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DEVELOPMENT OF THE “TAX FREE” SYSTEM IN UZBEKISTAN BASED ON
FOREIGN EXPERIENCE
Safarov Giyosiddin Abdullaevich
DSc, professor of "Taxes and taxation" department,
Tashkent State University of Economics
g_safarov@tsue.uz
ORCID: 0000-0002-3324-1519
Abstract.
This paper investigates the “Tax Free” system in foreign countries and Uzbekistan,
as well as its importance in the development of the country’s economy. Moreover, the paper
highlights the prospects for the development of the “Tax Free” system in Uzbekistan based on
foreign experience.
Key words:
Tax Free, VAT, VAT rate, operator, tourism, retail trade.
Аннотация.
В данной статье изучена система «Tax Free» в зарубежных странах и
Узбекистане, а также ее значение в развитии экономики страны. Более того, в статье
освещены перспективы развития системы «Tax Free» в Узбекистане на основе
зарубежного опыта.
Ключевые слова:
Tax Free, НДС, процентная ставка НДС, оператор, туризм, розничная
торговля.
Introduction
. The modern economy is characterized by its vast scale, unique features, rapid
changes, and global significance. In this context, alongside classical factors influencing product
pricing, taxes also play a crucial role. One such tax is the Value Added Tax (VAT), which
directly affects the formation of product prices and is one of the main sources of state budget
revenues in many countries. The range of goods and services subject to VAT is broad, and its
mechanism is relatively more complex compared to other types of taxes. Although the primary
purpose of this tax is fiscal, it also serves multiple functions. Notably, VAT plays an important
role in increasing the attractiveness of tourism and achieving economic growth through its
development. The Development Strategy of New Uzbekistan for 2022–2026 outlines "effective
measures for liberalizing foreign trade, tax, and fiscal policies in the process of reforming the
national economy" [1]. In this regard, continuous attention is being paid to liberalizing foreign
trade and improving the tax system in accordance with modern requirements.
Analysis
Foreign citizens have the right not to pay Value Added Tax (VAT) on purchases made during
their stay, and this system is known in international tax practice as Tax Free
.
The Tax Free
system is implemented in more than 50 countries around the world. It allows foreign visitors to
reclaim the VAT paid on goods purchased once they leave the country where the purchase was
made.
The refund amount depends on the VAT rate, the purchase price, and the commission charged
by the Tax Free operator. Refunds vary from country to country and typically range from 7% to
22% of the purchase price. This system is available to both individuals and legal entities. For
legal entities, Business Tax Free applies to purchases made during business trips abroad [3].
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ISSN: 2692-5206, Impact Factor: 12,23
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Exempting foreign visitors from paying VAT in the host country significantly boosts the
volume of purchases and promotes the development of domestic production, which helps safely
meet internal market demand.
The Tax Free system was first introduced in 1980 on a ferry route from Trelleborg, Sweden, to
Germany. Due to its effective results, the practice was quickly adopted by other countries.
There are several Tax Free operators in the global economic community (Table 1).
Table 1
Tax Free Operators [4]
Premier Tax Free
Tax
Free
Worldwide
Global Blue
Innova Tax Free
It
includes
20
countries,
among
them 15 European
nations
(Austria,
Belgium, Italy, Czech
Republic,
France,
Germany, Greece, the
Netherlands,
Hungary,
Ireland,
Portugal,
Spain,
Sweden, Switzerland,
and
the
United
Kingdom)
and
5
countries from other
parts of the world
(Argentina,
South
Africa,
Morocco,
Jordan,
and
Singapore).
Ireland’s Premier Tax
Free service
was
established in 1985
by
The
Fintrax
Group
.
It
includes
8
countries (Austria,
Germany, Denmark,
Ireland,
Iceland,
Norway, the United
Kingdom, and the
Faroe Islands) that
are part of Premier
Tax Free
.
