Authorities in Uzbekistan are considering the implementation of a unified turnover tax or a reduced Value-Added Tax (VAT) rate without offset for public catering services. Deputy Chairman of the Tax Committee, Alimzhan Fayzibaev, addressed this proposal on February 27 during discussions with restaurateurs.
Calls for Unified Taxation System
At a meeting attended by the Chairman of the Chamber of Commerce and Industry, Davron Vakhabov, representatives from ten major national cuisine establishments advocated for the adoption of a unified taxation system in public catering. Vakhabov highlighted the disparity in taxation between enterprises, citing concerns over maintaining competitiveness.
Implications of Current Taxation Structure
Vakhabov elucidated the challenges posed by the existing taxation framework, noting the impact on pricing strategies within the industry. He illustrated the scenario where VAT payment on a dish valued at UZS 50,000 ($4) results in a price hike to UZS 56,000 ($4.48), whereas neighboring establishments not subject to VAT incur a 4% turnover tax, resulting in a price of UZS 52,000 ($4.16).
Push for Tax Reform
Responding to queries regarding the prospect of VAT reduction for public catering enterprises, Vakhabov acknowledged the possibility of reducing the VAT rate without specifying the anticipated adjustment. He referenced international practices, such as France's application of a reduced VAT rate to restaurants, as potential models for Uzbekistan.
Deputy Chairman Fayzibaev outlined the Tax Committee's submission of proposals for a unified turnover tax regime for public catering establishments. He emphasized the international precedent for such taxation procedures and indicated that proposals for VAT rate reduction were also under consideration.
Industry Perspectives
Timur Musin, founder of Caravan Group, previously underscored the adverse effects of current VAT regulations on public catering enterprises. Musin advocated for a reduction in the VAT rate from 12% to 6% to alleviate financial burdens and foster a more conducive operating environment for businesses within the sector.
Earlier, it was reported that within the catering sector comprising 18,000 enterprises, only 2,300 were contributing to the Value Added Tax (VAT) in 2023. Multiple establishments exploited registration loopholes by creating 3-4 companies, each with turnovers below the UZS 1bn ($80,892) threshold.
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