VAT Gap (Tax Break in the VAT Chain) in Uzbekistan

Where a gap comes from

A buyer may offset VAT if the goods are used in taxable activity, an invoice showing the tax amount separately has been received, and the supplier is registered as a taxpayer (Art. 266 of the Tax Code of the Republic of Uzbekistan). The e-invoice system lets the tax authority compare the tax charged by the supplier with the tax offset by the buyer along the entire chain.

A gap arises when, at some link, tax is charged on the e-invoice but not reported or not paid by the supplier: the supplier filed a nil return, disappeared, operates with fictitious turnover, or its VAT payer certificate has been suspended.

• the supplier did not report the sale in its VAT return;
• the supplier reported but did not pay the tax;
• the supplier's VAT payer certificate is suspended, terminated or cancelled;
• the transaction is sham or simulated — the goods never actually existed.

How gaps are detected: pre-audit analysis

Before a desk audit, the tax authority may conduct a pre-audit analysis — an automated analysis of returns and other information about the taxpayer's activity using information systems, without the taxpayer's participation and without an order from the head of the authority (Art. 138).

If discrepancies are found between the returns and the tax authority's data, a notice is sent to the taxpayer's personal account. Within ten days of receiving it, the taxpayer must submit an amended return or a justification of the discrepancies. Failure to do either is a ground for a desk tax audit.

What a gap means for the buyer

If the supplier's certificate is suspended, terminated or cancelled, VAT on goods received from it is not offset by its buyers either (Art. 266¹). When the certificate is reinstated, the tax is offset from the date of suspension.

The tax authorities may cancel or adjust an offset if there is evidence that the right to it arose from a sham or simulated transaction (Art. 266). This is the main risk: a gap at the supplier becomes a reason to test whether the buyer's own transaction is real.

For VAT refunds, a prohibition has applied since 2023: when refunding a negative VAT amount, applying a tax gap coefficient is prohibited (item 8 of Presidential Resolution PP-292 of 4 September 2023). This does not remove checks on whether transactions are genuine, but it rules out mechanically reducing a refund by a coefficient.

From 2026: high-risk e-invoices

From 1 January 2026, the Tax Code introduced a mechanism for risk-rated e-invoices (Law ZRU-1108). VAT on an e-invoice classified as high-risk is not offset by buyers, unless the tax has been paid under the procedure in Art. 266¹ (Art. 267).

That procedure is as follows: tax on the transaction may be paid by the buyer as a tax agent for the purpose of offset. A legal entity, individual entrepreneur or self-employed person receiving goods from the supplier is treated as the tax agent. The amount is offset by the tax agent in the period in which the tax is paid to the budget. Any resulting overpayment at the supplier may be credited or refunded.

Classifying a supplier's e-invoices as high-risk does not deprive the supplier itself of the right to offset VAT on goods it has received. The Cabinet of Ministers sets the procedure for determining the risk level and keeping a register of such invoices. For low-risk e-invoices, an offset may be cancelled only where a sham or simulated transaction is proven.

What to do if you receive a gap notice

• respond within 10 days via the personal account — with an amended return or a written justification of the discrepancies (Art. 138);
• collect evidence that the transaction is real: contract, e-invoice, transport documents, acts, powers of attorney, payment orders, correspondence, photos and warehouse records;
• check the supplier's status: whether its VAT payer certificate is valid and whether it files returns;
• if the e-invoice is classified as high-risk — decide whether to pay the tax as a tax agent to keep the offset (Art. 266¹);
• if needed — reflect the offset adjustment in an amended return to reduce late-payment interest.

How to prevent gaps

Checking a counterparty before a deal is cheaper than a dispute after it. The minimum set is registration details, VAT payer status, resources to deliver (warehouse, transport, staff) and filing history. For major suppliers, it is reasonable to include in the contract the supplier's obligation to report the sale and pay VAT, and liability for suspension of its certificate.

Internally, it helps to reconcile offset VAT with e-invoice system data every month and to monitor notices in the personal account so as not to miss the ten-day deadline.