Foreign Currency Accounts and Settlements.

Reforming the foreign exchange market was launched in compliance with the Presidential Decree №УП-5177 dated the 2^nd of September 2017 “On priority measures on liberalization of foreign exchange policy”[i]. The following can be stated after summarizing the changes that affected the procedure for maintaining accounts and mutual settlements in foreign currency on the territory of the Republic of Uzbekistan.

1. Amendments introduced into the “Order for maintaining accounts in foreign currency by commercial banks” (reg. №511 of the Ministry of Justice dated the 22^nd of October 1998).

Firstly, changes have been introduced related to permissible sources of transfer of foreign currency amounts to accounts of legal entities-residents of Uzbekistan:

Previous edition

Amendments introduced by the Resolution of the Central Bank’ Board of Directors on the 12^th of September 2017.

а) on payments linked with conducting foreign trade operations;

b) those bought through commercial banks on the territory of the Republic of Uzbekistan;

c) cash foreign currency received in cases established by legislation;

d) on credits, investments and loans received in compliance with the order established by legislation, and payments linked with their implmentation;

e) on entering into the legal entities’ statutory fund (authorized capital) in accordance with the procedure established by law;

f) on payments of non-trade nature in cases established by legislation;

g) those transferred from the account owner’s accounts opened in other banks of the Republic of Uzbekistan;

g-1) those received on account of sales of air tickets in accordance with legislation**;

h) receipts of funds in other cases established by law.

е) on payments for plastic payment and credit cards in accordance with international practice;

**Sub-point g-1 lost its effect as of the 12^th of September 2017.

Secondly, amendments have been introduced related to the purposes of using the amounts on the accounts of physical and legal entities-residents of the Republic of Uzbekistan.
Thus, the amounts on the accounts of physical entities-residents (including those carrying out entrepreneurial activities without forming a legal entity) may be used for:

Previous edition

Amendments introduced by the Resolution of the Central Bank Board of Directors as of September 12, 2017

Amendments introduced by the Resolution of the Central Bank Board of Directors as of November 23 2017.

а) transfers:

- abroad to the accounts of physical persons in the amount of not more than the equivalent of US$ 5000 ;

- abroad on the basis of invoices, accounts and such other documents for training, treatment and insurance;

- abroad for expenses linked with formalizing, issuance and use of patents and certificates of authorship;

- for the payment of services of consular and such other official establishments of foreign states;

- for the payment of monetary funds on the basis of court sentences, decisions and rulings of noratry and judicial agencies;

- for participation in the competitions and exhibitions, as well as expenses linked with employment on the basis of contracts and such other operations of non-trade nature;

- to the accounts in foreign banks opened in compliance with the requirements of the legislation of the Republic of Uzbekistan in the name of the account holder;

- to other accounts of the account owner opened in other banks of the Republic of Uzbekistan;

b) paid in cash foreign currency (payment documents in foreign currency), including for export abroad, among them, a permit for the export of foreign currency is issued for the amount determined in accordance with the current regulatory enactments;

c) paid or transferred in the territory of the republic in soums at the rate of buying foreign currency on the date of transaction;

d) used to pay commission on bank operations in foreign currency;

e) used for other purposes stipulated for by the current legislation and regulatory acts of the Central Bank of the Republic of Uzbekistan.

b-1) paid in cash in foreign currency from the foreign currency accounts of physical persons-residents carrying out entrepreneurial activities without the formation of a legal entity.

4.4.1. amounts, that are on the accounts of physical entities carrying out entrepreneurical activities without the formation of a legal entity, may be used by the owner of the accout for paying the import of goods (works, services).

Thus, as determined by the Presidential Decree No.УП-5177, individual entrepreneurs engaged in the import of goods (works, services) can accumulate current trade revenue and such other income on their accounts in banks and, subsequently, acquire foreign currency in the order established for physical entities, that is, with crediting of purchased foreign currency funds to international plastic cards, and use them without restrictions abroad, including for the import of goods.
The amounts from the accounts of legal entities-residents of Uzbekistan, in their turn, can now be:

Previous edition

Amendments introduced by the Resolution of the Central Bank Board of Directors as of September 12, 2017

Amendments introduced by the Resolution of the Central Bank Board of Directors as of November 23 2017.

