Senate approves law on Islamic Banking in Uzbekistan

At its latest plenary session, the Senate of the Oliy Majlis discussed and approved the law “On Amendments and Additions to Certain Legislative Acts of the Republic of Uzbekistan Aimed at Introducing Islamic Banking Activities in Uzbekistan,” the Senate press service reported.

According to the announcement, the law introduces new provisions to two codes and seven laws, establishing the legal framework for Islamic banking operations in the country.

Specifically, the law introduces a new type of license granting the right to conduct Islamic banking activities, along with the associated requirements. Under this license, banks may carry out full Islamic banking operations or simultaneously conduct both conventional and Islamic banking activities.

Additionally, to coordinate issues related to Islamic finance, the law establishes an Islamic Finance Council under the Central Bank and in banks conducting Islamic banking operations, with requirements governing its activities.

The law also introduces a separate chapter in the Tax Code to account for the unique characteristics of Islamic financial operations. Income from Islamic finance will be equated with interest-based income for taxation purposes, while markups on goods provided to clients by banks and microfinance organizations under Islamic finance operations will be exempt from VAT.

Senators noted that the law is expected to expand access to financial services for the public and business entities, improve the competitive environment in the country, and attract new strategic investors to the banking and financial sector.

Following the discussion, the Senate approved the law.