Uzbekistan Permanent Establishment (PE): A Practical Guide

For foreign companies looking to operate in Uzbekistan, understanding the concept of a Permanent Establishment (PE) is fundamental. Essentially, a Permanent Establishment is established when a foreign company has a fixed place through which it conducts business activities within Uzbekistan. This can be a physical location or certain types of ongoing activities within the country. It's worth noting that if you have a workplace established for more than one month, it generally counts as a permanent workplace.

What Might Be Considered a PE?

Various activities and presences can lead to PE status:

• Physical Locations: This includes any type of office (management, branch, bureau), a factory, workshop, or even a laboratory.

• Production & Sales: If your business involves manufacturing, processing, or packaging goods, or if you use a warehouse as a sales point, these can trigger PE status.

• Resource Extraction: Activities related to mining, oil or gas wells, quarries, or any other natural resource extraction are also considered.

• Long-Term Projects & Services: Construction, assembly, or installation projects, or related supervisory activities that last over 183 days, typically create a PE. Similarly, providing services, including consulting, through your employees or personnel for at least 183 days can establish a PE.

• Insurance & Agency: Foreign insurance companies collecting premiums or insuring risks through a dependent agent in Uzbekistan may also have a PE. If someone consistently acts on behalf of your foreign company to conclude contracts in Uzbekistan, this can also lead to a PE.

When is a PE Not Created?

Certain activities are generally considered preparatory or auxiliary and do not automatically lead to a PE. These can include:

• Storage and Display: Using facilities solely for storing or displaying your goods.

• Limited Activities: Maintaining a fixed place of business just for purchasing goods or collecting information, as long as it's purely for preparatory or auxiliary purposes.

• Personnel Provision (with conditions): Providing foreign personnel to another company in Uzbekistan usually won't create a PE if your company isn't responsible for their work results and your income from this doesn't exceed 10% of your total costs for providing that personnel.

Starting Operations and Registration:

If your activities indicate a PE, you're generally considered to have started operating in Uzbekistan on the earliest of a few key dates, such as the signing of certain contracts or the arrival of personnel for contract fulfillment. Once a PE is established, your foreign company is required to register with the local tax authorities.

Taxation and Deductible Expenses:

Income generated by your PE in Uzbekistan will be subject to local taxes. The tax base is generally your PE's total income, considering specific deductions for business-related expenses. Certain payments from the PE to your foreign head office or other related entities might not be deductible. Net profit of the PE, after tax, is treated as dividends and may be subject to a 10% tax, though international treaties might offer lower rates.