Uzbekistan intends to extend tax benefits for capital market investors for another ten years. If the proposed amendments to the Law "On the Capital Market" are adopted, the current regime for dividend income from shares and bond income, which expires at the end of 2028, will be extended until 2038.

For the debt market, preferences are planned to be expanded: exempting foreign currency bonds and sukuk income from taxes.

What is currently in effect

The regime was established by presidential decree No. PP-90 and has been in effect since April 1, 2022:

  • dividends on shares for individuals — both residents and non-residents — are exempt from tax;
  • for non-resident legal entities, a rate of 5% applies to dividends, the same as for local companies;
  • interest on corporate bonds is exempt from personal income tax and corporate income tax regardless of residency status.

Before PP-90 was introduced, there was no complete exemption: rates of 5% for residents and 10% for non-residents applied.

Why tax affects coupon rates

Analyst at investment company Freedom in Uzbekistan Boris Bondar explains: the investor's tax burden becomes a pricing factor for the issue. If the coupon is subject to tax, the issuer must set a higher gross coupon to provide the investor with the required net return.

Zeroing out the tax eliminates this wedge — the same level of net return is achieved at a lower borrowing rate. For the issuer, this is direct savings on funding costs.

Parity with government securities

Income from government securities is exempt from tax on a permanent basis. Before tax benefits were extended to the corporate sector, private companies were at a disadvantage compared to the government not only due to credit risk differences but also due to tax differences.

The fewer tax differences between instruments, the more an investor's decision is determined by risk, maturity, liquidity, and yield.

The main value is predictability of the horizon

According to the expert, international experience shows: instability in conditions hurts demand faster than the benefit itself helps. A long horizon until 2038 removes the risk that taxes will be reintroduced mid-life of a security.

The practical effect is twofold: investors are more willing to accept longer maturities, which opens the window for long-term issues that the market severely lacks; and parity of net returns with deposits is maintained, which currently drives retail demand into bonds.

For retail depositors, this means comparing securities with deposit rates after tax deduction — with a zero rate, there is no gap between stated and actual returns.

Effect on business exit

A separate nuance: when selling a package through a stock exchange, income from the sale of securities is exempt from personal income tax. If the business is structured as an LLC, upon sale of a stake, the owner pays 12% on the difference between the sale price and incurred expenses.

What international experience shows

Brazil launched infrastructure bonds (debentures incentivadas) in 2012: interest and capital gains are exempt from income tax provided funds are directed to infrastructure and with a minimum circulation period of four years. For individuals, the rate is zero; for companies, it is 15%. In 2024, the structure was updated, shifting the benefit to issuers and new categories of buyers.

Kazakhstan went more radically: participants of the AIFC and investors on the AIX exchange are exempt from tax on dividends, coupons, and capital gains until 2066. However, the rules within the regime have been repeatedly revised since 2017 — an example showing the difference between the stated term of benefits and their actual stability.

Honest limitations

The effect of the benefit is primarily a shift in savings from deposits to securities and increased market activity, not automatic growth in real economic investment.

Tax benefits do not replace quality corporate debt, transparent issuer reporting, sufficient free-float, and an active secondary market. According to regulatory estimates, a comprehensive set of measures should increase investment volume in the stock market from the projected 10 trillion soums in 2026 to 20 trillion by 2030.

For now, this is a proposed provision: until amendments are adopted, the baseline end date for tax benefits remains December 31, 2028.

This material is for informational purposes only and is not an investment recommendation.