IT Park in Uzbekistan: A strategic location for digital development

In recent years, the Republic of Uzbekistan has undergone significant transformations in the IT and innovation sector, making it a prospective center for IT development.

Under the Digital Uzbekistan program, several initiatives have been implemented to facilitate this development, and here are the key points:
  • Technoparks are at the epicenter of innovation: Technoparks, such as the outstanding IT Park and the innovation center Mirzo Ulugbek, are of key importance. They provide IT companies not only with modern infrastructure, but also with tax incentives and support during registration.
  • Evolution of education: The government of Uzbekistan is actively investing in IT education and the result of this strategy is the opening of universities and courses that provide IT and programming training.
  • Financial support: The government is ready to provide financial assistance and tax advantages for IT companies, which creates a favorable climate for investors and businesses. 
  • Prospective and talented specialists: Uzbekistan can be proud of the presence of young and talented IT specialists who can boost the development of the industry.
  • Support for startups: The development of startups in the country is actively supported through incubation centers and startup accelerators.

The meaning of IT Park in Uzbekistan

In July 2019, the first IT Park was opened in Tashkent, Uzbekistan. 

IT Park is a complex of facilities, buildings and structures designed to launch and bring to market prospective startup projects, an extraterritorial free economic zone for IT companies, including integration with research and educational institutions. 

According to clause 2 of the Resolution of the Cabinet of Ministers of 15.07.2019 No. 589 “On the procedure for organizing the activities of the Technology Park of software products and information technologies” (Resolution  №589), the Technology Park of software products and information technologies (Technopark) is an organizational and legal entity operating on the principles of extraterritoriality within the territory of the Republic of Uzbekistan, with the location of Technopark residents throughout the territory of the Republic to create the most favorable conditions for the development of production of information.

Startups in IT Park

Creating a startup in the IT Park of Uzbekistan is growing quickly, representing a true embodiment of the company’s opportunities. To realize such an initiative, a number of actions must be taken:

  1. A detailed examination of the IT Park’s requirements for participation in the startup support program and a clear confidence that the company’s project meets all the stated criteria.
  2. Creating a detailed business plan that will help define the goals and development strategies of the startup. The business plan should also contain information about the products/services that the company will provide and potential sources of income.
  3. Registration of the company in the IT Park of Uzbekistan.
  4. Creation of a team of professionals.
  5. Obtaining financial support.

Directions of startups:

  • Fintech
  • Medtech
  • Agrotech
  • E-government
  • E-commerce
  • Internet of things 
  • Autotech
  • Online education
  • Game development

There are several programs for creating startups:

  1. Incubation Program is an educational and practical program that forms and develops the idea of a startup project. The program is designed for 3 months and provides the startup project with the following bonuses
  • a comfortable office;
  • work with professional mentors;
  • legal consultation;
  • accounting support;
  • active networking with successful entrepreneurs;
  • unlimited access to business events.
  1. Acceleration Program is an educational and practical program aimed at developing startup projects by testing and developing a business model with the organizational and advisory support of mentors and market experts.

IT Park resident status in Uzbekistan

According to clause 2 of Resolution No. 589, a “Technopark resident” is a legal entity registered in the Technopark under the established procedure and included in the Register of Residents.

To obtain the status of Technopark’s resident, legal entities must meet the following criteria:

  1. to be registered in the territory of the Republic of Uzbekistan as a legal entity;
  2. to carry out a type (types) of activity in accordance with Appendix №2 to Resolution №589;
  3. to have economically grounded business plans in accordance with the above activities.

Tax benefits for Technopark residents:

  • until January 1, 2028, residents are exempt from paying all types of taxes and mandatory contributions to state trust funds, as well as social tax; from paying customs duties (except for customs duties) for equipment, components, parts, assemblies, technological documentation, software imported for their own needs that are not produced in the Republic of Uzbekistan;
  • personal income tax – a fixed rate of 7.5% on income in the form of salary received before January 1, 2028 by employees under labor contracts with Technopark residents;
  • corporate tax – 0%;
  • real estate tax – 0%;
  • until January 1, 2025, the income tax rate on dividends of the founders of Technopark residents who are non-residents of the Republic of Uzbekistan – 5%;
  • residents are obliged to transfer to the deposit account on demand of the Directorate of the Technopark a 1% deduction from the total income.

