Payments abroad: when the company withholds tax at source

A company in the Republic of Uzbekistan that pays a foreign counterparty pays more than the counterparty. On a range of income types it must withhold tax at source and remit it to the budget — whether or not the recipient knows about it or agrees.

The role is called a tax agent. Liability for failing to withhold sits with the company, not with the foreign recipient, and is collected from the company.

What does withholding at source mean?

Normally the person who receives income pays the tax. With payments to non-residents the arrangement differs: the Uzbek company reduces the payment by the amount of tax and remits it to the budget of the Republic of Uzbekistan. The foreign recipient sees only the net amount.

The obligation does not arise on every payment. It attaches to the type of income and to whether that income counts as arising from a source in the Republic of Uzbekistan under the Tax Code of the Republic of Uzbekistan of 30.12.2019.

If the foreign company has a permanent establishment in the Republic of Uzbekistan, the order changes: such a company pays its taxes itself rather than through an agent.

At what rates are dividends taxed?

This is the most common case for a company with a foreign founder.

From 2026, tax already paid by the company on dividends it received is taken into account when calculating tax on dividends to a non-resident, which removes double taxation inside the chain.

The incentive for residents of the Technological Park of Software and Information Technologies (IT Park) runs to 1 January 2040, provided exports exceed half of total income. The terms of the status are covered in the IT Park cluster.

How do you apply a reduced treaty rate?

A double taxation treaty may lower the rate or change the treatment. But it does not apply automatically, and that is the main mistake in this area.

The order is:

1. Determine the type of income under the contract: dividends, interest, royalties, service income — each has its own treaty article and its own rate.
2. Check that a treaty is in force with the state of the recipient's tax residency.
3. Obtain the counterparty's certificate of tax residency confirming residency in that state for the relevant period.
4. Withhold at the treaty rate — but only if the certificate is in hand before payment.
5. Report the payment in the tax agent's return and keep the certificate for inspection.

Until the certificate exists, the tax agent withholds at the domestic rate of the Tax Code of the Republic of Uzbekistan. A reduced rate applied without the document means an assessment with late payment charges, and there is nothing to argue about.

When do you file and pay?

The tax agent's return on non-resident income is filed monthly. Tax on non-resident income is paid no later than the day following the day the income is paid.

That differs from the usual rhythm of "by the 15th or the 20th": the payment deadline is tied to the payment itself, not to a calendar date. A company planning a transfer to a foreign contractor at month end plans the tax for the next day.

The full list of forms with dates is collected in the reporting calendar.

What most often leads to assessments?

• A reduced rate applied without a residency certificate. The document arrived after payment or never — tax is assessed at the domestic rate with late payment charges.
• The type of income identified incorrectly. A payment for access to software is classified as royalties more often than companies expect, and the rate changes.
• Tax not withheld but paid on top of the contract amount. Such a payment is not always treated as discharging the agent's duty and does not automatically reduce the tax base.
• The payment deadline missed. It is tied to the day of payment, not to month end, and falls outside the accounting department's usual calendar.
• The certificate covers a different period. It confirms residency for a specific period, and last year's certificate does not fit this year's payment.

What comes next

The agent's duties are checked at the contract stage, not at the payment stage: the wording of the subject determines the type of income, the rate and whether a certificate is needed. Rewriting a contract before signature is cheaper than contesting a classification after an inspection.

TheBux supports the foreign trade of companies in the Republic of Uzbekistan: contracts, currency control and withholding tax at source — the scope is set out on the service page.