At the regular plenary session of the Senate of the Oliy Majlis, an important law that can open a new page for the country's financial system was discussed. We are talking about the Law "On Amendments and Additions to Certain Legislative Acts of the Republic of Uzbekistan Aimed at Introducing Islamic Banking Activities in Uzbekistan."
It was noted that today there is a growing need to expand the range of financial services and offer more convenient and diverse banking products for the population and businesses. In particular, it was noted that alternative services that meet international Islamic finance standards are in demand in the market. Based on this need, this Law introduces new norms defining the legal basis of Islamic banking activities into 2 codes and 7 laws.
One of the main innovations is the introduction of a separate type of license that gives the right to carry out Islamic banking activities. According to it, banks will now be able to choose one of two options: to work entirely on the Islamic banking model or to implement both traditional and Islamic banking services simultaneously. This is expected to increase competition in the market and expand customer choice.
It is also planned to establish an Islamic Finance Council at the Central Bank to coordinate Islamic finance issues, as well as at banks carrying out Islamic banking activities. The requirements for the activities of this council are also clearly defined. That is, the system will not be left "on its own" - its rules and control mechanism will be formed together.
Another major change was observed in the tax sphere. Taking into account the specifics of Islamic financial operations, a separate chapter is being introduced into the Tax Code. According to it, income from Islamic financial activities is equated to interest income for tax purposes. At the same time, the excess value of goods sold to clients by banks and microfinance organizations is exempt from value-added tax (VAT). This is significant because it is aimed at preventing situations where operations are "doubled in taxes."
According to the senators, this Law will expand access to financial services for the population and entrepreneurs, improve the competitive environment in the market, and also serve to attract new strategic investors to the banking and financial sector.
Following the discussion, the Senate approved the Law. So, now a legal field for Islamic banking services is being formed - which means "new players and new rules" in the financial market.
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