UZBEKISTAN: Cement Plant should pay tax on excess profit for six years

The Higher Economic Court of Uzbekistan has upheld the penalty tax on excess profit of Ahangarancement JSC (a subsidiary of Russian Eurocement Group JSC) from 2009 to 2014 and penalties for its late payment, the press service of Ahangarancement said.

The Higher Economic Court by its decision reversed the earlier decision of Economic Court of Tashkent region to invalidate the decision of the State Tax Inspectorate of the Ahangaran region to recover excess profits tax and penalties from the factory.

The message said that the decision by the Higher Economic Court was made despite the fact that the calculation of excess profit tax was made by Ahangarancement in accordance with the laws of the country, the correctness of the calculation was confirmed by the ministry of finance and the expert council at the State Tax Committee of the republic.

The press service said that the plant appealed to the Prosecutor General of Uzbekistan to “make a protest to the Supreme Economic Court of the Republic of Uzbekistan to reconsider the decision regarding the case."

“The decision significantly changes the legal practice on issues of the formation of profits of cement companies, significantly encumbers the plant with an additional tax burden, leads to a reduction of investment opportunities of the enterprise, jeopardizing the implementation of the project of modernization of the enterprise,” said the press release.

Tax authorities of Uzbekistan haven’t commented on this situation.

In March 2014, complex unscheduled inspection of financial and economic activity of Ahangarancement JSC started due to the criminal charges against several employees. However, the inspectors did not find large violations in the activity of the plant.

In July 2014, the Economic Court of Uzbekistan`s Tashkent region granted the claim of the Uzbek State Committee for Privatization, Demonopolization and Development of Competition to recognize invalid the contract for the sale of Ahangarancement JSC (Ahangaran city, Tashkent region). Cash in the bank accounts of the enterprise and fixed assets have been seized by court decision.

In late 2014, the Board of Appeals of the Tashkent Regional Economic Court overturned a lower court decision to invalidate the privatization of Ahangarancement JSC, which is controlled by Eurocement Group holding. The decision of the board was taken on the basis of a settlement agreement, which was signed by parties to the litigation.

In August 2006, Russian Eurocement Group holding purchased some 75.5 percent of shares in Ahangarancement JSC. At present, the share of Eurocement Group in the authorized capital of JSC is 83.92 percent.

Ahangarancement JSC is the second largest cement producer in Uzbekistan. The design capacity is 1.736 million tons of cement per year obtained by “wet” method. During the next three years, it is planned to introduce a new line of dry method of production. After its launch, the production capacity of the plant will exceed 4 million tons per year.

In 2014, Ahangarancement increased cement production by 5 percent, compared to 2013 - up to 1.7 million tons, clinker production - by 6.2 percent, up to 1.2 million metric tons. The plant's share in the domestic market of the country is about 30 percent. Products are exported to Kazakhstan, Kyrgyzstan and Turkmenistan.