Turnover Tax, 12% VAT, or 6% VAT: How to Choose a Tax Regime in Uzbekistan in 2026

A coffee shop and a wholesale company can have the same revenue and the same strong desire to pay less tax. Yet the regime that saves the first one money can push the second one into a loss. This is not a paradox; it is arithmetic. Turnover tax, nominally the "lightest" regime, takes away a company's right to credit input VAT and makes it a less convenient supplier for customers that are themselves VAT payers.

In 2026, the question became more complicated. On June 1, the turnover tax threshold rose from 1 billion soum to 12,000 BRV (the base calculation value, a statutory reference amount used in Uzbekistan legislation to set thresholds and other amounts). In July, businesses in trade, food service, and services gained a third option: a simplified 6% VAT regime with no corporate income tax. Most articles on the subject still compare two regimes and contrast rates: "4% versus 12% and 15%." That comparison does not answer the owner's main question: how much money will my business keep under each option?

Why "Simplified or Standard Regime?" Is No Longer the Right Question

Until mid-2026, small businesses faced a binary choice. One option was turnover tax: a percentage of revenue excluding VAT, with no VAT and no corporate income tax. The other was the standard regime: 12% VAT with the right to credit input VAT (subject to the cases in which a credit is not available and to any applicable tax incentives), plus 15% corporate income tax. The established advice was simple: stay on turnover tax for as long as you can.

Presidential Decree No. UP-100 of May 26, 2026, changed the picture in two ways. It raised the turnover tax threshold several times over, and it introduced an intermediate option available until January 1, 2030: 6% VAT on all sales, with no input VAT credit and no tax incentives, preferences, or partial VAT refunds — but with a 0% corporate income tax rate and no obligation to file corporate income tax returns. A typical store, restaurant, or service company now has three paths, and the simple rule no longer works.

The main mistake we see in practice is comparing regimes by their rates. The rates apply to different tax bases: 4% applies to total revenue; 12% applies to the value of sales excluding VAT, but with a credit for the tax paid on purchases, so in effect it applies to value added; and 15% applies to profit. Moreover, the regime affects not only the amount of tax but also the price you can charge your customers and the cost of your purchases. A fair comparison therefore looks not at the tax itself, but at how much money the company keeps after all taxes and costs.

This approach has international support. Economists from the IMF, the University of Oxford, the University of Warwick, and CUNEF studied tax data on UK companies for 2004–2014. They found that almost half of the firms entitled not to pay VAT registered for it voluntarily. This was most common among firms with a high share of purchases and a low share of sales to consumers. In other words, businesses choose the "more expensive" regime themselves when their customers and cost structure call for it. Uzbekistan's rules differ from the UK's, but the logic of the choice is the same.

The Three Regimes at a Glance

In short: turnover tax is levied on total revenue; the standard regime taxes the value of sales, with a right to credit input VAT, and taxes profit; the simplified VAT regime taxes the value of sales without an input credit but under VAT rules, so the buyer can credit the tax. The table shows the parameters for legal entities as of October 2026.

Three details are easy to overlook.

First, the threshold is set in BRV, so its value in soum changes. In June–August 2026, it was about 4.94 billion soum; from September 1, after the BRV was raised to 440,000 soum, it became 5.28 billion soum.

Second, the Decree's provisions have not yet been incorporated into the Tax Code. As of the date this article was prepared, the Code had not been amended: Articles 461 and 462 still refer to 1 billion soum, while the 12,000 BRV limit is set by paragraph 2 of Decree UP-100 and applies directly. The Code also contains no rules for the simplified 6% VAT regime: the switch is made by electronic notification, and the Tax Committee's methodological guidance is advisory only. As a result, certain accounting questions are interpreted in different ways; see the section on the pitfalls of the 6% VAT regime for details.

Third, a number of categories may not apply turnover tax regardless of revenue (Tax Code, Article 461, Part 2). They include producers of excisable goods (legal entities), sellers of medicines and medical devices, medical organizations, jewelry businesses, and markets and shopping complexes; some of the exclusions apply only to legal entities.

