“On introducing additions and amendments to some legislative acts of the Republic of Uzbekistan aimed at implementing Islamic banking activities in Uzbekistan” law was adopted.
It is reported that the law introduced amendments and additions to the Tax and Civil Codes, as well as 7 other laws.
In particular, this law:
- introduces into legislation the concepts of Islamic banking activity, Islamic finance operations, Islamic finance standards, and investment deposit;
- establishes a license granting the right to conduct Islamic banking activities, and sets specific requirements for obtaining this license;
- provides a list of Islamic finance operations that can be carried out by banks holding a license granting the right to conduct Islamic banking activities;
- permits banks conducting Islamic banking activities to engage directly in trading activities, as well as to establish legal entities and acquire shares or stocks in the charter funds of legal entities without restrictions;
- for the purpose of coordinating issues related to Islamic finance activities, establishes the organization of an Islamic Finance Council at the Central Bank and in banks, and sets requirements for its activities.
Furthermore, specific features of taxation for Islamic finance operations are established.
Specific features of taxation for Islamic finance operations
According to the law, an Islamic Finance Council of the Central Bank, consisting of 5 members, will be established.
Within the scope of Islamic finance activities, total income includes the following revenues:
- income in the form of reward from Islamic finance activities;
- income of Islamic insurance and Islamic reinsurance organizations from insurance and reinsurance contracts.
The following are exempt from VAT:
- operations related to Islamic securities (certificates).
- services provided by a bank or microfinance organization on a paid basis to the principal (client) under trust management (agency) contracts within the scope of Islamic finance activities;
- within the scope of Islamic finance activities, when leasing property under financial lease (Islamic lease), the positive difference between the total amount of all lease payments for leasing this property under financial lease (Islamic lease) and its purchase price;
- the markup applied by banks and microfinance organizations to goods sold to a client (buyer) under contracts concluded within the scope of Islamic finance activities.
Banks and microfinance organizations leasing immovable property under financial lease (Islamic lease) within the scope of Islamic finance activities are recognized as property tax payers.
This Law shall enter into force three months after the date of its official publication.
