Due diligence in Uzbekistan: financial and tax review before a deal

Financial due diligence and quality of earnings

The financial workstream answers two questions: how much the company earns on a recurring basis, and which balance-sheet items are debt in substance. Even error-free statements can show a profit that will not repeat after the deal.

• quality of earnings: we normalise EBITDA and net profit — removing one-off items, the owner's personal costs and the effect of off-market related-party pricing, and adding unrecognised provisions;
• revenue: support by cash received, dependence on the largest customers, cut-off between periods;
• working capital: the normal level of receivables, payables and inventory — the basis for the completion price adjustment;
• net debt: bank and shareholder loans, leases, overdue amounts owed to suppliers and the budget, unpaid dividends;
• assets and off-balance-sheet exposure: collectability of receivables, pledges, guarantees given for third parties, litigation.

Tax due diligence: look-back period and key exposures

The limitation period for a tax liability is three years after the end of the tax period (Article 88 of the Tax Code), so we cover at least the last three years plus the current period. Where a rate, exemption or deduction was applied subject to temporary conditions, the period is extended by the term of those conditions (Articles 84 and 88).

• completeness of filings and payments, differences with the tax authority's records, open audits and disputes;
• exemptions and special tax regimes, input VAT and electronic invoices, personal income tax and social tax;
• related parties: direct and/or indirect participation of more than 20 percent; an individual's interest includes those of their spouse, parents, children and siblings (Articles 37, 38);
• controlled transactions: between related Uzbek tax residents where annual income from their transactions exceeds UZS 5 billion — or UZS 500 million where one party applies a special tax regime or tax incentives or participates in a special economic zone and the other does not (Article 180); foreign-trade deals in non-ferrous and precious metals, mineral fertilisers, hydrocarbons and petroleum products, cotton fibre and yarn, and deals with parties from offshore jurisdictions (Article 181); a notification is due by the deadline for the annual financial statements (Article 182).

Share deal or merger: who bears historic tax liabilities

In a share deal the company itself remains the taxpayer, liable for its obligations with all of its property (Article 4 of ZRU-1137; Article 4 of the Law on Joint-Stock Companies), so past-year reassessments are paid from its money — in effect, from the value of your stake.

In a reorganisation, tax obligations pass to the successor regardless of whether it knew of the underpayment, including fines imposed before the reorganisation was completed (Article 92 of the Tax Code). In an accession the absorbing company is the successor, so the target should be reviewed before the reorganisation decision.

Buying an LLC stake under the 2026 law

The Law on Limited Liability Companies (ZRU-1137) has been in force since 22 July 2026; the 2001 law No. 310-II has been repealed.

• transfer: title passes when the entry is made in the Unified State Register of Business Entities; breaching the form of the agreement or the registration procedure makes the transaction invalid; a stake that is not fully paid can be transferred only to the extent paid; all rights and obligations of the participant that arose before the transfer pass to the buyer (Article 21);
• pre-emption: the seller notifies the other participants and the company in writing of the price and terms and, if the right is not exercised within one month (the charter or a participants' agreement may set another period), may sell to a third party only on those terms; if the right is breached, a participant may, within three months of learning or when it should have learned of the breach, ask the court to transfer the buyer's rights and obligations to it (Article 21);
• mandatory offer: a buyer who held less than 50 percent of the charter capital and reaches 50 percent or more must within fifteen days offer the minority participants to buy their stakes at market value, and must buy from those who consent in writing within thirty days (Article 21); we build the potential buy-out into the deal budget;
• pledges and approvals: a stake is pledged to a third party with the company's consent by a decision of the participants' meeting (Article 22); major transactions (above 25 percent of net assets unless the charter sets a higher threshold) and interested-party transactions made without proper approval may be declared invalid by a court (Articles 49, 50);
• related-party transactions worth 10 percent or more of net assets must be approved after an independent external audit firm has reviewed the terms, taking into account the market value determined by an appraiser (Article 58).

Joint-stock companies: when an audit firm must review the deal terms

• decisions on a major transaction (including a loan, credit, pledge or guarantee) — where the book value of property disposed of or the value of property acquired exceeds 15 percent of net assets, outside the ordinary course of business — and on a related-party transaction worth 10 percent or more of net assets must be taken after an independent external audit firm has reviewed the terms, taking into account the appraised market value; a major transaction made in breach of the law may be declared invalid by a court (Articles 83, 84, 88);
• a person who held less than 50 percent and comes to own 50 percent or more of the shares must within thirty days announce an offer to the remaining shareholders to buy their shares at market value (Article 40).

What we request from the seller

Access is agreed before work starts: the company may provide documents containing confidential information to third parties under a non-disclosure agreement (Article 54 of ZRU-1137). A refusal to share part of the data is itself a finding.

• constituent documents, minutes, evidence that the charter capital was paid;
• financial statements, the accounting database, audit opinions, tax audit reports;
• loan, pledge and key commercial contracts, related-party deals;
• debt breakdowns, headcount data, litigation.