Importers are a separate case. Decree UP-100 abolished the rule that importers must be treated as VAT payers (paragraph 9 of the Decree), and in practice this provision applies directly: an importer can remain on turnover tax until it exceeds the threshold. However, the text of the Code still lists importing as grounds for switching to VAT from the date of the import contract or the date of importation, whichever comes first (Tax Code, Articles 461 and 462). Until the amendments are made, it is advisable to confirm your position for your specific situation through a written inquiry to the tax authority.

Dividend tax and social tax on payroll do not depend on the regime. They do not affect the choice, so we leave them out of the analysis below.

Four Questions That Matter More Than the Rates

Four variables determine which regime pays off: whether your customers are consumers or VAT payers, whether you can pass VAT on in your prices, what share of your costs consists of VAT-bearing purchases, and what your margin is. Everything else is secondary.

Who Pays for Your Product or Service?

If the buyer is an individual, what matters to them is the price at the checkout. Under turnover tax, you keep that entire price minus the turnover tax. Under the standard regime, 12% VAT has to be carved out of the same price; under the simplified regime, 6%.

If the buyer is a VAT-registered company, the logic changes. What matters to it is the price net of the tax it will credit. A VAT-registered supplier invoices 100 + 12; the customer credits the 12 and effectively pays 100. A supplier on turnover tax cannot charge more than 100, or it will be more expensive than its competitor. Yet it pays 4% on that 100 and cannot credit the VAT on its own purchases. That is why turnover tax often turns out to be an expensive regime in B2B.

Can You Pass VAT On in Your Prices?

All the calculations below assume that the market sets the price and that the price does not change when the regime changes. For sales to consumers, this is the key assumption. If a company can raise its price by the amount of VAT without losing customers, the picture changes dramatically.

Take the coffee shop from the scenarios section. Its customers pay it 4 billion soum a year. Its food purchases from VAT-registered suppliers cost 1.8 billion soum excluding VAT (2.016 billion including VAT), and its other expenses (payroll, rent, and so on) come to 1.6 billion soum.

Scenario A: prices stay the same. Customers still pay 4 billion soum a year, but that amount now includes VAT. At 12%, that is about 429 million soum in tax; after a credit for 216 million in input VAT, about 213 million is paid to the budget. The coffee shop is left with about 3.57 billion soum in revenue excluding VAT, and the 15% corporate income tax comes to about 26 million. At 6%, VAT comes to about 226 million, all of which is paid to the budget, and revenue excluding VAT is about 3.77 billion soum. Under turnover tax there is no VAT: the coffee shop pays 4% on 4 billion, or 160 million soum, but it cannot credit the input VAT on its purchases either. Profit after tax comes to about 224 million soum under turnover tax, 158 million under 6% VAT, and 146 million under the standard regime. These are the figures shown in the table below.

Scenario B: the coffee shop raises prices by the amount of VAT. It keeps the same 4 billion soum in revenue excluding VAT and adds the tax on top. Customers would then pay 4.48 billion soum a year at 12% and 4.24 billion at 6%. Profit after tax comes to 510 million soum under the standard regime and 384 million under 6% VAT: without an input VAT credit, 6% loses. Under turnover tax, where prices did not change, the result remains 224 million.

The difference between the scenarios is enormous, but Scenario B assumes that customers will calmly accept prices that are 12% or 6% higher. In practice, some will go to competitors, especially if those competitors do not raise their prices. The real result therefore lies somewhere between the two scenarios, and exactly where depends on how price-sensitive your customers are and what prices your competitors charge. Also check how the price is worded in your contracts: "including VAT" or "plus VAT."

How Much Do You Buy with VAT?

Under turnover tax and the simplified VAT regime, input VAT is not credited and becomes a cost. For consulting, where payroll is the main expense, this hardly matters. For trading, where 80–90% of the cost of sales consists of goods from VAT-registered suppliers, it is the decisive factor. The Tax Committee gives the same warning: because they lose the credit, some companies are better off staying at 12%.

How Profitable Are You?

Corporate income tax exists only under the standard regime. The higher your margin, the more you gain under the regimes that do not have it. The lower your margin, the harder a tax on revenue hits: at a 5% net margin, a 4% turnover tax takes four-fifths of your profit.

