Non-public Education Gets Government Support
Two normative acts, passed already at the beginning of the academic year in the field of non-public education services, turned into an important event for investors which carry out their activities in this sphere. Thus, the Resolution of the President of the Republic of Uzbekistan №ПП-3276 “On Measures on Further Development of Activities on Rendering Non-Public Educational Services” dated September 14, 2017 outlined the most important changes and priviliges in this area.
In particular, a procedure of rendering non-public educational services by legal entities on the basis of licenses, in the first place, is being introduced starting from the 1st of January, 2018 irrespective of their forms of ownership and organizational and legal form. In compliance with the Law “On Education” and relevant by-laws, registration of legal entities with the objective of getting a license for carrying out non-public educational services were possible in the past only on condition of setting them up in the form of an establishment – NEE (non-government educational establishment) - which made up an organizational and legal form of non-commercial legal persons.
Tax benefits have been established for legal entities engaged in rendering non-public educational services in the sphere of pre-school and general secondary education. Up until the 1st of January 2018 they shall be exempted from paying:
- all types of taxes and mandatory contributions into the state trust fund (with the exception of a unified social payment) with the targeted channeling of released funds for fitting them out with modern teaching aids, purchase of expendable materials, inventory, reconstruction and overhaul of buildings and structures, as well as provision of free educational services to socially vulnerable categories of population;
- unified social payment from the salaries and wages of foreign teachers and specialists involved in the educational process under the employment contract.
In addition, it has been established that a resolution will have to be elaborated in respect of legal entities engaged in activities for the provision of non-public educational services in the field of preschool and general secondary education, that would provide for exemption from customs payments (with the exception of fees for customs clearance) for new educational equipment and expendable training materials not produced in the Republic of Uzbekistan, and approval of their lists.
We would like to remind that the educational services had earlier been covered already with tax incentives. In accordance with the Resolution of the President of the Republic of Uzbekistan №ПП-325 “On Measures for Accelerated Development of the Sphere of Services and Service Sector in the Republic of Uzbekistan in 2006-2010” dated the 17th of April 2006, the educational services, including computer training were included into the List of services exempted from paying a single tax payment and income (profit) tax. The effect of the Resolution of the President of the Republic of Uzbekistan “On the Forecast of the Main Macroeconomic Indicators and Parameters of the State Budget for 2017” had been extended till the 1st of January 2020. However, considering that this benefit indicated in these Resolutions covered micro-firms and small businesses, its application in regard to non-public educational establishments remained disputable and controversial because of absence of normative-legal basis for relating non-commercial organizations to micro-firms and small businesses – small business entities. But now the application of the aforesaid benefits will not cause any controversy with consideration of provided opportunities to legal entities, rendering services in the sphere of education, to register in any organizational and legal form.
New rules in regard to legal entities, rendering non-public educational services, have been introduced, which represent in themselves an important support of the system:
- foreign teachers and specialists shall be exempt from paying physical entities’ income taxes and deductions into the non-budget pension fund under the Ministry of Finance of the Republic of Uzbekistan within the framework of concluded labor contracts;
- employers will have the right to cover two-way air tickets’ costs (not more than twice a year under long-term labor contracts);
- employers will have to cover accommodation costs, incurred by foreign teachers and specialists working under short-term labor contracts (for the term of no longer than one month), while accommodation expenses under long-term labor contracts will have to be reimbursed along with the payment of salaries and wages in compliance with conditions of concluded agreement;
- within the established procedure the Ministry of Foreign Affairs of the Republic of Uzbekistan will have to ensure the formalization of entry visas to foreign teachers and specialists, invited to work by legal entities engaged in activities on rendering non-public educational services, without charging consular and such other fees.
Commercial Banks have been instructed to allocate soft loans to legal entities involved in activities on rendering non-public educational services in the sphere of pre-school and general secondary education for the period of not less than 5 years for shaping their start-up capital, acquisitions, reconstruction and major overhaul of buildings and structures, purchase of modern training equipment and educational facilities at a rate not exceeding the refinancing rate of the Central Bank of the Republic of Uzbekistan.
The Resolution herewith specifies also the high social responsibility of legal entities involved in the provision of non-public educational services in the field of pre-school and general secondary education. It has been established in particular that they enroll on a competitive basis for free (grant) training talented and endowed children from families in need of social support, within the limit of not less than 10% from the overall number of average annual contingent of pupils with financing their education at the expense of income collected on account of rendered educational services. Moreover, a decision on continuation of free (grant) education within subsequent years shall be taken by a legal entity engaged in the activities on rendering non-public educational services depending on the material condition of the student’s family and his/her academic performance results.
The Resolution also entrusted the State Committee of the Republic of Uzbekistan on the promotion of privatized enterprises and development of competition jointly with the Council of Ministers of the Republic of Karakalpakstan, regional administrations and the City of Tashkent to carry out within the established procedure the sale of unused buildings, premises and facilities under public ownership to legal entities engaged in the activities on rendering non-public educational services on conditions of government-private partnership.
Such a decision in the past has been noted only in relation to pre-school educational establishments in the Resolution of the President “On Measures on Radical Improvement of the System of Pre-School Education” dated the 9th of September 2017. This Resolution established in part that commencing from the 1st of January 2018 new pre-school educational establishments will have to be set up in Tashkent, Nukus and regional centers as an experiment on conditions of the public-private partnership, among them those envisaging:
– free allocation to investors land plots and vacant premises for the purposes of creation of modern socially accessible pre-school educational establishments;
– possibility of providing investors with tax and such other benefits needed for creation of pre-school educational institutions, especially in regions with the greatest need in such institutions and under-developed infrastructure;
– implementation of a project by investors on the basis of an agreement on the public-private partnership will have to be concluded for the duration of 50 years by authorized government agencies;
– acceptance by investors of obligations to strictly observe the conditions stipulated in the agreement on public-private partnership, state requirements in the field of pre-school education, sanitary and hygienic standards, preservation of the profile of activities during the whole term of the agreement, as well as ensuring the social accessibility of the pre-school educational institutions’ services costs.
Apart from that, as an experiment, the pre-school educational institutions, located in the City of Tashkent, will have to be allowed to conclude direct contracts with business entities on the delivery of food and ready-made meals that meet the quality and sanitary-hygienic standards.
It has to be admitted in conclusion that in compliance with the Resolution of the President dated the 14th of September 2017 it is expected within the next two months to pass government acts, which envisage:
- introduction of efficient mechanisms of the public-private partnership in the sphere of rendering non-public educational services;
- improvement of organizational and legal forms and procedure of the government registration of legal entities engaged in activities on rendering non-public educational services with consideration of the best foreign practices;
- control mechanisms for monitoring the activities of legal entities engaged in rendering non-public educational services;
- approval of the Provisions on Licensing the activities on rendering non-public educational services.
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