Free Economic Zones in Uzbekistan: Benefits and Conditions for Participants

Types of special economic zones

Under Article 9 of the Law, special economic zones are created as free economic zones, special science and technology zones, tourist and recreational zones, free trade zones and special industrial zones. A zone is created by decision of the President for up to thirty years; extension, boundary changes and liquidation are also decided by the President (Article 20).

A free economic zone is intended for new production capacity, high-tech manufacturing, output of competitive, import-substituting and export-oriented finished industrial goods, and development of infrastructure and logistics (Article 10).

Requirements for the investment project

• General requirements for all zones (Article 15): compliance with legislation on architecture and construction, technical regulation, ecology, occupational safety and industrial safety; available sources of financing; consistency with the zone's specialisation; energy-efficient equipment and technology.
• For FEZs (Article 16): the project must provide for new types of products that are not made in Uzbekistan or are made in volumes that do not meet domestic demand.
• Processing must be substantial: a change in the tariff heading of the final product compared with the raw materials at the level of one of the first four digits of the HS code, or an increase in value-added output of at least 30%.
• Projects for products whose market is saturated or where domestic producers meet demand are not allowed.
• Activities prohibited in the zones include production of alcohol and tobacco, weapons, cement, concrete and bricks, and the processing and burial of waste (Article 19).

How to obtain participant status

Within five business days of leasing a land plot through an electronic online auction, or an unused building, the investor files documents to register a legal entity at the zone's location (Article 29). The legal entity becomes a participant after signing the investment agreement and being entered in the Register of Participants; a fee set by the Cabinet of Ministers is paid for registration.

A participant may use the benefits and preferences, obtain land through auction and require the zone directorate to provide infrastructure on time under the investment agreement. It must meet its obligations under the agreement on time and report to the directorate on the agreement and business plan (Article 30).

Tax benefits under the Tax Code

• Property tax and land tax — exemption depending on the amount invested, for a period set by decision of the President (Part 1 of Article 473 of the Tax Code); the period runs from the date the participant certificate is received (Article 474).
• Profit tax — exemption depending on investment: USD 3–5 million — 3 years; USD 5–15 million — 5 years; USD 15 million and above — 10 years (Part 2 of Article 473). The period runs from the date the production facility in the zone is commissioned.
• For those obtaining status from 1 April 2026, the profit tax benefit takes a different form — a right to accelerated depreciation of fixed assets for a period depending on the amount invested (Part 3 of Article 473). This is a fundamental change for the financial model: instead of zero tax, the tax burden is shifted to later years.
• All benefits apply only to the activities set out in the Investment Agreement with the zone directorate (Part 4 of Article 473) and only to activity within the zone (Article 37 of the Law).
• If a participant increases its investment to a threshold with a longer period, it may extend the benefits in line with the actual amount invested (Article 474).

Customs benefits and VAT

• Exemption from customs payments (other than VAT and customs clearance fees) on construction materials not produced in the country and imported for the project during construction (Article 39 of the Law).
• Exemption from customs payments (other than clearance fees) on imports of process equipment with no domestic equivalents, according to an approved list.
• No customs payments (other than clearance fees) on imports of raw materials, materials and components used to make products for export.
• A deferral of import VAT for up to 120 days.
• The special customs regime does not apply to transit of goods through the zone (Article 38).

Risks: loss of status and oversight

Status is lost on liquidation of the zone or the legal entity, relocation outside the zone, failure to meet investment agreement obligations, at the participant's request, and on reorganisation — except mergers or acquisitions between participants with the same benefits (Article 31). If obligations are not met, the directorate draws up an act describing the breaches (Article 32). After losing status, benefits cannot be used from the 1st day of the month in which status was lost (Article 474 of the Tax Code).

Two more restrictions are often overlooked. FEZ participants cannot join a consolidated group of taxpayers (Article 62 of the Tax Code), and their transactions with non-participants may be reviewed under transfer pricing control. Prices for intra-group supplies between a participant and a parent company outside the zone should be supported in advance.