Tax Audit and Appeal of Its Results (Uzbekistan)

A tax audit is the most comprehensive inspection conducted by the tax service of Uzbekistan. This audit is carried out to verify the correctness of calculation and payment of taxes by the taxpayer (or tax agent) by reviewing financial and tax reporting for accuracy and compliance with all aspects of tax legislation, as well as the procedure for the formation and reflection of tax liabilities in accounting and tax records.

Taxpayers (legal entities and individual entrepreneurs) do not always agree with the results (outcomes) of a tax audit. Below, we outline the stages of initiation, conduct, and appeal of the results of a tax audit.

1. When and for Whom a Tax Audit May Be Conducted

A tax audit is conducted:

• For taxpayers classified as having a high level of tax risk (as determined in Annex No. 1 to the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated January 7, 2021, No. 1);
• If, based on the results of a desk tax audit, the taxpayer:

a) did not submit revised tax reports to the tax authority (including after a revised demand); or

b) did not provide justifications for the discrepancies identified, or the justifications provided were deemed insufficient by the tax authority;

• In cases of voluntary liquidation of legal entities (incorporated in Uzbekistan), representative offices, and permanent establishments of foreign companies in Uzbekistan. However, an audit is not conducted if the liquidating taxpayer has an opinion from tax consultants on taxes;
• As part of audits of financial and economic activities of taxpayers conducted in connection with criminal cases;
• For individual entrepreneurs who have ceased activity, except those paying personal income tax at a fixed rate or based on a declaration.

A tax audit is not conducted for operating business entities with an "AAA" stability rating. However, tax audits may still be conducted without restriction:

• For any business entity within the framework of criminal cases (including those with "AAA" ratings);
• For any state-owned enterprises and legal entities with a state share of 50% or more in the charter capital;
• For commercial organizations that have not conducted financial and economic activities since their state registration and have no tax arrears.

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

2. Initiation of a Tax Audit

To initiate a tax audit, the tax authority prepares a tax audit program based on the study and analysis of tax reports and/or other information about the taxpayer’s activities. An order is then issued by the head (or deputy head) of the tax authority to conduct the tax audit and approve the program.

In the case of a criminal case, the order of the tax authority’s management must be issued within 2 working days from the date the tax authority receives a resolution from the authorized officer of the body conducting the pre-investigation, investigator, prosecutor, or court order. The scope of the taxpayer’s audit is determined by the body that requested the audit in the criminal case.

The tax audit of large taxpayers is conducted by the Interregional State Tax Inspectorate for Large Taxpayers based on an order from the head (or deputy head) of the inspectorate.

Large taxpayers include:

a) Enterprises producing excisable goods and providing services subject to excise tax, except those producing alcoholic and beer products;

b) Commercial banks, insurance organizations, commodity, stock, and currency exchanges;

c) JSC “Navoi Mining and Metallurgical Combine,” JSC “Almalyk MMC,” JSC “Uzbekiston Temir Yullari” and organizations established by them;

d) Organizations participating in production sharing agreements (PSA);

e) Legal entities and permanent establishments (branches) of foreign legal entities in Uzbekistan, whose net revenue from the sale of products (goods, works, and services) exceeded 735,000 BRV (approximately USD 21 million) in the previous calendar year or in a consecutive 12-month period, with an average annual number of employees of at least 10 people, except cotton-textile clusters, textile manufacturing enterprises, and wholesale traders of alcoholic beverages;

f) Legal entities engaged in extraction, processing, supply, and sale of hydrocarbons and mineral resources, as well as those producing and supplying electricity, and permanent establishments of foreign legal entities supplying them goods (works, services), except for gas stations;

g) Users of Uzbekistan’s airspace for international passenger transportation and their constituent legal entities;

h) Foreign legal entities providing electronic services where the place of supply is Uzbekistan.

The list of large taxpayers is approved annually by the State Tax Committee (STC) of Uzbekistan no later than 3 months before the start of the next tax period.

Orders for tax audits must be registered in the Unified Electronic Registration System of Inspections.

3. Notifications Before a Tax Audit

Before starting a tax audit of a legal entity, the tax authority must notify:

• The Business Ombudsman – the Commissioner under the President of Uzbekistan for the protection of the rights and legitimate interests of business entities;
• The taxpayer at least 30 calendar days in advance (by registered mail or online via the taxpayer’s personal account).

Prior notice from the tax authority is not required:

• For liquidating legal entities, individual entrepreneurs, representative offices, and permanent establishments of foreign companies;
• When STC approval is obtained if there are signs of tax evasion (concealment/understatement of the tax base);
• In audits conducted within criminal cases.

Tax Code Article 223 lists signs of tax evasion, including non-recording of income, shipment of goods without proper documentation, false documents, missing inventory, unregistered goods, document forgery or destruction, use of fake accounting documents, tampering with fiscal memory software, false expense reporting, shifting revenue to another period, inflated resource consumption norms, underreporting wages, and more.

