Desk Tax Audit and Appeal of Its Results

A desk tax audit is a tax inspection carried out by the tax authority based on the review and analysis of tax reports and/or other information about the taxpayer’s activities available to the tax authority, for the purpose of verifying the correctness, timeliness, and completeness of the calculation and payment of taxes and fees to the budget. This audit is conducted remotely (at the location of the tax authority), without visiting the taxpayer’s premises (territory).

During a desk tax audit, the tax authority is not entitled to:

1. Enter the taxpayer’s territory;
2. Inspect the taxpayer’s territory or premises;
3. Request documents from the taxpayer and/or summon the taxpayer to the tax authority;
4. Seize the taxpayer’s documents and/or items.

Document exchange between the tax authority and the taxpayer during this audit is carried out as follows:

• Relevant documents are sent electronically to the taxpayer’s personal account. The documents are considered received after they are read, but no later than 3 (three) days from the date of sending;
• If the taxpayer does not have a personal account, the documents are sent by registered mail and are considered received 5 (five) days after sending;
• Documents can be delivered personally to the taxpayer or their representative against a signature indicating the date of receipt.

Not all audited persons (legal entities and individual entrepreneurs) agree with the results (findings) of the tax audit. Below are the stages of initiation, conduct, and appeal of a desk tax audit.

1. Grounds for Conducting a Desk Tax Audit

A desk tax audit is carried out in the following cases:

• Failure by the taxpayer to submit an amended tax report or justification within 10 (ten) days from the date of receiving a notice from the tax authority regarding discrepancies identified during the pre-audit analysis;
• Existence of a risk of violation of tax legislation, as determined by the tax authority based on the tax risk management system;
• Detection of errors or discrepancies in the taxpayer’s submitted tax reports;
• Receipt by the tax authority of appeals from individuals and legal entities about violations of tax legislation;
• Submission by the taxpayer of an amended tax report that reduces the amount of tax payable compared to the previously submitted report or increases the amount of loss incurred.

A desk tax audit is not conducted:

• For active business entities classified in the "AAA" stability rating category;
• For commercial organizations that have not carried out financial and economic activities since state registration and have no tax arrears.

However, tax audits can be conducted without restrictions for any state-owned enterprises and legal entities with 50% or more state participation in their charter capital.

The stability rating of business entities is generated automatically (online) on the "Entrepreneur Stability Rating" electronic platform and is published on the website of the Chamber of Commerce and Industry of the Republic of Uzbekistan (https://chamber.uz).

2. Initiation of the Audit

An order to conduct a desk tax audit is issued by the head (or deputy head) of the tax authority. This order is not subject to registration in the Unified Electronic Registration System for inspections, unlike field tax audits or tax audits by audit.

3. Notifications Prior to the Audit

Before starting a desk tax audit of a legal entity, the tax authority is not required to notify the taxpayer or the Business Ombudsman – the Commissioner under the President of the Republic of Uzbekistan for the protection of rights and legitimate interests of business entities. The tax authority is also not required to provide the taxpayer with a copy of the order to conduct the desk tax audit. Such notifications are only required in the case of field tax audits or tax audits by audit.

4. Conduct of the Audit

The audit is conducted remotely. During the process, both the tax authorities and taxpayers have rights and obligations established by law.

The taxpayer has the right to:

• Deny tax officials entry to their premises for the purpose of conducting a desk tax audit;
• Refuse to comply with demands from tax officials that are unrelated to the tax audit;
• Participate personally or through a representative during the tax audit;
• Provide explanations to the tax authorities regarding compliance with tax legislation;
• Refuse to provide documents requested by the tax authority;
• Challenge the appointment of an expert by the tax authority and request that an expert from among those proposed by the taxpayer be appointed;
• Be present (with permission) during an expert examination, provide explanations to the expert, and review the expert’s opinion;
• Review the materials of the tax audit and, based on the results, receive the conclusion and audit report;
• Appeal illegal actions of tax officials committed during the tax audit.

Tax officials are entitled to adjust the tax base for the relevant taxes if the transaction price is below or above the market value of goods (services).

5. Timeframe

A desk tax audit can last up to 60 (sixty) days. This term cannot be extended.

If necessary, witnesses, experts, specialists, interpreters, and attesting witnesses may be involved, and an expert examination may be appointed by a separate decision of the tax authority.

