Recent legislative reforms in Uzbekistan introduce a range of measures aimed at strengthening entrepreneurship, ensuring fair competition, reducing the shadow economy, and stimulating employment and high value-added production. One of the key elements of this reform package is the simplification of procedures for the liquidation of inactive business entities, coupled with targeted tax incentives for priority economic sectors.

These amendments affect several core legislative acts, including the Civil Code and the Tax Code, and are intended to improve the efficiency of public administration while reducing unnecessary regulatory burdens on the business environment.

 

Policy Objectives and Regulatory Context

 

The reform reflects a broader state policy focused on:

• Improving the quality of the business climate;
• Ensuring equal and transparent market conditions;
• Encouraging formal economic activity;
• Redirecting state resources toward active and productive enterprises.

Inactive legal entities and individual entrepreneurs have long posed administrative and fiscal challenges, including distorted statistical data, ineffective tax supervision, and increased compliance costs. The new framework addresses these concerns by introducing clear, predictable, and expedited mechanisms for removing inactive entities from official registries.

 

Simplified Exclusion of Inactive Individual Entrepreneurs

 

Amendments to the Civil Code establish a streamlined procedure for excluding individual entrepreneurs from the state register where they have ceased meaningful economic activity.

Under the new rules:

• If an individual entrepreneur subject to turnover tax or value-added tax is transferred to an inactive status due to failure to conduct financial and economic activity;
• And if such entrepreneur does not resume activity within one year from the date of being classified as inactive;
• The registering authority is empowered to exclude the entrepreneur from the register based on an application submitted by the tax authority.

This mechanism eliminates the need for lengthy judicial or administrative liquidation procedures and ensures that business registries accurately reflect the active economic landscape.

 

Employment-Oriented Tax Incentives for Service Sectors

 

In parallel with the liquidation reforms, the Tax Code introduces reduced social tax rates to incentivize job creation, particularly among young workers.

Businesses operating in specified sectors including retail trade, public catering, hospitality, transportation, vehicle maintenance, IT services, household repairs, agriculture, veterinary services, and entertainment are eligible for a 1% social tax rate on wages paid to employees under the age of thirty, provided certain conditions are met.

These conditions include:

• An average monthly wage of no less than 2.5 times the statutory minimum wage;
• At least 60% of total income derived from the qualifying activities at the end of the reporting period.

The legislation also establishes strict compliance safeguards. Where concealment of employee numbers is identified, the preferential tax treatment is revoked, reinforcing transparency and accountability.

 

Support for Agricultural and High-Technology Initiatives

 

The reform package further extends fiscal support to agricultural modernization and high-technology development.

Initiators of new orchards benefit from VAT exemptions on the import of grafted fruit trees, planting materials, and certain technical equipment sourced from non-neighboring countries during the designated incentive period. This measure aims to reduce upfront investment costs and accelerate modernization in the agricultural sector.

Taken together with incentives for high-technology manufacturing and pharmaceutical production, these provisions demonstrate a shift toward sustainable, innovation-driven economic growth.

 

Practical Impact on Businesses and Regulators

 

From a practical perspective, the simplified liquidation mechanism:

• Reduces compliance costs for genuinely inactive entrepreneurs;
• Improves the quality of state business registers;
• Enables tax authorities to focus resources on active taxpayers;
• Lowers systemic risks associated with dormant entities.

At the same time, the employment and sector-specific incentives encourage businesses to remain active, expand operations, and formalize labor relations, thereby aligning regulatory efficiency with economic development goals.

 

Conclusion

 

The introduction of simplified liquidation procedures for inactive business entities marks a significant step in modernizing Uzbekistan’s business regulation framework. By combining deregulation for inactive participants with targeted incentives for active and compliant enterprises, the reform achieves a balanced approach that promotes transparency, efficiency, and sustainable growth.

These changes underscore a broader legislative trend toward pragmatic governance where regulatory mechanisms are tailored to economic realities while safeguarding fair competition and public fiscal interests.