If any of these signs are present, the taxpayer learns about the audit on the day it begins. Otherwise, they are given at least one month’s notice to prepare documents and fix discrepancies.

4. Obligations of Tax Authorities Before the Audit

Before the audit begins, tax officials must:

• Inform the taxpayer (or representative) of the purpose of the audit, show identification;
• Hand over a copy of the audit order;
• Explain the taxpayer’s rights and obligations related to the audit.

5. Rights and Duties During the Audit

Taxpayers have the right to:

• Deny entry to tax officials if the order is not properly issued or presented, if the inspector is not listed in the order, or if the audit period is not valid;
• Refuse unlawful demands unrelated to the audit;
• Participate personally or through a representative;
• Provide explanations regarding compliance with tax law;
• Refuse to resubmit documents already submitted in previous audits or monitoring;
• Challenge the appointed expert and request an expert of their choice;
• Attend expert examinations, provide explanations, and review expert conclusions;
• Review audit materials and receive a copy of the audit report;
• Appeal unlawful actions of tax officials;
• Provide reports/opinions from tax consultants as justification during or after the audit.

Tax officials have the right to:

• Inspect business premises and taxable objects;
• Request documents from the taxpayer or third parties;
• Seize documents, items, and electronic data carriers;
• Conduct inventory checks;
• Adjust tax bases if transaction prices differ from market value.

6. Duration of the Tax Audit

A tax audit must not exceed 30 working days. In certain cases, it may be extended for 2–6 months, but the total duration must not exceed 6 months.

Witnesses, experts, specialists, translators, and attesting witnesses may be involved, and examinations may be appointed.

7. Completion of the Audit and Audit Report

After completion, a tax audit report (in three copies) is prepared. Supporting documents for any violations found are attached. If no violations are found, this must be stated in the report. One signed copy must be given to the taxpayer within 3 working days.

8. Objections to the Audit Report

If the taxpayer disagrees with the report, they may submit written objections (to the entire report or specific parts) within 10 days. Supporting documents should be attached or provided within the agreed period.

9. Tax Authority’s Decision

The head (or deputy head) of the tax authority must review the report and any objections within 15–20 days and decide:

• To charge additional taxes and penalties or reject them;
• To hold the taxpayer liable for a tax offense or reject liability.

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

10. Interim Measures

Even before the decision enters into force, the tax authority may issue a separate order to apply interim measures to secure execution of its decision, such as:

• Prohibition on disposal/pledging of property without tax authority consent;
• Suspension of taxpayer’s bank transactions.

11. Appeal of the Decision

From the moment the taxpayer receives the decision, they may appeal:

• To a higher tax authority – within 30 days; or
• To an administrative court – within 10 days.

If the decision was made by the STC itself, it can only be appealed in court.

The higher tax authority may refuse to review the complaint if it is unsigned, late without a request for reinstatement, withdrawn, repetitive, improperly filed, or filed regarding a criminal case or court proceeding.

The appropriate court (economic or administrative) depends on what exactly the taxpayer is disputing.

Any unlawful actions or demands by tax officials can also be appealed, and responsible persons may be held accountable.

Tax Code Article 13 states that any irreconcilable contradictions and ambiguities in tax law must be interpreted in favor of the taxpayer. However, in practice, the STC and courts often favor the tax authority.

Tax disputes are heard by inter-district or district (city) courts as courts of first instance, except cases under the jurisdiction of the Supreme Court or regional courts.

Economic courts hear:

• Cases on collection of tax debts (claims filed by the tax authority);
• Cases on refund of funds from the budget (claims filed by taxpayers);
• Cases on application of legal enforcement measures.

Administrative courts hear:

• Cases challenging tax authority decisions;
• Cases challenging actions/inactions of tax officials;
• Cases challenging refusals to register consolidated taxpayer group agreements.

Filing a complaint suspends enforcement of the decision or action until a final decision is made.

12. Administrative and Criminal Liability

If violations subject to administrative liability are detected, the tax authority official prepares an administrative offense report. Appeals of such decisions are made through district/city criminal courts.

Sanctions may be imposed for obstructing the audit or violating tax law even before the audit is completed.

Sanctions include:

a) Suspension of bank account operations for up to 10 days (longer only by court order) if the taxpayer unjustifiably denies inspectors access, is absent at their registered address, or refuses to present requested documents;

b) Administrative fines under Articles 174–175-6 of the Administrative Liability Code;

c) Penalties under Articles 219–227 of the Tax Code (fixed amounts or percentages of the violation).

If criminal violations (Articles 184, 184-1 of the Criminal Code) are detected, a criminal case is opened both regarding the fact of violation and against the guilty persons.