A Benchmark for B2B and B2C: When 6% Beats 12%

If your customers are VAT payers, comparing 6% with 12% comes down to a simple trade-off. Under the standard regime, the company pays 15% corporate income tax but credits the input VAT on its expenses. Under the simplified 6% VAT regime, there is no corporate income tax, but input VAT is not credited and becomes a cost. In both cases, customers credit the VAT, so the VAT-exclusive price does not change for them. All that remains is to compare how much the company saves on corporate income tax with how much it loses on the credit.

In an ordinary year, the 6% VAT regime is more advantageous than the standard regime if the following condition is met:

VAT-bearing expenses (excluding VAT) × 12% < Profit before corporate income tax × 15%

This gives the 1.25 benchmark, which is the 15% corporate income tax rate divided by the 12% VAT rate (15% ÷ 12% = 1.25):

Threshold for VAT-bearing expenses (excluding VAT) = Profit before corporate income tax × 1.25

To apply the benchmark, compare your VAT-bearing expenses (excluding VAT) with this threshold. If they are below the threshold, the 6% VAT regime is more advantageous; if they exceed it, the standard regime is more advantageous. VAT-bearing expenses are measured excluding the VAT itself, and profit before corporate income tax is calculated under the standard regime. The benchmark is valid only under the conditions listed below.

The benchmark holds only under four conditions:

• Customers credit VAT in full, so the VAT-exclusive price is the same for them under every regime.
• Profit is positive: if there is a loss and there are VAT-bearing expenses, the 6% regime always loses to the standard regime.
• VAT-bearing expenses include all purchases for which a credit is available under the standard regime: goods, services, rent, and equipment in the year of purchase. Purchases from suppliers that are not VAT-registered are excluded from the calculation.
• The comparison covers an ordinary year: no VAT adjustment upon the switch, no tax incentives or partial VAT refunds, and no corporate income tax exemption for businesses moving off turnover tax for the first time (discussed in the section on the threshold). In the year of such an exemption, in B2B the standard regime is no worse than 6% at any level of VAT-bearing expenses; for sales to consumers, this is not necessarily the case (see the beauty salon below).

Example: a consulting agency. Take the agency from the scenarios section. Its profit before corporate income tax under the standard regime is 900 million soum a year, and its expenses bearing input VAT (services, equipment, rent) are 300 million soum a year excluding VAT.

• Corporate income tax saved by switching to 6%: 900 million × 15% = 135 million soum.
• Input VAT that cannot be credited under 6%: 300 million × 12% = 36 million soum.
• Comparison: the savings of 135 million exceed the lost credit of 36 million; the difference is 99 million soum in favor of 6%.
• Check against the benchmark: 900 million × 1.25 = 1.125 billion soum. VAT-bearing expenses (300 million) are far below this threshold.

Conclusion: under the stated assumptions, in an ordinary year the 6% VAT regime is more advantageous than the standard regime for this agency by about 99 million soum. This conclusion applies to this specific ratio of expenses to profit; it is not a rule for all service companies. If, however, the agency is moving off turnover tax for the first time, the result is different in the year of the corporate income tax exemption: there is no corporate income tax to save, and the standard regime is more advantageous (900 million versus 864 million).

For sales to consumers at a fixed price, the 6% regime has an additional advantage. The customer pays the same amount, but only 6% tax rather than 12% is carved out of it. As a result, the company keeps about 5.66% more revenue excluding VAT than under the standard regime. This lets the 6% regime withstand a higher share of VAT-bearing purchases than in B2B. The condition looks like this:

VAT-bearing expenses (excluding VAT) × 12% < Revenue excluding VAT under the standard regime × 5.66% + Profit before corporate income tax × 15%

The left side is what the company loses under 6%: input VAT on purchases that cannot be credited. The right side is what it gains: additional revenue from the lower VAT embedded in the price, plus the corporate income tax it saves. Revenue and profit on the right side are calculated under the standard regime, excluding VAT. There is no double counting: the additional revenue under 6% is not subject to corporate income tax, and corporate income tax is calculated on the standard-regime profit.

Let’s run the numbers for the coffee shop (4 billion soum a year from customers, purchases of 1.8 billion soum excluding VAT):

• Lost credit: 1.8 billion × 12% = 216 million soum.
• Additional revenue: 3.57 billion × 5.66% ≈ 202 million soum.
• Corporate income tax saved: 171 million × 15% ≈ 26 million soum.
• Total gain: 202 + 26 ≈ 228 million soum.

