How to Reduce Tax Risks

Reducing tax risks is a critical task for any business and requires a comprehensive approach, along with a deep understanding of tax legislation. In Uzbekistan, as in any other country, businesses need to minimize these risks to avoid penalties and other sanctions. Here are key strategies to help reduce tax risks:

1. Accurate Determination of the Tax Base
   Accurately determining the tax base is essential for minimizing tax risks. This requires precise accounting of all company revenues and expenses, in line with established standards. According to Article 71 of the Tax Code of the Republic of Uzbekistan, the tax base is the monetary, physical, or other characteristic of the taxable object. The tax base, and the procedure for determining it, are established for each tax by the Tax Code. It is determined based on financial statements, which must adhere to National Accounting Standards (NAS) and, for certain categories of enterprises, International Financial Reporting Standards (IFRS). Paying attention to detail when determining the tax base helps avoid excessive tax burdens and potential sanctions.
2. Timely and Full Payment of Taxes
   Timely and complete payment of all taxes is a critical aspect of managing tax risks. Businesses should have a well-organized system of tax accounting and planning to monitor payment deadlines and amounts. Ensuring timely payments minimizes the risk of penalties and fines.
3. Utilization of Tax Benefits and Exemptions
   Taking advantage of tax benefits and exemptions can significantly lower the tax burden. However, it’s essential to verify that the conditions for applying these benefits comply with established legal requirements, to avoid unjustified claims from tax authorities. Consulting with tax specialists can ensure proper interpretation of the law and maximize the use of available benefits.
4. Documentary Evidence of Transactions
   Maintaining accurate and complete documentation for all financial and business transactions is critical for reducing tax risks. Properly formatted documents that comply with legislative requirements ensure transparency and accuracy in accounting. This reduces the likelihood of disputes with tax authorities.
5. Regular Audits and Internal Controls
   Conducting regular internal audits helps identify and resolve potential tax risks early. These audits ensure that tax accounting practices comply with legal standards and allow for timely corrections. Internal controls are key to building a robust tax risk management system, contributing to long-term business stability and transparency.