6. Conclusion of the Audit

Upon completion, the authorized tax officer prepares a conclusion, indicating:

• The grounds for initiating the audit;
• Whether tax violations were detected, and if so, whether they were fully or partially confirmed;
• Whether discrepancies or errors exist in the tax reporting;
• The results of the review and analysis of information (documents) obtained from the taxpayer or third parties.

The conclusion must be reviewed and approved by the head (or deputy head) of the tax authority within 2 (two) days.

7. Requirement to Correct Discrepancies

If discrepancies or errors are found, the tax authority must send a requirement to correct them within 2 (two) days of approval of the conclusion. The date the requirement is sent is considered the date of completion of the audit.

If no discrepancies or errors are found, a notification is sent to the taxpayer’s personal account.

8. Taxpayer’s Obligations After Receiving the Requirement

Within 5 (five) days of receiving the requirement, the taxpayer must submit to the tax authority:

• An amended tax report for the relevant taxes; or
• A justification of the discrepancies with supporting documents.

The taxpayer may submit an opinion from a tax consulting organization as justification.

9. Review of Justifications

The head (or deputy head) of the tax authority must review the taxpayer’s justifications within 15 (fifteen) days.

If the justifications are accepted fully or partially, the tax authority must, within 3 (three) days, send the taxpayer:

• A notice canceling the previously issued requirement; or
• An updated requirement to amend the tax reporting.

If the taxpayer fails to submit an amended tax report or justification within 5 (five) days, or if the justifications are deemed insufficient, the tax authority may initiate a tax audit of the taxpayer.

10. Act of Tax Violation

If tax violations are detected, an act of violation must be drawn up:

• Within 10 (ten) days from detection of the violation but no later than the end date of the audit; and
• Before the final conclusion is prepared.

The act must be signed by the tax officer and the taxpayer.

11. Decision on Additional Tax Assessments

Based on the act and other audit materials, the head (or deputy head) of the tax authority must, within 5 (five) days, decide whether to impose additional taxes and penalties or deny them.

The decision must be delivered to the taxpayer within 2 (two) days and comes into force 1 (one) month after delivery.

12. Interim Measures

Even before the decision enters into force, the head (or deputy head) of the tax authority may issue a separate decision imposing interim measures to secure enforcement.

These measures may include:

• Prohibition on the alienation (or pledge) of the taxpayer’s property without tax authority consent;
• Suspension of the taxpayer’s bank account operations.

13. Appeal of Results

If the taxpayer agrees with the violations and decision, they must pay the additional tax and penalties.

If they disagree, they have the right to appeal within:

• 30 days to the higher tax authority; or
• 10 days to an administrative court.

The higher tax authority may leave the complaint unreviewed if:

• The complaint is unsigned or lacks proof of the representative’s authority;
• It is filed late without a petition for restoration of the missed deadline;
• The taxpayer withdraws it before a decision is made;
• A complaint on the same grounds was previously filed;
• The decision was already appealed earlier;
• The complaint violates procedural requirements;
• The complaint does not comply with form and content requirements;
• The complaint is filed within a criminal case or when the taxpayer has already appealed to court.

The type of court to file with (economic or administrative) depends on the nature of what is being challenged.

Any illegal actions or demands of tax officials related to the audit can also be appealed, and officials can be held liable.

Under Article 13 of the Tax Code of Uzbekistan, all unresolvable contradictions and ambiguities in tax legislation must be interpreted in favor of the taxpayer. However, in practice, the State Tax Committee (STC) and courts often favor the tax authority.

Jurisdiction of Courts

By general jurisdiction rules, tax disputes are considered by inter-district, district (city) courts as courts of first instance (except for cases under the jurisdiction of the Supreme Court, regional, and equivalent courts).

Cases under the jurisdiction of economic courts include:

• Cases on recovery of tax arrears (initiated by the tax authority);
• Cases on refund of funds from the budget (initiated by taxpayers);
• Cases on application of legal enforcement measures.

Cases under the jurisdiction of administrative courts include:

• Cases challenging decisions of tax authorities (initiated by taxpayers);
• Cases challenging actions (or inaction) of tax officials;
• Cases challenging refusal of the tax authority to register a consolidated group of taxpayers.

Filing a complaint with a higher tax authority or a court suspends enforcement of the challenged decision or action (including collection of additional taxes and fees) until the complaint is resolved by the higher authority or until the court decision enters into force.

The taxpayer must notify the tax authority in writing and attach a copy of the complaint.