Must franchise agreements be registered in Uzbekistan?

Yes. All franchise agreements and significant amendments must be registered at two authorities: the Public Service Center (PSC), which handles primary registration typically within one business day, and the Intellectual Property Department of the Ministry of Justice, which registers the intellectual property rights transfer (e.g., trademarks). An unregistered agreement is legally invalid.

What is the withholding tax rate on royalties paid to a foreign franchisor in Uzbekistan?

The Uzbek Licensee must withhold income tax at 20% from each royalty payment to a non-resident Licensor that has no permanent establishment in Uzbekistan. This rate may be reduced or fully exempted under an applicable international double taxation treaty between Uzbekistan and the Licensor's country of residence.

Can a foreign franchisor repatriate royalty payments from Uzbekistan?

Yes. Franchise agreements with foreign Licensors are treated as foreign trade contracts. Payments can be made in foreign currency under such contracts, and there are generally no significant restrictions on repatriation of royalty funds from Uzbekistan.

Who can be a party to a franchise agreement in Uzbekistan?

Only commercial organisations and registered individual entrepreneurs can be parties to a franchise agreement in Uzbekistan. Natural persons who are not registered as individual entrepreneurs cannot enter into franchise agreements under Uzbek law.

Franchising in Uzbekistan: Legal Framework & Entry Structures

Franchising offers a powerful avenue for business growth and market entry in Uzbekistan. However, to leverage this model effectively, a clear understanding of its legal foundation and mandatory registration requirements is crucial. Operating without proper adherence can lead to significant penalties.

01Legal Framework and Core Definition

Franchise agreements in Uzbekistan are primarily governed by the Civil Code of the Republic of Uzbekistan, alongside laws on Trademarks, Competition, and Trade Secrets. Legally, a franchise agreement is defined as a comprehensive business licence agreement under which the Licensor grants the Licensee a 'complex licence' — a set of exclusive rights for a fee. This package typically includes the right to use the Licensor's brand name, trademarks, commercial secrets, and other intellectual property in the Licensee's business operations.

02Key Requirements for Your Franchise Agreement

Written Form and Mandatory Registration: All franchise agreements and their significant amendments must be in writing and legally registered. Failure to do so renders the agreement invalid.
Eligible Parties: Only commercial organisations and registered individual entrepreneurs can act as parties to a franchise agreement.
Clear Subject Matter: The agreement must precisely define the exclusive rights being granted, the scope of use, and any specified territory or field of activity.
Term: Agreements can be for a fixed period or indefinite.
Remuneration: Payment can be structured in various forms — fixed fees, periodic royalties, revenue deductions, or mark-ups on goods.
Information & Training: The Licensor is obliged to provide the Licensee with all necessary technical and commercial documentation, information, and training for proper operation.

03Understanding Registration Procedures

Public Service Centers (PSC): The primary registration of the agreement itself, including any amendments, is handled here — typically within one business day if documents are complete. A state fee (1/3 of the basic estimated amount) applies, with a 10% discount for online applications.
Intellectual Property Department: The portion of the agreement transferring intellectual property rights (e.g., trademarks) must be registered with the Intellectual Property Department of the Ministry of Justice. Non-compliance here can invalidate the IP transfer or even the entire agreement.
Unified System of Foreign Trade Operations: If your franchise agreement involves international trade (import/export), it also requires registration in this system.

04International Aspects, IP Protection, and Liabilities

Governing Law: Parties to an international franchise agreement can choose the applicable law, though Uzbek law provides default rules if no choice is made.
Intellectual Property: Beyond registration, protecting commercial secrets through adherence to the Law 'On Commercial Secrets' is vital, with penalties for disclosure.
Competition: The law allows certain exclusive clauses (e.g., non-compete for licensee) but invalidates others (e.g., licensor dictating licensee's prices).
Liability: The Licensor bears subsidiary liability for the quality of goods/services provided by the Licensee. For products manufactured by the Licensor, there is joint and several liability for certain claims.

05Currency and Taxation Considerations

For foreign Licensors, the agreement is treated as a foreign trade contract. While domestic payments are in Uzbek Soum, foreign currency payments are permitted under foreign trade contracts, and there are generally no significant restrictions on fund repatriation.

From a tax perspective, if royalties are paid to a non-resident Licensor without a permanent establishment in Uzbekistan, the Licensee is required to withhold income tax at a 20% rate from each payment. This rate may be reduced or exempted by international double taxation agreements.