Should you register as a VAT payer? Advantages and drawbacks
What being a VAT payer gives a business and what it demands. The story of two entrepreneurs and a comparison table.
Aziz and Dilshod both sell building materials. Aziz is a VAT (value added tax) payer, Dilshod is not. One day a large construction company asked both of them for cement and... chose Aziz. Why?
Why did the large company choose Aziz?
The company is itself a VAT payer. If it buys from Aziz, it can deduct the VAT shown on the invoice from its own tax. If it buys from Dilshod, there is no VAT to deduct. So at the same price, Aziz's goods effectively cost the company less.
What are the advantages and drawbacks?
| Being a VAT payer | |
|---|---|
| ✅ Large clients | Working with VAT-registered companies becomes easier |
| ✅ Input VAT | VAT paid on purchases can be credited, reducing the tax due |
| ✅ Credibility | An advantage in major tenders and contracts |
| ⚠️ Accounting complexity | Every invoice and VAT return must be kept accurately |
| ⚠️ Retail customers | When selling to individuals, VAT may push up the price |
| ⚠️ Responsibility | An error in a document can lead to losing the VAT credit |
Who must register as a VAT payer?
Registration as a VAT payer is mandatory once income exceeds a certain threshold. Even below it, voluntary registration is possible. Check the threshold and conditions in the current version of the Tax Code.
How should you decide?
- If your clients are mainly businesses, being a VAT payer is often beneficial
- If you sell mainly to individuals, do the maths: how will VAT affect your price
- If your purchases carry a lot of VAT (equipment, raw materials), the ability to credit it matters
Test yourself
5 questions on this topic: pick an option or reveal the answer.
"Andijon tola" LLC (a VAT payer) exported its products from Uzbekistan under the export customs procedure and sold them to a foreign buyer. Under the Tax Code, how does VAT apply to this turnover?
The tax debt of "Sirdaryo yo'l qurilish" LLC: tax 4 000 000 soum, accrued late-payment interest 600 000 soum, fine 1 000 000 soum. The company paid 4 700 000 soum. In what order is the payment allocated under Article 55 of the Tax Code?
"Sayram choy" LLC accrued dividends of 30 000 000 soum to an individual who is its participant and a non-resident of Uzbekistan (assume no relief under an international treaty applies). Applying the rate in Article 382 of the Tax Code, how much personal income tax is withheld at source?
"Yangiyer qog'oz" LLC (a VAT payer) bought raw materials for production. Under Article 266, part 1, clause 2 of the Tax Code, what condition must be met for the input VAT on the purchase to be offset?
"Mir texno" LLC is concluding an employment contract with a new employee. Under Article 127 of the Tax Code, what is the rule on the taxpayer identification number (TIN) in an employment contract?
Answered: 0 / 50 of 5 correct
All tests →See also
Sources
- Tax Code of the Republic of Uzbekistan · VAT payers, conditions for mandatory and voluntary registration; check the thresholds here
- Example · prepared by the author