It includes 36 countries,
among them 29 European
countries (Austria, Belgium,
Croatia, Cyprus, Czech
Republic,
Denmark,
Estonia, Finland, France,
Germany, Greece, Hungary,
Iceland,
Ireland,
Italy,
Latvia,
Liechtenstein,
Lithuania, Luxembourg, the
Netherlands,
Norway,
Poland, Portugal, Slovenia,
Slovakia, Spain, Sweden,
Switzerland, and the United
Kingdom) and 7 countries
from other parts of the
world (Argentina, South
Korea, Morocco, Turkey,
Singapore,
Japan,
and
Uruguay).
Switzerland’s Global Blue
service was established in
1980 by the Global Refund
Group.
It includes five
countries (Spain,
France, England,
Italy, Portugal, and
the
People’s
Republic
of
China).
Table 1 presents the major Tax Free operators and the countries they serve, highlighting their
crucial role in the effective functioning of the system. The Global Blue operator covers 36
countries and plays a significant role in the successful operation of the Tax Free system.
Similarly, Premier Tax Free, which includes 20 countries, is considered one of the major
operators in the field.
The United States does not have a Tax Free system. However, in the U.S., foreign visitors can
receive discounts of up to 11% at major retail outlets when making purchases by presenting a
foreign passport.
According to Resolution No. 653 of the Cabinet of Ministers of the Republic of Uzbekistan
dated November 8, 2022, starting from January 1, 2023, a pilot Tax Free system was introduced.
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Under this system, foreign nationals are partially refunded the VAT paid on certain goods
purchased from retail businesses in Uzbekistan [2].
According to this resolution, the Tax Free system allows foreign nationals to receive a refund of
the VAT amount paid for specific goods purchased in Uzbekistan, provided they export these
goods from the territory of the Republic of Uzbekistan.
Refunds are made only after it is confirmed that the purchased goods have been taken out of
Uzbekistan by the foreign citizen either in their checked baggage or carry-on luggage. To
receive a VAT refund, a request must be submitted within three months from the date of
purchase. The refund applies only to goods on which VAT was actually paid. Moreover, the
total value of purchased goods eligible for VAT refund must be at least 1 million Uzbek soums
[2].
Under Uzbek legislation, the VAT refund to a foreign national is issued after the 25th day of the
month following the month in which their departure from Uzbekistan is confirmed. In this case,
foreign citizens are refunded 90% of the total VAT amount paid on goods eligible under the
Tax Free system. The remaining 10% of the VAT amount, as indicated on the receipt, is
retained as the operator’s service fee.
The “Tax Free” system enables foreign tourists to receive a refund on the value-added tax
(VAT) paid on purchases made during their visit. This mechanism serves as a stimulus for
inbound tourism and domestic retail sales. Countries such as the UAE, Singapore, and EU
member states have successfully implemented this system. For Uzbekistan, which is actively
integrating into the global economy and developing its tourism sector, the introduction of a
modern and efficient Tax Free system holds strategic importance.
The Tax Free system involves several steps:
1.
A tourist makes a purchase at a participating store.
2.
They request a Tax Free form and receipt.
3.
At the border (airport or land exit), the form is validated by customs.
4.
The tourist receives a VAT refund either in cash, bank card, or via transfer.
To qualify, the goods must:
Be exported within a certain period (typically 90 days).
Exceed a minimum amount (varies by country, e.g., €50 in many EU states).
Global Experience
1. European Union
VAT refund applies to non-EU residents.
Digital validation and automated kiosks have made the process efficient.
Third-party operators (e.g., Global Blue, Planet) handle administration.
2. Singapore
A digital Tax Free system is integrated with the Immigration & Checkpoints Authority.
Tourists can claim refunds electronically via kiosks at airports.
The refund is processed in multiple currencies or through e-wallets.
INTERNATIONAL JOURNAL OF ARTIFICIAL INTELLIGENCE
ISSN: 2692-5206, Impact Factor: 12,23
American Academic publishers, volume 05, issue 06,2025
Journal:
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page 1334
3. United Arab Emirates
Implemented in 2018, managed by Planet.
Real-time digital platform, integrated with retailers and customs.
High compliance and ease-of-use increase tourist satisfaction.
