Government expands local revenue base under new tax distribution rules

Starting January 1, 2026, Uzbekistan will begin redirecting a portion of value-added tax (VAT) revenues to local governments as part of broader fiscal decentralization efforts. Under the new framework, 5% of collected VAT will be transferred to the local budget of the city of Tashkent, while 20% will be allocated to the local budgets of other regions.

The government will also introduce clear standards for distributing revenues to district and city budgets from funds credited to local budgets. These sources will include VAT, corporate income tax, excise taxes on the retail sale of gasoline, diesel fuel, and gas, as well as state duties, fines, and fees.

In addition, district and city councils of people’s deputies will be authorized to raise the maximum rates of certain local fees, including fees applied to public catering businesses, to up to 20%. All proceeds from these fees will be fully retained by the budgets of the respective districts and cities.

Local budgets will also receive new revenue streams. Funds previously transferred to the state budget from the direct lease of agricultural land will instead be redirected to district and city budgets. Likewise, taxes paid to the republican budget by dehkan, specialized, and clothing markets will be reassigned to the budgets of the districts and cities where these markets operate, with the aim of improving local infrastructure.

Prepared by: Дониёр Тухсинов

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