Preferences for Technopark residents:

  • payment of dividends and salaries to its foreign founders (participants) and foreign specialists in foreign currency as part of the proceeds from the export of goods (works, services) by crediting to international payment cards;
  • simple and fast company registration procedure;
  • conducting business by using a virtual office service;
  • engagement of foreign specialists to work without obtaining confirmation of the right to work in the territory of the Republic of Uzbekistan;
  • use of convenient conditions and forms of payment and settlements for exported services;
  • residents of IT Park can receive support from the government in the form of financial assistance, quality trainings and interesting events;
  • due to the favorable geographical location in Central Asia, registration of a company in the IT Park of Uzbekistan provides access to the global arena and allows to expand the client base.

IT-Visa in Uzbekistan

IT-Visa is a multiple-entry visa issued for a validity period of up to three years. Its validity is extended at the request of the applicant without the need to leave the territory of the Republic of Uzbekistan.

Advantages of IT-Visa:

  • Obtaining education and medical services on the conditions provided for citizens of the Republic of Uzbekistan;
  • Residing in any region of Uzbekistan without the obligation to re-register at the place of residence;
  • Purchasing real estate of any value.

These conditions also apply to family members of people who hold IT-Visa.

Who can get an IT-Visa?

  1. IT-specialist – a specialist with qualification/specialization in the IT field, employed in a legal entity of a resident of the Republic of Uzbekistan in the IT specialty and confirming his/her income from IT activities not less than the equivalent of USD 30,000 for the last 12 months at the time of application.
  2. Founder of an IT Park resident – an individual who is the founder of a legal entity of a Technopark resident registered in accordance with the established procedure and included in the Register of Residents.
  3. Investor – an individual or a representative of a foreign investment company that provides financing to a legal entity operating in the IT field through a transaction in the amount of not less than the equivalent of USD 10,000.

Conclusions

The establishment of the IT Park in Uzbekistan has opened new perspectives for the country’s development. The startup support program provides residents with significant tax benefits, creating a favorable environment for their development.

It should be noted the favorable status of the IT Park resident with its tax advantages, including exemption from a number of taxes and mandatory deductions. 

The introduction of IT-Visa, aimed at attracting and retaining qualified specialists in the IT sector, underlines the importance of international cooperation and the country’s attractiveness to foreign investors.

Thus, the IT Park in Uzbekistan is a favorable location for digital development, thanks to an effective support system, promotion of innovation, talented workforce and an attractive financial environment. This creates perspectives for stable and sustainable growth of the IT industry in the country.

The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.


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License for Virtual Assets Service Providers in Uzbekistan: prospects for Crypto business

Earlier, we wrote that Uzbek Citizens are now allowed to trade with crypto assets in licensed crypto exchanges. In July 2022, the National Agency on Perspective Projects of the Republic of Uzbekistan (hereinafter referred to as: – “NAPP”) which is the licensing authority in the field of circulation of crypto assets announced licensing procedures for new market participants. Licensing of service providers in the field of circulation of crypto assets is carried out in accordance with the Regulations on the procedure for licensing the activities of service providers in the field of circulation of crypto assets, approved by order of the Director of the NAPP from July 2022. Today, we will discuss the process and conditions for obtaining Virtual Asset Service provider (VASP) licenses.