Current State in Uzbekistan
Uzbekistan introduced a pilot Tax Free system in 2022, primarily in Tashkent and Samarkand.
Key features:
Applicable to purchases exceeding 1 million UZS.
Only goods taken out of Uzbekistan within 90 days are eligible.
VAT refunds can be claimed at airports via special counters.
However, challenges persist:
Limited store participation.
Manual paperwork processes.
Lack of awareness among tourists.
No mobile/digital application support.
Key Issues Hindering Development
Technological gaps: No centralized digital platform for real-time validation.
Institutional fragmentation: Lack of coordination between the Tax Committee, customs,
and retail networks.
Legal uncertainty: Ambiguities in VAT laws and refund procedures.
Low tourist awareness: Insufficient promotion of the system abroad.
Recommendations Based on Foreign Experience
1.
Create a centralized digital Tax Free platform connected to customs, retail, and financial
institutions.
2.
Outsource operations to experienced global service providers (like Global Blue or
Planet).
3.
Simplify eligibility criteria and reduce the minimum purchase amount to encourage
usage.
4.
Promote the system internationally through tourism campaigns, airport displays, and
travel agencies.
5.
Provide multi-language support and mobile applications for refund tracking and form
generation.
6.
Train retail and customs staff on Tax Free protocols and customer service.
Expected Benefits for Uzbekistan
Boost tourism receipts: Tourists are more likely to spend more if they know they can
claim VAT refunds.
Support retail sector: Local merchants can attract more foreign buyers.
Enhance international image: Being a “tourist-friendly” destination improves
competitiveness.
INTERNATIONAL JOURNAL OF ARTIFICIAL INTELLIGENCE
ISSN: 2692-5206, Impact Factor: 12,23
American Academic publishers, volume 05, issue 06,2025
Journal:
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page 1335
Encourage formalization of retail sales: Tax Free participation may reduce shadow
economy transactions.
For Uzbekistan, the development of an efficient, transparent, and digital Tax Free system is a
vital step toward aligning with global tourism practices. Leveraging international best practices
and tailoring them to national conditions will maximize economic benefits and support
sustainable tourism growth.
Analysis shows that the VAT refund process for foreign citizens’ purchases has not yet been
effectively organized, resulting in limited efficiency of the system. This highlights the need to
further develop the tax free system in Uzbekistan based on international best practices. Notably,
in the European Union member states, the tax free system is well-developed and applies not
only to purchases made within a single country but also across all EU countries. Additionally,
fast-track VAT refund procedures have been implemented for goods eligible under the tax free
system.
Conclusion
In order to develop the tax free system in Uzbekistan based on international experience,
attention should be given to the following:
-
Establishing cooperation with tax free operators that hold a significant position in the
global economic community and utilizing their experience in the development of this system;
-
Increasing the attractiveness of the tax free system for foreign citizens by revising the
timeframe for VAT refunds on eligible goods. In this regard, it is necessary to ensure that
foreign citizens can receive the VAT refund in cash or other forms upon departure from the
territory of the Republic of Uzbekistan, according to their preference.
References:
1. Presidential Decree of the Republic of Uzbekistan No. PF-60 dated January 28, 2022, “On
the Development Strategy of New Uzbekistan for 2022–2026,” https://lex.uz/docs/5841063
2. Resolution No. 653 of the Cabinet of Ministers of the Republic of Uzbekistan dated
November 8, 2022, “On the Introduction of a VAT Refund System for Foreign Citizens
upon Departure from the Territory of the Republic of Uzbekistan for Previously Purchased
Goods,” https://lex.uz/docs/6278382
3. Golubtsova E.V., Goloshchapova A.S., Oganova A.S. Development of the Tax Free
System in Russia Based on Foreign Experience. International Journal of Professional
Science, No. 11-2019.
4. Paulov P.A., Kraskina E.Yu. Comparative Characteristics of the Tax Free System in the
Russian Federation and Foreign Countries. International Journal of Humanities and Natural
Sciences, Vol. 2-1 (53), 2021.
5. Data from the Customs Committee under the Ministry of Economy and Finance of the
Republic of Uzbekistan.