Since 228 million exceeds 216 million, the 6% regime wins, but only by about 12 million soum a year. This is the difference between 158 million and 146 million in the table. The margin is so thin that an increase in purchases of about 45 million soum a year, that is, from 45% to 46% of revenue, would wipe it out. If, on the other hand, the coffee shop can raise prices by the amount of VAT (Scenario B above), the 5.66% advantage disappears and the B2B rule applies.

Both formulas are benchmarks for an initial estimate, not a substitute for a full calculation. They do not take into account the VAT adjustment on inventory and assets upon the switch (discussed below). They also do not reflect the tax incentives and partial VAT refunds that do not apply under 6%.

Four Businesses, Four Different Answers

There is no single “best” regime: in our calculations, each of the three regimes wins at least once. We took four hypothetical but typical Uzbek businesses and calculated how much each would earn in a year after all business taxes. The market price stays the same in every scenario. For consumers, it is the price at the checkout; for companies, it is the price net of creditable VAT.

Bold indicates the best regime in an ordinary year. Profit is shown after VAT, turnover tax, and corporate income tax; nonrecoverable input VAT is treated as a cost. Social tax, dividends, other tax incentives, and the VAT adjustment upon a change of regime are not included. Amounts are rounded to the nearest 1 million soum.

* The corporate income tax exemption applies for one tax period: the year following the year of the first switch from turnover tax (Tax Code, Article 337, Part 13). This column applies only if the company previously paid turnover tax and is not covered by the exclusions; see the section on the threshold for details.

The figures are illustrative. For each business, we fixed revenue, cost structure, and the market price, and applied the tax rules literally. A small change in a single parameter can change the winner, and the ability to pass VAT on in prices changes the calculation dramatically. The table shows what the answer depends on; it does not give a ready-made answer for your company.

Coffee shop and beauty salon. Both sell to consumers, and for both, turnover tax is currently the most advantageous option. But the size of that advantage differs.

• Beauty salon: it has almost no purchases, so 6% VAT trails by only 50 million (less than 10% of profit). Once the salon crosses the threshold, 6% should be the first option it considers: 6% beats the standard regime even in the year of the corporate income tax exemption (526 million versus 429 million).
• Coffee shop: the gap relative to turnover tax is 66 million, almost 30% of profit, while 6% and the standard regime are nearly equal. Purchases need only rise from 45% to about 46% of revenue for the standard regime to overtake 6%. In the year of the corporate income tax exemption, the standard regime (171 million) beats 6% (158 million). For the coffee shop, keeping the right to turnover tax is a matter of tens of percent of profit.

Consulting. Customers credit VAT, purchases are small, and the margin is high. In an ordinary year, 6% beats the standard regime by about 99 million soum, and the 1.25 benchmark confirms this: VAT-bearing purchases of 300 million against a threshold of 1.125 billion. But if the agency is moving off turnover tax for the first time, the standard regime is more advantageous in the exemption year: 900 million versus 864 million. And if VAT-bearing purchases rise to about 22% of revenue, 6% loses even in an ordinary year. Interestingly, turnover tax here loses even to the standard regime (744 million versus 765 million).

Wholesaler. With a net margin of about 7% and VAT-registered customers, any regime without an input credit makes the business unprofitable. This holds at least under our assumption that competitors are VAT-registered and prices cannot be raised. The 1.25 benchmark gives the same answer: VAT-bearing purchases (3,825 million) are almost ten times the threshold (1.25 × 315 million ≈ 394 million).

For this business, the standard regime is the only workable option, even if its turnover still allows it not to choose that regime. This is a case where voluntary VAT registration is not a gesture of goodwill but a condition for survival. If the wholesaler imports goods, its eligibility for turnover tax needs to be checked separately (see the discussion of importers above). However, this does not affect the conclusion: even if it kept the right to turnover tax, it would remain loss-making with this cost structure.

The 12,000 BRV Threshold: Choose a Regime for the Business You Will Be a Year from Now

Raising the threshold from 1 billion to more than 5 billion soum expanded the range of companies on turnover tax, but it did not remove the “cliff” itself. On the day its income since the beginning of the year reaches the threshold, a company stops paying turnover tax and becomes a VAT payer (Tax Code, Article 462). For the coffee shop in our example, with prices unchanged, profit falls from 224 million soum:

• to 171 million (by 23.5%) in the year of the corporate income tax exemption;
• in subsequent years, to 158 million under 6% VAT or 146 million under the standard regime (by 30–35%).

