GILS Corporate law: Tajikistan
TAJIKISTAN
(1) Forms of doing business and Establishment
1.1. What are the options for establishing a company's presence in a country (branch, representative office, subsidiary, etc.), and what are their key advantages and limitations?
The laws of Tajikistan provide several forms for doing business in Tajikistan for foreign legal entities and individuals. Among these options, the most frequently chosen forms because they offer more flexibility vis-à-vis corporate housekeeping, general compliance matters and maintaining the closely held nature of the business are:
Limited Liability Company (preferred by most) - a company founded by one or more participants, the charter capital of which is divided into shares. Participants are not liable for the obligations of the company and bear the risk of losses associated with the activity, within the value of the contributions made. The number of participants should not exceed 30.
Branch Office (second preferred option) - is a separate subdivision performing all or part of the functions of the company, including the functions of a representative office.
Representative Office - is a separate subdivision representing and protecting the company's interests.
There is also the option of establishing a joint stock company, however this option is rarely considered and is not recommended due to the fact that it requires dealing with securities and related laws and authorities. Unfortunately, the laws governing securities issues have not been developed in recent years, and since there are very few joint-stock companies in Tajikistan, the procedures are not streamlined, therefore, many difficulties may arise, and it will be time and resource consuming endeavour.
1.2. What is the process for creating a legal entity or another form of presence in the country, including the laws to follow, legal entities to be considered, documents required, stages and terms for registration?
The formation of legal entities in Tajikistan is facilitated through the tax authorities, which manage the process from start to finish. Key steps include:
Documents.
Initial Documentation: Applicants must submit an official form from the tax authorities, constitutional documents such as the charter and regulations, and a resolution from the authorised body detailing the approval of constituent documents, legal address, and director appointment.
Beneficial Ownership Disclosure: Identity documentation is required for any beneficial owner holding more than 25% of shares.
Director’s Documentation: Foreign directors need to provide passport copies, visa, registration card, and a Tajik tax identification number.
Legalisation and Translation: Foreign documents must be legalised (no apostille required for CIS countries) and translated into the state language with notarized translations.
Timelines for Registration.
Document Preparation: Typically requires 10-12 days.
Authority Processing: By statute, registration should be concluded within 5 working days after documents are submitted. Practically, it can take between 30 to 45 days, particularly for foreign entities or directors.
Post-Registration Steps: Additional procedures, including obtaining statistical codes, local tax registration, and bank account opening, usually take another 10-12 days.
Mandatory Capital Requirements.
Limited Liability Company: Minimum charter capital is TJS 500.
Closed Joint-Stock Company: Minimum of TJS 1 000.
Open Joint-Stock Company: Required charter capital is TJS 5 000.
Representative Offices and Branches: These entities are not required to have charter capital.
Completion Timeline.
The entire process for registering a foreign company, representative office, or branch in Tajikistan can take up to 2 months, encompassing all necessary legal and procedural steps.
1.3. What additional authorizations/approvals are required to create a legal entity or start operations, and how do they vary depending on the type of business (if any)?
No additional authorizations and approvals are required.
1.4. What are the most common types of Legal Entities in your country and the differences between them in terms of taxation, liability, and management?
1.4.1. What are the shareholder structures of these types of legal entities?
1.4.2. What is the Shareholders’ responsibility in these types of legal entities?
1.4.3. What is the responsibility of the representatives in these types of legal entities?
1.4.4. Briefly, what are the characteristics of the other types of Legal Entities?
1. Limited Liability Company (LLC).
Structure: Formed by one or more participants, with a maximum of 30. The charter capital is divided into shares.
Liability: Participants are not liable beyond their contributions.
Management: Flexible management structures are permissible. The General Meeting of Participants is the supreme management body, and executive functions can be handled by a single individual or a board.
2. Branch Office.
Structure: Operates as a subdivision of the parent company, performing all or some of the company’s functions, including representation.
Liability: The parent company bears ultimate responsibility for the branch's obligations.
Management: Managed by representatives appointed by the parent company.
3. Representative Office.
Structure: A subdivision focused solely on representing and protecting the parent company’s interests without engaging in commercial activities.
Liability: As with branches, the parent company holds full liability.
Management: Managed by representatives focusing on advocacy and negotiation, without direct business operations.
4. Joint Stock Company (JSC).
Types:
Closed Joint Stock Company (CJSC): Limits shareholders to 50, does not offer shares publicly. Minimum capital required is TJS 1000.
Open Joint Stock Company (OJSC): No limit on the number of shareholders, can offer shares to the public. Minimum capital required is TJS 5,000. Liability: Shareholders risk is limited to their investment in shares.
Management: Governed by a General Meeting of Shareholders, a Board of Directors, and an Executive Body.
Taxation:
Taxation is consistent across all entities, with the exception that legal entities are taxed on dividends, whereas branches of foreign legal entities are taxed on the net profits of the permanent establishment.
Shareholder and Management Responsibilities:
1. Shareholder Structures
LLC: Ownership is divided into shares of charter capital, with each participant holding a portion.
JSC: Capital divided into shares, which may include other securities like bonds.
2. Shareholders’ Responsibility:
LLC & JSC: Shareholders or participants are responsible for losses up to the amount of their contributions. They have preemptive rights to buy shares and must act within the corporate governance framework.
3. Representative Responsibilities:
Representatives, including directors and board members, are obligated to manage in accordance with the entity’s charter and national laws, focusing on the best interests of the entity.
