Tax relief for banks: what will become more expensive for the public?
It has been proposed to reduce profit tax for certain major sectors in Uzbekistan and, instead, introduce value-added tax on banks’ commission-based services. If the initiative is adopted, banks and mobile operators could pay tax at a unified rate of 15 percent instead of 20 percent.
However, there is another side to the tax relief: 12 percent VAT could be applied to maintaining accounts and cards, acquiring, currency exchange and other services. This could make some bank commissions more expensive.
For now, this is not about an adopted decision or a finalized law—the proposal has been submitted for expert discussion.
Whose profit tax could be reduced?
At the “Fiscal Dialogue” held on July 30, the Institute for Fiscal Analysis under the Ministry of Economy and Finance proposed unifying the profit tax rate for certain taxpayers currently subject to a higher rate.
The initiative concerns the following sectors:
commercial banks;
mobile communications operators;
manufacturers of polyethylene granules;
markets and shopping complexes.
For these entities, the current 20 percent rate is expected to be reduced to 15 percent. The basic profit tax rate in Uzbekistan is 15 percent, and it has also been maintained at this level for 2026. The essence of the institute’s proposal is to bring the higher rate applied to certain sectors into line with the general standard.
Analysts expect such a change to reduce sectoral disparities in the tax system, leave companies with more funds at their disposal and increase incentives for investment.
However, according to estimates, reducing the rate by five percentage points could lower state budget revenues by approximately 859 billion soums annually.
What will cover the 859 billion soum shortfall?
The institute has proposed covering the potential budgetary loss by expanding the VAT base for financial services.
A 12 percent VAT could be introduced for certain commission-based services currently exempt from tax. These include:
maintaining bank accounts and cards;
acquiring services at points of sale;
currency exchange operations;
payment processing;
issuing bank guarantees;
depositary services;
certain exchange-related operations.
During the official discussion, the issue of expanding the VAT base by reviewing certain benefits in the financial services sector was raised. The institute’s broader goal is to assess tax benefits based on their economic and budgetary effectiveness.
There is an important distinction here: the current situation is not “zero-percent VAT,” but rather an exemption of certain services from VAT. If the new procedure is adopted, the value of the services will become subject to turnover tax.
Will bank customers pay more?
The introduction of VAT does not automatically mean that commissions will increase by exactly 12 percent. The outcome will depend on banks’ pricing policies.
For example, if a commission of 100,000 soums is currently charged for a particular service, the final payment could rise to 112,000 soums if the bank passes the full VAT burden on to the customer. However, the bank could also cover part of the tax from its own margin, restructure its tariffs or combine certain services into a package.
Individuals have no opportunity to offset VAT, so they would feel any potential price increase in full. Certain businesses that are VAT payers may be able to offset the tax paid for services if the conditions established by law are met.
The change is likely to particularly affect those who frequently use the following services:
regular fee-paying card and account holders;
businesses generating large turnover through terminals;
customers who frequently conduct currency transactions;
businesses using bank guarantees and depositary services.
For this reason, it is not enough to assess the initiative’s actual impact solely by budget revenues. Changes in commissions, the effect on cashless payments and the costs incurred by small businesses must also be calculated separately.
Relief for banks, additional costs for customers?
This is precisely where the controversial aspect of the proposal lies.
On the one hand, banks’ profit tax would be reduced from 20 percent to 15 percent. This means they would retain more net profit. In theory, these funds could be directed toward expanding lending, investing in technology and improving services.
On the other hand, if the state budget’s loss is offset by introducing VAT on financial services, part of the tax burden could shift from banks to their customers.
Therefore, it is important that at least three issues be clearly specified in the final draft:
Which services will be subject to VAT?
Will basic banking services for the public be exempted?
Will the tax relief received by banks be tied to an obligation not to increase commissions?
Otherwise, reducing profit tax could become relief for businesses, while the mechanism for offsetting it could turn into a new expense for the public and entrepreneurs.
Will a 5 percent tax on deposit interest also be introduced?
The Institute for Fiscal Analysis has also submitted for discussion the idea of imposing a 5 percent tax on interest income earned by individuals from bank deposits. Its budget potential has been estimated at approximately 1.4 trillion soums annually.
However, this is not an official decision either.
In a separate statement, the institute emphasized that the proposal to tax deposit interest is solely an academic and analytical idea and has not been adopted as a draft law or state policy. Under current legislation, interest income earned by individuals from bank deposits is currently exempt from income tax.
Therefore, it would be incorrect to interpret the reduction of banks’ profit tax, the introduction of VAT on commission-based services and the 5 percent tax on deposit interest as a single package that has entered into force. All three are currently fiscal options under discussion.
When could the changes take effect?
For the proposal to take effect, amendments to the Tax Code, an assessment of its financial and economic impact and passage of the document through the prescribed legislative process would be required.
The idea expressed during the discussion itself does not change bank tariffs or tax rates. It is impossible to make precise calculations for customers until the final draft specifies the list of services, exemptions, effective date and transitional period.
The success of the fiscal initiative will not be measured solely by how much money enters the budget. The main criterion will be the extent to which the tax relief granted to banks benefits the economy and whether its cost is passed on to ordinary customers.
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