonal activities.

 According to the aforementioned Resolution, measures of influence (application of increased property tax and land tax rates) to owners of unused objects shall be applied by state tax authorities in the following order:

  • Up to 3 months of «unused object» – double the established rate;
  • After 3 months – 5 times the established rate;
  • After 6 months – 10 times the established rate;
  • After 12 months each subsequent 12 months – double the established rate of the last increased rate.

In addition, the benefits and preferences for property tax and land tax previously granted under the law in relation to “unused objects” shall be suspended.

 

The Resolution shall enter into force as of November 14, 2019.