1.5. What are the operating costs associated with the maintenance of a legal entity or presence in the country?
Operational costs are not one-size-fits-all. They vary significantly across different organisations, influenced by unique factors such as industry requirements, activities, and company size.
(2) General taxation issues
2.1. What tax obligations are associated with doing business in the country?
There are two taxation regimes in Tajikistan:
1. simplified regime; and
2. general regime.
1. Simplified regime - this regime applies to companies whose gross income for the last 12 consecutive calendar months did not exceed TJS 1 million (approximately USD 91 600).
This regime does not apply to: investment funds, professional participants of the securities market, insurance and credit organisations, microfinance organisations, pawnshops, users of natural resources, suppliers of primary aluminium, producers and importers of excisable products, as well as persons engaged in intermediary activities on the basis of commission, assignment and other intermediary agreements.
The tax rate under the simplified regime is 6%, except for the VAT on import of goods into the customs territory of the Republic of Tajikistan and non-resident value added tax withheld at the source of payment.
2. General regime - companies under this regime are liable to pay the following taxes:
- Corporate Income Tax - The taxable income of a legal entity is taxed at the following rates:
- 13% for the production of goods;
- for the activities of financial institutions and mobile companies - 20%;
- for natural resources extraction and processing activities and all other activities - 18%;
- VAT - 14% for 2024. From 2027, 13%;
- Excise Tax - The excise tax rate depends on the type of activity;
- Natural Resources Tax - The rate depends on the type of use of //natural resources.
2.2. What tax and customs incentives are available in a country?
In Tajikistan, tax and customs privileges for certain persons are established by the annual Law "On the State Budget" or granted by the Decree of the Government of the Republic of Tajikistan.
2.3. What are the accounting and reporting requirements for different types of presence, and how often must they be submitted?
According to Article 10 of the Law of the Republic of Tajikistan "On Accounting and Financial Reporting", the main requirements for accounting and financial reporting are:
1. Accounting of property, assets, liabilities and business operations of organisations is kept in the national currency of the Republic of Tajikistan.
2. Property, assets and liabilities, which are the property of the organisation, are accounted for separately from the property of other legal entities, which are part of this organisation.
3. Accounting is kept by the organisation continuously from the moment of its registration as a legal entity.
4. The organisation keeps accounting records of property, assets, liabilities and business operations by double entry on interrelated accounting accounts.
5. Analytical accounting data correspond to the turnovers and balances of the synthetic accounting accounts.
6. All business operations and inventory results are subject to timely and complete registration in the accounting accounts.
7. Subjects of public interest shall be obliged to keep accounting records and prepare financial statements in accordance with international standards and this Law.
8. Heads of public interest entities shall be obliged to organise a permanent internal audit service.
9. Organisations, except for subjects of public interest, shall be obliged to keep accounting records and prepare financial statements in accordance with national or international standards recognized by the Republic of Tajikistan.
Declaration on income tax of legal entities and annual accounting reports, including balance sheet, shall be submitted before April 1 of the year following the reporting year.
The above requirements apply to all organisations, regardless of organisational and legal form, as well as to foreign organisations operating in the Republic of Tajikistan.
2.4. What is the taxation of dividends for foreign investors?
Dividends paid by resident enterprises of Tajikistan are subject to withholding tax at the rate of 12%.
This dividend tax rate applies to both local and foreign investors and shareholders (participants).
2.5. What strategies exist for minimising tax liability when conducting international business?
Currently, there is no strategy in place to minimise the tax liability when conducting international business.
(3) Regulatory and miscellaneous
3.1. What are the general data protection and privacy requirements in the country, and how do they affect company operations?
In Tajikistan, the Personal Data Law, adopted in 2018, is the foundational legislation governing the protection of personal data. This law mandates that personal data may only be collected with the consent of the data subject, which can be obtained through various means, including written forms or digital acknowledgements such as tick boxes, although written consent is specifically required for biometric data due to its sensitivity. The law also addresses the issue of cross-border data transfer, permitting it, provided that the data subject’s consent is obtained, and does not impose any data localization requirements, allowing data to be stored abroad.
3.2. What labour law features should be considered when hiring local and foreign employees?
There are no special restrictions on the employment of local employees, while labour relations with foreign nationals can be established during the period of their registration with the Visa and Registration Department (OVIR). Their registration with the OVIR is confirmed by the issuance of a Registration Card to foreign nationals, which is usually issued for a period of up to one year (with possible extension). Also, in order to attract foreign workers, the Employer must first obtain the appropriate Licence and then will have to obtain a work permit for them for their employment.
3.3. What are the requirements for currency regulation and currency control?
According to Article 7 of the Law "On Currency Regulation and Currency Control", currency transactions between residents and non-residents are carried out without restrictions.
3.4. What corporate law features should be considered when planning mergers, acquisitions, and company restructuring in the country?
First of all, it is necessary to take into account the applicable provisions of the Law of the RT "On Limited Liability Companies" and the Law of the RA "On Joint Stock Companies".
Secondly, the requirements of the Law of the RT "On Competition" should be taken into account.
In the third place, the requirements of the Law of the RT "On State Registration of Legal Entities and Individual Entrepreneurs" should be taken into account.
3.5. What are the most efficient mechanics for dispute resolution?
Through negotiation, or through the courts.
Authors:
Kamoliddin Mukhamedov, Bahodur Nurov.
