The amendments to Uzbekistan’s legislation, which introduced the concept of “Abuse of Law” into the Tax Code, are currently causing many questions and ambiguous interpretations.
In accordance with Article 14 of the Tax Code of Uzbekistan: if a taxpayer performs operations or a series of operations, the sole or primary purpose of which is to obtain an unjustified tax benefit in the form of non-payment or reduction of taxes owed, such actions are considered an abuse of rights for the purposes of this Code.
A scheme aimed at reducing tax amounts is also recognized as an abuse of right when such reduction is a direct or indirect goal or consequence, or one of the goals or consequences, and this goal or consequence is not secondary. The reduction of tax amounts includes direct or indirect changes in the scope of taxation, utilization of tax benefits, or any other decrease in the amount of tax payable.
In cases of abuse of rights, the tax authorities have the right to disregard certain transactions or a sequence of transactions that are characterized by abuse of rights when determining the amount of taxes payable by a taxpayer. Also, the tax authorities have the right to correct the amounts of taxes payable in such a way as to exclude the effect of such abuse.
The identification of cases involving abuse of rights, sham or fictitious transactions, as well as the application of their consequences, is carried out by tax authorities. In the event of a taxpayer’s disagreement, these matters are resolved by a court based on a lawsuit filed by the tax authorities.
In other words, the tax authority will now independently determine what entrepreneurs actually meant when entering into various transactions, registering legal entities, or applying alternative transaction schemes that the tax authority finds “unclear.” Based on their analysis, the tax authority will propose that the entrepreneur voluntarily pay additional taxes. If the entrepreneur refuses, the case will be brought to court for consideration.
So, what does this mean? Is it the end of creativity? How will the concept of “abuse of rights” coexist with “tax optimization” aimed at legally reducing the tax burden? Will the terms “scheme” and “tax optimization” become synonymous with tax offenses? We believe that many of these issues will be regulated by judicial acts, and judges, in addition to being responsible for replenishing the state budget, should also feel responsible to entrepreneurs for the formation of correct judicial practice.
In any case, when developing transaction schemes, entrepreneurs should keep in mind the provisions of the legislation specified in this article and be prepared in advance for the need to explain (prove) the economic content and legal formalization of the concluded transactions.
Judicial practice demonstrates that with effective legal structuring, planning, and documentation of business operations, involving lawyers and tax consultants, claims from tax authorities are extremely rare. Furthermore, in cases of additional tax assessments and the entrepreneur’s disagreement, the chances of obtaining a favorable court decision significantly increase.
The amendments to Uzbekistan's legislation, which introduced the concept of "Abuse of Law" into the Tax Code, are currently causing many questions and ambiguous interpretations. In accordance with Article 14 of the Tax Code of Uzbekistan: if a taxpayer performs operations or a series of operations, the sole or primary purpose of which is to obtain an unjustified tax benefit in the form of non-payment or reduction of taxes owed, such actions are considered an abuse of rights for the purposes of this Code.
"Never say that you know a person if you have not divided an inheritance with them" (Johann Kaspar Lavater, Swiss writer, poet, and philosopher). Time has accelerated its pace: years pass by like days, and days fly by so quickly that you hardly notice them. Everything around us is changing rapidly, but the human desire to live in happiness and prosperity has remained unchanged throughout the centuries. Confidence in the future, the belief that what has been earned and accumulated will “serve” children, and possibly grandchildren, is also an understandable human desire. What opportunities does the law provide for the realization of all of the above? Naturally, we are talking about inheritance law. In Uzbekistan, expressing one's will by leaving orders regarding one's property in case of death is not as popular as, for example, in European countries. Perhaps, the reason lies in the traditional patriarchal way of life, habitual for the people, where the word of a man - the head of the family - has supreme power and does not require legal formalization.
