Chamber of Commerce proposes 6% VAT rate amid inefficient credit system

“Although simplifying VAT refunds has been discussed at high-level meetings, the system remains ineffective in practice. We therefore propose either streamlining the refund process or lowering the VAT rate,” said Davron Vakhobov.

The comments highlight a growing concern that difficulties in reclaiming VAT – rather than the 12% rate itself – are straining cash flow, particularly for smaller firms.

During an April 21 meeting with entrepreneurs in the public catering and gastronomy sectors, a business owner from Navoi region noted that rising prices are inflating turnover. This is pushing many small companies toward the mandatory VAT registration threshold of UZS 1 billion.

Under current regulations, businesses exceeding this threshold must register for VAT, while those below it pay a turnover tax. While companies collect VAT from consumers, they are entitled to reclaim input tax through a credit mechanism – a process businesses claim remains inefficient.

Vakhobov noted that raising the VAT threshold could further complicate the tax landscape. He pointed to an alternative proposal currently under discussion with the government: a flat 6% turnover tax regardless of company size. To date, authorities have instead focused on accelerating VAT refunds, including proposals to fast-track repayments of 40–50% of eligible amounts.

He concluded that while a reliable refund system would ease pressure on the private sector, a formal rate reduction must be considered if tangible improvements are not realized.