Requirements for virtual asset service providers

A license to carry out the activities of service providers in the field of circulation of crypto-assets of services is issued only to legal entities – residents of Uzbekistan. The license requirements and conditions for service providers are as follows:

·Availability of an electronic platform and (or) a complex of hardware and software located on servers on the territory of the Republic of Uzbekistan;

·storage of information on all transactions related to crypto assets , identification data of platform participants, materials relating to the relationship of service providers with platform participants (including between platform participants), including business correspondence, for five years;

·compliance with the requirements of the legislation of the Republic of Uzbekistan in the field of circulation of crypto assets, legalization of proceeds from crime, financing of terrorism and financing the proliferation of weapons of mass destruction, as well as the storage and use of personal data;

·a ban on advertising in the field of circulation of crypto assets, including promises about the effectiveness (income) of activities related to the use of crypto assets, a ban on the dissemination of information that making transactions with crypto assets is an easy way to get rich, and accepting payment or paying with crypto assets in the territory Republic of Uzbekistan, subject to the requirements that they cannot be used as legal tender;

·do not conduct transactions with anonymous crypto-assets;

·provision of information related to the implementation of the activities of the platform, free of charge at the request of the authorized body;

·other requirements in accordance with regulatory documents.

Additional licensing requirements and conditions for crypto exchanges are as follows:

·quotation of crypto assets based on supply and demand;

·the presence of an authorized fund formed in cash in the amount of at least five thousand multiples of the base calculated value (1 BCV = 300,000 soums; 5,000 BCV = 1,500,000,000 soums ≈ EUR 134722), of which three thousand multiples of BCV (3,000 BCV = 900,000,000 soums ≈ EUR 80833) is reserved on a separate account with a commercial bank of the Republic of Uzbekistan;

·the functions of control over the activities of service providers and their compliance with regulatory legal acts on combating the legalization of proceeds from crime, the financing of terrorism and the financing of the proliferation of weapons of mass destruction are assigned to the licensing body of service providers and the relevant competent state bodies;

·the statutory fund of service providers is formed only at the expense of funds and other property of their founders. Funds allocated for the formation of the statutory fund of service providers are not allowed to be replenished by attracting credit or pledge funds and other similar funds;

·legal entities pay a commission for activities in the field of circulation of crypto assets. Fees are distributed between the State Budget of the Republic of Uzbekistan and the Agency.

In addition, a license is not issued to companies registered in offshore zones, as well as to persons whose convictions for economic, corruption and information crimes have not been expunged or extinguished.

License types

Licensing of service providers in the field of circulation of cryptoassets is carried out in accordance with the Regulations on the procedure for licensing the activities of service providers in the field of circulation of cryptoassets, approved by order of the Director of the Agency No. 32 dated July 14, 2022 (No. 3380 dated August 15, 2022).

Types of activities for which service providers in the field of circulation of crypto assets are licensed:

a) crypto exchange an organization that provides an electronic platform for the purchase, sale and (or) exchange of crypto assets;

b) mining pool – an organization that provides an electronic platform that combines computing power to support the mining process;

c) crypto depository – an organization that provides an electronic platform and (or) a set of hardware and software tools for the provision of services for the issuance, initial placement and storage of crypto assets;

d) crypto store – an organization that provides an electronic platform and (or) a set of hardware and software tools for the provision of services related to the purchase and (or) sale of crypto assets.

The license is issued for an unlimited period, and the license is issued separately for each type of licensed activity.

Submission of applications for obtaining a license by applicants

Applications of applicants for obtaining licenses, as well as the documents attached to them, can be accepted by e-mail to the email address of the Agency info@napp.uz or sent by mail to the legal address of the agency: Nukus street , 22, Mirabad district, Tashkent city or can be accepted upon delivery in person.

Following documents that must be submitted to obtain a license:

a)name and legal form of the legal entity, its postal address, taxpayer identification number (TIN), location, e-mail address, name of the bank and bank account, type of licensed activity, reason for filling out the application (obtaining a new license or re-registration), an application reflecting consent of the license applicant to comply with license requirements and conditions;

b)information about the management of the license applicant (head, his deputies) and the founder, specified in Appendix 2 to the Regulation . In this case, information about the founders is displayed up to the last beneficial owner;

c)if the management (head, his deputies) and the founders of the license applicant are foreign citizens, a certificate of non-conviction from the competent authority of the relevant foreign state for the crimes provided for by subparagraph “h” of paragraph 9 of the Regulation ;

d)a certificate from a commercial bank stating that the statutory fund (capital) has been formed for the implementation of crypto -exchange activities and the corresponding part of the statutory fund (capital) has been allocated.