Therefore, if your revenue is projected to exceed the threshold next year, the comparison you need is not turnover tax versus VAT, but the two VAT options against each other. Prepare for the switch in advance: specify in your customer contracts whether the price includes VAT, set up processing of incoming VAT invoices, and review your prices. A company that learns about the switch from a tax authority notice usually loses money on contracts in which the price became “including VAT” at its own expense.

The switching rules are worth knowing in advance:

Returning to turnover tax. After voluntarily switching to VAT, a company may return to turnover tax no earlier than 12 months later, only from the start of the next year, and only if its income for the current year has not exceeded the threshold (Tax Code, Article 462). Experimenting with a regime costs at least a year.

New companies. For them, the threshold is prorated. If income from the registration date to the end of the year exceeds the annual threshold divided by 365 and multiplied by the number of those days, the switch to VAT and corporate income tax takes effect from the start of the following year (Tax Code, Article 462).

Support measures for a first switch. For a first switch from turnover tax to VAT and corporate income tax, three measures apply from 2026 (Decree UP-138). Two of them have been incorporated into the Tax Code by Law No. ZRU-1108.

• Exemption from corporate income tax (except on dividends and interest income) for one tax period: the year following the year of the switch. Tax is payable in the year of the switch itself. The exemption does not apply to reorganized companies or to payers of excise tax and subsoil use tax. Nor does it apply upon liquidation or where splitting of income has been identified (Tax Code, Article 337, Parts 9 and 13).
• No penalty for violating the VAT registration procedure if the company registers within one year of the date the obligation arose (Tax Code, Article 219).
• Compensation for accounting services: for six months, part of these costs, up to 3.5 times the minimum monthly wage (MROT) per month, is deducted from tax payments (Decree UP-138).

Accounting costs from 2027. From January 1, 2027, small businesses will be able to deduct payments to accounting firms and tax consultants as expenses at double the amount (Decree UP-100, paragraph 4). This lowers the cost of proper accounting under the standard regime.

One more warning. A common response to the threshold is to “split” the business into several companies or individual entrepreneurs. The Tax Code expressly names identified splitting of income among several entities as grounds for denying corporate income tax incentives, including the exemption for a first switch (Tax Code, Article 337, Part 9). A scheme that saves tax today may lead to additional tax assessments later. It also makes it harder to attract an investor and to sell the business at a fair price.

The 6% VAT Regime: Unresolved Issues and Pitfalls

In economic terms, the simplified VAT regime looks like a strong option for service businesses with a low share of purchases. But the regime’s legal framework is still incomplete, and the cost of a mistake when switching can exceed several years’ worth of savings.

The right to use the simplified regime was granted from June 1, 2026, but according to the Tax Committee, switching to it became possible only from July 1. Paragraph 14 of the Decree instructed the Ministry of Economy and Finance and the Tax Committee to submit proposals for legislative amendments to the Cabinet of Ministers within one month. The current version of the Decree (as of August 28, 2026) contains no rules on adjusting previously credited VAT upon a switch to 6%. As of the date this article was prepared, we had not found any published amendments to the Tax Code concerning this regime. Before making a decision, check the “Sources of amendments” section of the Tax Code.

Pitfall 1: VAT Adjustment on Inventory and Assets

The Decree expressly addresses only two points:

• A negative VAT difference upon the switch to 6% is written off.
• Upon a return to the standard regime, VAT on inventory and long-term assets may be credited.

The Decree says nothing about what to do with previously credited VAT upon a switch to the 6% regime.

Nevertheless, the Tax Committee explained its position at a seminar on August 7. Companies that have switched to 6% must adjust the VAT credited on inventory and long-term assets. They must also file amended returns for the period preceding the switch (in practice, for the last month before it). In some cases, they must also repay tax that has already been refunded. According to some reports, some companies have already received letters with such a demand. Tax experts consider this adjustment methodologically sound but see no direct basis for it in either the Tax Code or the Decree.