а) listed on payments related to the implementation of current international transactions;

b) used for payment of commission on bank operations in foreign currency, payment of expenses related to sending employees for business trips outsdide the Republic of Uzbekistan (including in cash);

c) used for repayment of credits, loans, interest and such other revenues;

d) transferred to expenses on introducing legal entities in the statutory fund (authorized capital) in accordance with the procedure established by law;

e) used for sale through commercial banks on the territory of the Republic of Uzbekistan;

f) listed for non-trade payments in cases established by law;

g) transferred to other accounts of the account holder opened in other banks of the Republic of Uzbekistan;

h) used in other cases established by law.

2.4.1 amounts, that are on the currency accounts of farms can be paid out in cash foreign currency, at the order of the account holder.

g-1) paid out in the form of dividents.

Thus, within the framework of guaranteeing free disposal of the farms’ own foreign currency funds that have incomes in foreign currency, they are also entitled to the right to withdraw foreign currency cash from their bank accounts.

Apart from that, the right to payment of dividents in foreign currency to non-residents or residents without limitation of amounts and without delimitation of founders (shareholders, participants, members) was introduced starting from the 24^th of November 2017.

2. Amendments introduced to the Regulation “On the procedure of acceptance of cash foreign currency on the territory of the Republic of Uzbekistan (reg. №1165 of the Ministry of Justice dated the 12^th of August 2002).

Article 18 of the Law of the Republic of Uzbekistan “On foreign currency regulation” determines in which cases shall be allowed settlements and payments in foreign currency on the territory of the Republic of Uzbekistan. The list of admissible cases established by this article is not exhaustive.

“Other cases established by law” are the cases when settlement in foreign currency shall be allowed following their determination by by-laws, in particular by the Provision “On the procedure for accepting cash foreign currency on the territory of the Republic of Uzbekistan”. In connection with the ongoing reforms in the sphere of currency legislation, the aforesaid Provision has been also amended by the Resolution of the Central Bank, the Ministry of Finance, and the State Tax Committee on the 22^nd of November 2017, which excluded the following grounds for payment in foreign currency:

Grounds for payment in cash foreign currency, which shall be maintained in compliance with the current edition:

Excluded grounds for payment in cash foreign currency:

c) consular services of foreign states’ diplomatic representative offices;

e) transactions linked with settlement of accounts at the duty free shops, as well as settlements in the realization of goods and services to passengers en route of international means of transport during international deliveries;

f) repayment of urgent and overdue loans and interest on them in foreign currency;

g) contribution to the statutory fund (authorized capital) of legal entities in accordance with the procedure established by law;

h) contribution of funds to deposits in commercial banks;

i) contribution of funds made for charitable purposes;

j) repayment of debts under insurance and reinsurance contracts in accordance with the procedure established by law;

m) other cases established by law.

а) exported goods (works, services) of small enterprises’ own production;

b) air tickets sold by air companies and their agents in accordance with the procedure established by law;

d) customs duties provided for by law;

k) carrying out transport operations and charter (chartering) services to physical entities in case of rendering services related to transit, transportation of the exported or imported cargo by the freight forwarder, carrier and freighter;

l) commission on bank operations in foreign currency;

m-1) services for accommodation in hotels and other accommodation facilities provided to foreign citizens and stateless persons who do not have a permanent place of residence in the Republic of Uzbekistan;

m-2) tourist services of foreign partners through domestic tourist operators by citizens of the Republic of Uzbekistan.

It has to be noted however, that since the Law “On currency regulation” (Article 18) provides for payments in foreign currency with the international payment cards on the territory of the Republic, and this is also allowed by Presidential Decree No.УП-5177, payment for works, services, goods and own products, including those for which cash payment in foreign currency is prohibited can be accepted both from non-residents, as well as from residents with the currency payment or credit card. The procedure of application of payment terminals shall be regulated by a special Regulation on the procedure for fitting out and application of payment terminals while effecting monetary settlements with the population (reg. MU №1986 da

[i] See the Publication dated the 6^th of September 2017 “The launch of foreign exchange policy liberalization in Uzbekistan”.