Two major Central Asian countries - Uzbekistan and Kazakhstan - revealed plans to extend their VAT systems to the digital services supplied by foreign businesses in late 2019. Uzbekistan did so on January 1, 2020, while Kazakhstan - initially mirroring their neighbour's approach - now plans to amend their VAT regime in January 2021.
The region had not witnessed much movement until then with only Azerbaijan, across the Caspian Sea, being the closest tax jurisdiction to have made any amendments to their tax code to bring foreign-supplied digital services into scope.
Rules in Azerbaijan for foreign suppliers of digital services to pay VAT at the place of consumption have been in place since January 2017. However, the burden of the collection is currently with the local card issuers.
Here we outline some of the characteristics of the Uzbekistan and Kazakhstan proposals.
Date of introduction: January 1, 2020
Tax rate: 15% (VAT) - reduced from 20% in October 2019
Foreign suppliers of affected digital services must register for the collection and remittance of VAT on the sales they have in Uzbekistan. The rules were introduced on January 1, 2020, and foreign suppliers with digital sales to customers in Uzbekistan can register online here: http://tax.uz/en
By late September 2020, a total of 19 foreign suppliers had registered to collect and remit VAT on their sales in Uzbekistan. The list is available here: https://tax.uz/en/site/companys
At the same time Uzbekistan's Ministry of Finance also released a lengthy statement on the importance of the digital economy to the country's continued growth.
The place of supply of affected digital services are deemed to be in Uzbekistan if:
Affected digital services include the following (non-exhaustive list):
Planned date of introduction: January 1, 2021
Tax rate: 12% (VAT)
According to the proposed changes, a foreign digital service supplier with customers in Kazakhstan will be required to register for VAT. These suppliers will also be obliged to regularly remit VAT on their sales in Kazakhstan based on the turnover of services rendered.
Affected digital services would include (non-exhaustive list) the provision of the following services via the internet:
Date of introduction: January 1, 2017
Tax rate: 12% (VAT)
Rules in Azerbaijan for foreign suppliers of digital services to pay VAT at the place of consumption have been in place since January 2017.
However, the rules differ from those proposed in Kazakhstan and Uzbekistan as the burden of the collection is currently with the local card issuers. We will, of course, update you if there is a change to this obligation.
Taxamo content is created for guidance only, please consult your local tax advisor.
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