The Double Taxation Relief (Taxes on Income) (Uzbekistan) Order 1994

PART II EXCHANGE OF NOTES

London

17th November 1993

Excellency

I have the honour to refer to the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Uzbekistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains which was signed in Tashkent on 15th October 1993 and to make on behalf of the Government of the Republic of Uzbekistan the following proposals:

Article 2: Taxes covered

At the time of signature of the Convention, the following specific Uzbekistan taxes are included within the meaning of Article 2(3)(b):

(1) In respect of taxes payable by enterprises in accordance with the law of the Republic of Uzbekistan “On the Taxation of Enterprises, Associations and Organisations”:

(i) tax on income;

(ii) tax on income from movable and immovable property, as part of the general income of legal entities;

(iii) tax on foreign currency income; and

(iv) tax on capital gains.

(2) In respect of taxes, payable by individuals in accordance with the law of the Republic of Uzbekistan “On the Taxation of Citizens, Foreign Citizens and Stateless Persons”:

(i) tax on income;

(ii) tax on income from movable and immovable property, as part of the general income of individuals;

(iii) tax on foreign currency income;

(iv) tax on capital gains; and

(v) payments for the issue of patent or registration certificates to engage in private entrepreneurial activity.

Articles 7: Business profits

Interest Payable by a Permanent Establishment of a Resident of a Contracting State.

In computing tax payable on its income or profits, there shall be allowed to a permanent establishment of a resident of a Contracting State, a deduction for interest incurred for the purpose of its trade or business whether paid to a bank or other person and without regard to the period of the loan, but that deduction shall not be available to the extent that the interest paid exceeds, for whatever reason, the amount which would have been agreed upon in the absence of a special relationship between the payer and the beneficial owner of the interest.

Articles 11 Interest and 12 Royalties

Both Contracting States understand that where interest or royalties arising in one Contracting State are received by a resident of the other Contracting State and such resident is not the beneficial owner of the interest or royalties then such interest or royalties may be taxed in the first mentioned Contracting State using the rules applicable in its domestic legislation.

The Contracting States agree that where Uzbekistan agrees to a lower rate of tax than5 per cent in paragraph (2) of Article 11 or in paragraph (2) of Article 12 in any Convention between Uzbekistan and a third State which is a member of the Organisation for Economic Co-operation and Development, and that Convention enters into force either before or after the date of entry into force of this Convention, the competent authority of Uzbekistan shall notify the competent authority of the United Kingdom of the terms of the relevant paragraph in the Convention with that third State immediately after the entry into force of that Convention and such lower rate of tax shall be substituted for 5 per cent in paragraph (2) of Article 11 or paragraph (2) of Article 12, as the case may be, of this Convention with effect from the date of entry into force of that Convention, or of this Convention, whichever is the later.

Article 22: Elimination of Double Taxation

Interest Payable by a Company or other Taxable Entity which is a Resident of a Contracting State.

In computing tax payable on its income or profits, there shall be allowed, to a company or other taxable entity which is a resident of a Contracting State and which is at least 20 per cent owned by a resident or residents of the other Contracting State, a deduction for interest incurred for the purpose of its trade or business whether paid to a bank or other person and without regard to the period of the loan, but that deduction shall not be available to the extent that the interest paid exceeds, for whatever reason, the amount which would have been agreed upon in the absence of a special relationship between the payer and the beneficial owner of the interest.

Article 29: Entry Into Force

The Contracting States understand that the Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Union of Soviet Socialist Republics for the Avoidance of Double Taxation of Air Transport Undertakings and their Employees signed at London on the 3rd May 1974 and the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Union of Soviet Socialist Republics for the Avoidance of Double Taxation with respect to Taxes on Income and Capital Gains signed at London on 31st July 1985 shall continue to have effect:

(a) in the United Kingdom, for any year of assessment, financial year or chargeable period, and

(b) in Uzbekistan, for any taxable period,

beginning, in either case, before the entry into force of the Convention.

Withholding tax

Each Contracting State shall endeavour to establish procedures to enable taxpayers to receive income dealt with under Articles 10, 11 and 12 without the imposition of withholding taxes where the Convention provides for taxation only in the State of residence. Where the Convention provides for taxation in the State where the income arises each State shall endeavour to establish procedures to enable taxpayers to receive income under deduction of tax at the rate provided for in the Convention. Where a claim is made by a taxpayer, tax withheld at source in a Contracting State at the rate provided for under domestic law shall be repaid in a timely manner where that tax is withheld at a rate in excess of that provided for under the terms of the Convention.

If the following proposals are acceptable to the Government of the United Kingdom of Great Britain and Northern Ireland I have the honour to suggest that the present Note and Your Excellency’s reply to that effect shall be regarded as constituting an agreement between the two Governments in this matter which will enter into force at the same time as the entry into force of the Convention.

I avail myself of this opportunity to extend to Your Excellency the assurance of my highest consideration.