The practical conclusion for owners: if your balance sheet includes significant assets purchased with a VAT credit (premises, equipment, a large stock of inventory), model the switch under the worst-case scenario, with the adjustment. Otherwise, a one-time additional payment could wipe out your savings for all the months remaining until 2030.

Pitfall 2: The Way Back May Be Closed for a Year

Under the Decree, both switching to the regime and opting out take effect from the 1st day of the month following the notification. However, the Tax Committee explains that after returning to 12%, a company may not choose 6% again for at least a year. The text of the Decree contains no such restriction. Even so, it is wise to plan as if it applies. Some companies that rushed to switch have already returned to 12% after seeing the amount of the adjustment.

Pitfall 3: You Can Lose Eligibility During the Year

A company’s principal activity is the line of business that accounts for the predominant share of net revenue for the reporting period (Tax Code, Article 60). It is not determined by the company’s OKED code (the code under Uzbekistan’s national classifier of economic activities).

• Change in revenue mix: a company with several lines of business may lose eligibility for the regime if, for example, manufacturing becomes its principal activity by revenue.
• Large-taxpayer status: the regime is closed to large taxpayers (Decree UP-100, paragraph 5), so becoming a large taxpayer ends eligibility for 6%.
• VAT classification: it is also worth checking how your transactions are classified for VAT purposes, as services or as sales of goods. This determines which line of business turns out to be your principal activity.

How to Decide: Five Steps for Business Owners

The regime decision should be based on your accounting data for the past 12 months and your plan for the next 12, not on a table of rates. Here is the procedure:

1. Check which regimes are available to you. Compare your line of business against the list of exclusions from turnover tax and the eligibility conditions for 6%. A pharmacy, for example, has no need to compare turnover tax with VAT.
2. Break down your revenue by customer type. What share of your money comes from consumers, what share from VAT-registered companies, and what share from companies that are not VAT-registered? The larger the share of VAT-registered customers, the weaker the case for turnover tax. Separately, assess whether you can include VAT in your prices without losing customers.
3. Calculate your VAT-bearing purchases and your profit. These are the two figures for the formula in the section above. Count only purchases documented by electronic VAT invoices from VAT payers.
4. Model the next year. If your revenue is approaching 12,000 BRV, compare the two VAT options and identify the month in which the switch is likely. For a first switch from turnover tax, calculate the year of the corporate income tax exemption and the subsequent years separately.
5. Calculate the cost of the switch itself. The VAT adjustment on inventory, the revision of prices and contracts, and the reconfiguration of accounting systems and cash registers all cost money too. Compare these costs with the annual savings.

Before sending your notification, check the following:

• Your line of business is not on the list of exclusions for the chosen regime
  
• Your principal activity by share of revenue is trade, food service, or services (for 6%)
  
• Your annual income forecast has been checked against the 12,000 BRV threshold at the current BRV
  
• The share of VAT-registered customers has been calculated
  
• You have assessed whether VAT can be passed on in your prices
  
• Annual VAT-bearing purchases and profit before tax have been calculated
  
• The corporate income tax exemption has been taken into account if the company is moving off turnover tax for the first time
  
• A possible VAT adjustment on inventory and fixed assets has been assessed
  
• Your customer contracts specify how the price changes when the tax regime changes
  
• Cash registers, receipts, and electronic VAT invoices are set up for the new rate
  
• You know when you will be able to return to your previous regime
  

This kind of calculation based on a company’s actual data is part of CA Consulting’s accounting services.

Conclusion: Choose a Regime Based on Your Customers and Costs, Not the Rate

In 2026, the question “simplified or standard regime?” turned into a choice among three options, each suited to its own type of business:

• Turnover tax most often wins where customers are consumers and revenue is comfortably below the threshold.
• The 6% VAT regime is strong in services with a low share of purchases, especially in B2B.
• The standard regime is indispensable for trading and manufacturing businesses with high purchases and low margins. It also wins where VAT can be passed on in prices.

For a first switch from turnover tax, the answer may change for one year because of the corporate income tax exemption.

The choice of regime is not only a tax decision but also a commercial one. It affects the price for the customer, negotiations with suppliers, and how painful growth will be. And as long as the rules for 6% are not set out in the Tax Code, a proper calculation should cover not only the best-case scenario but also the worst-case one.

This article is for informational purposes only and does not constitute tax advice. Base your regime decision on calculations using your company’s own data.