In the case when the management (head, his deputies) and the founders of the license applicant are citizens of the Republic of Uzbekistan, the licensing authority independently considers the circumstances provided for in subparagraph “h” of paragraph 9 of the Regulations. The above documents must be approved (signed) by the head of the license applicant. It is not allowed to require the license applicant to submit documents that are not provided for by the Regulations . No fee is charged for consideration of an application for a license.

Terms of consideration of the application

The decision to issue or refuse to issue a license is made within 20 working days from the date of receipt of the license applicant’s application. The status of applications can be tracked by this link . Requirements and conditions that must be met by legal entities when carrying out licensed activities:

a) the presence of an electronic platform and (or) a complex of hardware and software located on servers on the territory of the Republic of Uzbekistan;

b) store information about all transactions related to crypto assets , identification data of platform participants, materials relating to the relationship of service providers with platform participants (including between platform participants), as well as business correspondence for five years;

c) compliance with the requirements of the legislation of the Republic of Uzbekistan in the field of circulation of crypto assets, legalization of proceeds from crime, financing of terrorism and financing of the proliferation of weapons of mass destruction, as well as the storage and use of personal data;

d) Compliance with the requirements for advertising in the field of circulation of cryptoassets, determined by clause 11 of the Regulations ;

e) not to carry out clandestine mining (mining activities on the computing power of third parties using special software without their notification and consent) and operations with anonymous crypto assets, including mining of anonymous crypto assets (crypto assets operating on the principle of anonymity);

f) free provision of information related to the operation of the platform, at the request of the licensing authority;

j) timely and full payment of remuneration for activities in the field of circulation of crypto assets, established by law;

Prevent a VASP from being run by people who:

·participated or suspected of participating in terrorist activities or proliferation of weapons of mass destruction;

·not cleared or convicted of crimes related to economic crimes, as well as money laundering, terrorism, proliferation of weapons of mass destruction, their financing, organized crime, drug trafficking, corruption, and crimes related to information technology;

In addition, do not allow the participation of persons specified in subparagraph “h” and companies registered in offshore zones in the authorized capital (capital) of service providers.

Fees

The amount of the state fee for licensing the activities of service providers in the field of circulation of crypto assets:

Paragraph 2 of subparagraph “g” of the Decree of the President of the Republic of Uzbekistan PQ-3832 dated July 3, 2018 “On measures to develop the digital economy and the sphere of circulation of crypto assets in the Republic of Uzbekistan” and in accordance with order No. 39 of the Director of the Agency (NAPP) dated August 30, 2022, The amount of the state fee for issuing a license to carry out the activities of service providers in the field of circulation of crypto assets is determined in the following amounts compared to the amount of the base calculation effective on the date of their payment:

In terms of the turnover of crypto assets, the amount of the state fee for issuing a license to increase the activities of service providers is determined in the following amounts compared to the basic calculation of the value (1 BCV = 300,000 UZS at the time of writing), effective on the date of their payment:

·for a crypto-exchange – 73,400 multiples of the BCV (EUR 1977715);

·for mining – 1900 multiples of BCV (EUR 51 195);

·for a crypto-depository – 18,400 BCV (EUR 495 776);

·for a crypto store – 2600 multiples of the BCV (EUR 70 055).

20% of the fee will be distributed to the settlement account of the Agency for Perspective Projects in a commercial bank. The remaining 80% will go to the state budget. According to the data , the monthly fees for the implementation of work in the field of circulation of crypto assets are set at the following multiples of the base calculation value (BCV = 300,000 UZS at the time of writing) in force on the date of payment, for:

  • miners – 10 multiples of BCV- (EUR 270)
  • crypto exchanges – 400 multiples of BCV (EUR 10 778);
  • mining pool – 100 multiples of BCV (EUR 2 695);
  • crypto-depository – 5 multiples pf the BCV (EUR 135);
  • crypto-shop – 20 multiples of the BCV (EUR 539).