S. A. IVANCHENKO

Head of the Department of Treaty Law, Ministry of Foreign Affairs, Republic of Uzbekistan

London

17th November 1993

Excellency

I am in receipt of your note dated 17th November 1993 which states as follows:

“I have the honour to refer to the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Uzbekistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains which was signed in Tashkent on 15th October 1993 and to make on behalf of the Government of the Republic of Uzbekistan the following proposals:

Article 2: Taxes covered

At the time of signature of the Convention, the following specific Uzbekistan taxes are included within the meaning of Article 2(3)(b):

(1) In respect of taxes payable by enterprises in accordance with the law of the Republic of Uzbekistan “On the Taxation of Enterprises, Associations and Organisations”;

(i) tax on income;

(ii) tax on income from movable and immovable property, as part of the general income of legal entities;

(iii) tax on foreign currency income; and

(iv) tax on capital gains.

(2) In respect of taxes, payable by individuals in accordance with the law of the Repubblic of Uzbekistan “On the Taxation of Citizens, Foreign Citizens and Stateless Persons”;

(i) tax on income;

(ii) tax on income from movable and immovable property, as part of the general income of individuals;

(iii) tax on foreign currency income;

(iv) tax on capital gains; and

(v) payments for the issue of patent or registration certificates to engage in private entrepreneurial activity.

Article 7: Business profits

Interest Payable by a Permanent Establishment of a Resident of a Contracting State.

In computing tax payable on its income or profits, there shall be allowed to a permanent establishment of a resident of a Contracting State, a deduction for interest incurred for the purpose of its trade or business whether paid to a bank or other person and without regard to the period of the loan, but that deduction shall not be available to the extent that the interest paid exceeds, for whatever reason, the amount which would have been agreed upon in the absence of a special relationship between the payer and the beneficial owner of the interest.

Articles 11 Interest and 12 Royalties

Both Contracting States understand that where interest or royalties arising in one Contracting State are received by a resident of the other Contracting State and such resident is not the beneficial owner of the interest or royalties then such interest or royalties may be taxed in the first mentioned Contracting State using the rules applicable in its domestic legislation.

The Contracting States agree that where Uzbekistan agrees to a lower rate of tax than 5 per cent in paragraph (2) of Article 11 or in paragraph (2) of Article 12 in any Convention between Uzbekistan and a third State which is a member of the Organisation for Economic Co-operation and Development, and that Convention enters into force either before or after the date of entry into force of this Convention, the competent authority of Uzbekistan shall notify the competent authority of the United Kingdom of the terms of the relevant paragraph in the Convention with that third State immediately after the entry into force of that Convention and such lower rate of tax shall be substituted for 5 per cent in paragraph (2) of Article 11 or paragraph (2) of Article 12, as the case may be, of this Convention with effect from the date of entry into force of that Convention, or of this Convention, whichever is the later.

Article 22: Elimination of Double Taxation

Interest Payable by a Company or other Taxable Entity which is a Resident of a Contracting State.

In computing tax payable on its income or profits, there shall be allowed, to a company or other taxable entity which is a resident of a Contracting State and which is at least 20 per cent owned by a resident or residents of the other Contracting State, a deduction for interest incurred for the purpose of its trade or business whether paid to a bank or other person and without regard to the period of the loan, but that deduction shall not be available to the extent that the interest paid exceeds, for whatever reason, the amount which would have been agreed upon in the absence of a special relationship between the payer and the beneficial owner of the interest.

Article 29: Entry Into Force

The Contracting States understand that the Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Union of Soviet Socialist Republics for the Avoidance of Double Taxation of Air Transport Undertakings and their Employees signed at London on the 3rd May 1974 and the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Union of Soviet Socialist Republics for the Avoidance of Double Taxation with respect to Taxes on Income and Capital Gains signed at London on 31st July 1985 shall continue to have effect:

(a) in the United Kingdom, for any year of assessment, financial year or chargeable period, and

(b) in Uzbekistan, for any taxable period,

beginning, in either case, before the entry into force of the Convention.

Withholding tax

Each Contracting State shall endeavour to establish procedures to enable taxpayers to receive income dealt with under Articles 10, 11 and 12 without the imposition of withholding taxes where the Convention provides for taxation only in the State of residence.Where the Convention provides for taxation in the State where the income arises each State shall endeavour to establish procedures to enable taxpayers to receive income under deduction of tax at the rate provided for in the Convention.Where a claim is made by a taxpayer, tax withheld at source in a Contracting State at the rate provided for under domestic law shall be repaid in a timely manner where that tax is withheld at a rate in excess of that provided for under the terms of the Convention.”

The foregoing proposals being acceptable to the Government of the United Kingdom of Great Britain and Northern Ireland, I have the honour to confirm that Your Excellency’s Note and this reply shall be regarded as constituting an agreement between the two Governments in this matter which shall enter into force at the same time as the entry into force of the Convention.