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New measures in support of the textile industry

New measures in support of the textile industry

  A presidential decree “On measures to further deepen reforms and expand the export potential of the textile and garment-and-knitwear industry” dated February 12, 2019, provides for measures aimed at supporting and developing the textile and garment-and-knitting sector of economy.
 In particular, it has been established that as of April 1, 2019, an order in compliance with which:

  1. the costs associated with the payment of interest on loans from commercial banks allocated to garment-and-knitwear enterprises in 2019-2021, exporting not less than 80% of finished goods produced, shall be covered on account of the State Fund for Supporting the Development of Entrepreneurship under the Cabinet of Ministers of the Republic of Uzbekistan in the following order:

  -in the amount of 25% of the established interest rate on loans issued in national currency for the replenishment of working capital (for the purchase of yarn, linen, fabrics and materials for the production of finished textile products), but not more than 5 percentage points;
  - in the amount of 50% of the established interest rate on loans issued in foreign currency for modernization of production (purchase of premises and equipment).

  2. refund to the taxpayer of the VAT amount, formed as a result of applying the zero rate, shall be carried out in an expeditious manner within 7 working days from the date of submission of necessary documents in full. This cancels the requirement to provide information that is available with the state tax service, including the act of reconciliation of taxes and such other obligatory payments and calculations on the value-added tax.
   On the instructions given in the Resolution, within one month period the Ministry of Finance and the State Tax Committee should develop and introduce an automated program for consideration of applications incoming from business entities for the refund of VAT generated by turnover taxed at zero rate.
  That is, the current procedure (Chapter 41 of the Tax Code of the Republic of Uzbekistan, the Regulation “On the procedure for refunding the excess tax amount to the taxpayer's bank account on the value added tax generated as a result of application of the zero rate”, registration No.2775 with the Ministry of Justice on April 7, 2016) shall be amended with relevant changes.
   3. the exclusive requirement stipulated for in the Regulation “On the Procedure for the Sale of Cotton Fiber at Exchange Trading” (Annex No. 2 to the Resolution of the Cabinet of Ministers (RCM) No. 106 dated February 12, 2018) on the provision of a bank guarantee for the sale of cotton fiber through exchange trading shall be canceled. In this case, the method of ensuring the fulfillment of mutual commitments shall be determined between the parties on a contractual basis.
  It has also been established that from the harvest of 2019 onward, when selling cotton fiber to organizations of the republic, VAT shall be calculated on the basis of its actual sale price, regardless of prevailing world prices for cotton fiber. This refers to the eleventh part of Article 204 of the Tax Code of the Republic of Uzbekistan and the current Regulation “On the Procedure for Selling Cotton Fiber and Making Calculations” (Appendix No.1 to the RCM No.106 dated February 12, 2018). According to the current norm, if world prices for cotton fiber are added up:
 - below the approved wholesale price list with consideration of VAT, then while selling cotton fiber to organizations of the republic, suppliers calculate the value-added tax based on actually established prices on the stock exchange, using the following formula: actual selling price multiplied by 20/120 (VAT = actual selling price x 20/120); 
  - above the approved wholesale price list with consideration of VAT, then while selling cotton fiber to organizations of the republic, suppliers calculate the value-added tax based on the wholesale price list.
     That is, now, starting from the harvest of 2019, the calculation shall be made on the basis of the actual selling price, regardless of world prices.
  It is expected to develop and adopt the Concept of Accelerated Development of the Textile and Garment-and-Knitwear Industry for the period of 2019–2025 aimed at developing this sector and bringing the volume of textile exports up to US$ 7 billion by the year 2025 on account of processing the entire volume of cotton yarn produced in the country.
      In addition, on the instructions of the President, within the period of three months, the “Uztextilprom” Association jointly with the National Project Management Agency (NPMA) under the President of the Republic of Uzbekistan is expected to launch a single information portal of textile and garment-and-knitwear (hereinafter referred to as the Portal), providing for  publication of a list of tenders (competitions), exhibitions and fairs of this sector, including foreign ones; remote training of small business entities in the full cycle of exports of textile and garment-and-knitwear products; familiarization with full-fledged reports - analysis of imports and exports of textile and garment-knitwear products in all countries of the world; creation of Uzbekistan’s interactive map with indication of locations of manufacturers of textile and garment-knitwear products and suppliers of relevant services, materials and raw materials; placement of nomenclature and volume of services, materials and raw materials produced and required for domestic textile enterprises and such other useful information resources for the subjects of this sector of economy.
     The President has also instructed:
 -  the “Uzstandard” Agency jointly with the “Uztextilprom” Association to determine prior to March 1, 2019 the list and timetable for the adoption of international standards for the products of the textile and garment-and-knitting industry and its testing methods.
 -  the Ministry of Investments and Foreign Trade of the Republic of Uzbekistan, jointly with stake holding organizations and commercial banks, to implement within two months period a “pre-export financing of textile and garment-and-knitwear enterprises under the pledge of existing contracts for the export of their products”.  
  -   the State Customs Committee of the Republic of Uzbekistan to develop measures to strengthen counteraction to illegal importation of finished textile and garment-and-knitwear products into the territory of the Republic.


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