Effective 1 January 2022, Uzbekistan has introduced Controlled Foreign Company (CFC) provisions. The rules provide that for the first year, a person (natural or legal) will be considered a controlling person of a CFC if their participation exceeds 50%. From 1 January 2023, the participation threshold triggering the CFC rules is reduced to 25%. A foreign entity or permanent establishment is considered a CFC if:

• The taxpayer directly or indirectly holds itself, or with associated enterprises, more than 50% (or 25% from 2023) of the foreign entity's or the permanent establishment’s capital, voting rights, or rights to profit; and
• The actual corporate tax paid by the foreign entity or permanent establishment on its profits is less than the difference between the corporate tax that would have been paid under the tax provisions and the actual corporate tax paid on the profits by the entity or permanent establishment.

The CFC rules do not apply where the CFC:

• Is deemed to be an active foreign holding company as per the established standards and is not incorporated in an offshore jurisdiction as per the approved list; or
• Is subject to an effective corporate income tax rate, which is not less than 15% and is located in a country with which Uzbekistan has a double taxation avoidance treaty.

The resident company is required to pay tax on the undistributed profits of the CFC in proportion to its shareholding.

Effective 1 January 2022, forms and procedures for notifications on participation in foreign legal entities and on CFC are approved.