Proposal in Uzbekistan to unify taxation for individual entrepreneurs and self-employed

The Institute for Reducing the Share of the Shadow Economy, Improving Tax and Customs Administration, and Fiscal Analysis at the Ministry of Economy and Finance has put forward an initiative to unify the approach to paying the social tax for individual entrepreneurs (IEs) and self-employed individuals in Uzbekistan. This idea was presented during a fiscal dialogue on July 30th.

Currently, both categories use the same basic calculation unit (BCU) of 412 thousand soms, which will increase to 440 thousand soms starting September 1st. However, the frequency of payments differs.

According to Part 1 of Article 408 of the Tax Code, IEs are obliged to pay the social tax monthly in an amount of no less than one BCU, equivalent to 5.28 million soms per year. Self-employed individuals, according to Part 2 of the same article, have the option to voluntarily pay 1 BCU per year to count this period towards their employment record. After the BCU increase, their annual payment will be 440 thousand soms, which is approximately 36.7 thousand soms per month.

The presentation noted that the financial burden on an individual entrepreneur is twelve times higher than the burden on a self-employed person. This difference is partly due to the fact that IEs, unlike self-employed individuals, can hire up to five employees and conduct retail trade, giving them a broader scope of activity and additional opportunities.

Proposed Changes

The Institute recommends abandoning the existence of two parallel systems with significant differences in payment amounts and transitioning to a single category of self-employed individuals. International experience is cited as a reference, where contributions are usually tied to declared income or minimum wage.

The proposal is to calculate the minimum social tax based on the minimum wage (MW) rather than the BCU. Applying the basic rate of the social tax established by Article 405 of the Tax Code to an MW of 1.36 million soms would result in a monthly payment of 163.2 thousand soms, or almost 1.96 million soms per year.

At the same time, the proposed amount would be approximately 4.45 times higher than the current voluntary payment of self-employed individuals (about 36.7 thousand soms per month), but it would be 2.7 times less than the minimum payment that IEs would have to make after the BCU increase.

The Institute does not insist on introducing a one-time targeted payment. Instead, it proposes starting with a monthly contribution of about 50 thousand soms, followed by a gradual increase to 163.2 thousand soms according to an approved schedule.

It is important to note that this initiative represents an analytical proposal from the Institute and does not yet have the status of an adopted legislative act or bill.

As of July 1, 2026, 375.1 thousand individual entrepreneurs were registered in the country. The number of self-employed individuals varies across sources—from 2.8 million to 5.5 million.

Economist Otabek Bakirov stated that the principle of equality when revising the social tax should apply not only to IEs and self-employed individuals but also to enterprises that benefit from 1% preferential or reduced rates. He suggested considering the introduction of a minimum mandatory payment for such beneficiaries, similar to the procedure for paying land tax and property tax by some exempted legal entities. Bakirov emphasized: 'Strength becomes justice only when it is applied equally not only to the weak and small, but also to the strong and large. Only then does trust in such justice appear.'

Furthermore, it was learned in mid-July that the authorities plan to make pension contributions mandatory for self-employed individuals. Currently, 2.8 million self-employed individuals are registered in Uzbekistan, but only about 800 thousand people, or 30%, voluntarily make the corresponding contributions. The existing system allows a self-employed person to pay one BCU—412 thousand soms—and receive one year of service for pension purposes.

The Cabinet of Ministers of Uzbekistan has approved changes to the procedure for returning a portion of the value-added tax (Tax Free) to foreign citizens for goods purchased in the country. The relevant resolution dated July 16, 2026, was published on the legal portal Lex.uz.

Changes to Refund Conditions

The amendments provide for a relaxation of requirements for receiving VAT refunds. Specifically, the minimum total purchase amount required to apply for Tax Free has been reduced from 1 million to 300,000 soums.

Expansion of Product List

Furthermore, the list of goods subject to the VAT refund system has been significantly expanded. Almost all categories of goods are now eligible for the cashback system, with the exception of meat and meat by-products, fish and seafood, animal products, vegetables, fruits, nuts, coffee, tea, spices, cereals, flour, and baked goods, animal and vegetable fats, meat, fish, and other aquatic invertebrates products, sugar and confectionery made from sugar, cocoa, processed vegetable, fruit, nut, and other plant products, as well as other food products.

Modification of Fund Transfer Procedure

The fund transfer procedure has also been changed. VAT refunds will now be credited to the foreign citizen's bank card or account within three working days. Previously, payments were made through the general mechanism of the tax cashback system—after the 25th day of the month following the month of refund registration.

Option for Cash Receipt

The new rules also introduce the possibility of receiving the refund in cash in US dollars upon leaving Uzbekistan. In this case, the foreign citizen will be paid 85% of the tax amount, and the remaining 15% will constitute the operator's commission for the Soliq Servis system. Cash payments are made on the day of the foreigner's confirmed departure from the country, and the system operator maintains separate records of persons entitled to this method of receipt.

Reform Initiative

The reform of the Tax Free system was initiated by a decree of the President of Uzbekistan, signed in March of this year. This document provides for reducing VAT refund periods and introducing a mechanism for receiving cash payments.