In this case, if the license is received before the twentieth day of the current month, the fee for this month is paid in full, and if the license is received after the twentieth day of the current month, it is paid from the first day of the next month.

In case of suspension or termination of activities in the field of circulation of crypto assets, the accrual of commission is suspended from the first day of the next month. The remuneration is transferred to the treasury account of the Agency for Perspective Projects of the Republic of Uzbekistan before the tenth day of the current month in the form of an advance payment.

Our conclusion

The government of Uzbekistan is legalizing the circulation of Virtual assets and digitizing its financial system. The crypto transactions are not subject to taxation and VASP license can be obtained only by foreign companies, which gives a green light for new market participants. However, costly license fees and requirements to host local servers storing personal data about Uzbek citizens inside the country can be another obstacle for newcomers to the VASP business in the country and might discourage innovation.

While Uzbekistan has the best proposition for IT companies in terms of tax benefits, as residents of IT Park are completely free from taxes and the government supports foreign investments and is ready to provide an infrastructure to do business. We help you to obtain relevant licenses and permits for your business and ready to provide a legal guidance for smooth transition into Uzbek market.

The content of this article is intended to provide a general guide to the subject matter, not be considered as a legal consultation.


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Recent legal moves in Uzbek Crypto arena

The government of Uzbekistan has taken a very careful approach concerning the regulation of crypto assets.

Until November 23, 2021, Citizens of Uzbekistan could only sell their virtual assets, but thanks to recent regulatory updates, Individuals can now freely buy and sell their digital assets in specialised crypto exchanges.

What are the key legal changes?

Crypto asset trading

In accordance with the order by The National Agency of Project Management, (hereinafter:- “NAPM”) which came into force from November 23, 2021, residents of Uzbekistan can now freely trade crypto assets with other residents of Uzbekistan in national currency (uzbek soums), while they can only sell their crypto assets to non-residents in foreign currency.

Security tokens

The order also allowed issuance of security tokens by legal entities and individual entrepreneurs who passed relevant registration for the purposes of attracting investment and financing their activities.

All the tokens offered for trade in Uzbek Crypto exchange platforms must be backed by physical or other material property. While crypto exchanges are liable for checking the organisation who placed tokens for the presence of property security. Moreover, at least 10% of the amount planned to be attracted as part of offered tokens must be deposited on a special account of the crypto-exchange.

Licensing rules

Correspondingly, the order from the NAPM also amends the regulation on the licensing procedure for cryptocurrency exchanges, which was initially adopted back in January 2019. Accordingly, strict procedures for licensing crypto-exchanges in Uzbekistan have been established.

Only foreign companies can open crypto exchanges by opening subsidiaries are eligible for obtaining the license on condition that the following specific requirements are met:

  • presence of a statutory fund in the amount of at least 30,000 minimum wages (EUR 2,019), out of which 20,000 (EUR 1,346) should be reserved in one of commercial banks of Uzbekistan;
  • placement of a functioning electronic system of crypto-exchange trades on the servers located within the territory of Uzbekistan;
  • availability of rules for crypto-exchange trading (procedure for admitting to trading, the size of the fee, registration of transactions, etc.);
  • storage of information on transactions, identification data, business correspondence for 5 years.

The license is issued for an indefinite period. In cases of violation of the rules and requirements, the license might be suspended or even canceled.

It is worth highlighting that local companies cannot even be co-founders for the crypto exchange business (have a share in the authorized capital of foreign companies or their subsidiaries). So far, UzNEX (launched in January 2020) is the first and the only licensed crypto exchange in Uzbekistan and in Central Asia.

Final thoughts

Until recent regulatory changes, citizens of Uzbekistan were prohibited to buy Cryptocurrencies and other virtual assets.. But legalizing crypto trading and abolishing criminal liability has been a serious step to improve the actual state of affairs in the industry. NAPM has a quite optimistic attitude towards the cryptoexchange platforms, as these businesses not only introduce innovative IT solutions, but attract more foreign direct investment into the economy.

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