Government Incentives For Tourism Sector Investment

On January 5, 2019 the President of Uzbekistan issued the Decree No. UP-5611"On Additional Measures for Accelerated Development of the Tourism Industry". The Decree is aimed at stimulating further development of entrepreneurial activities in the sphere of tourism infrastructure development, including hotels, and sanitary facilities.

Construction Costs Compensation Program

The Government initiates a compensation program, whereby a part of the investors' costs for the construction and equipping of hotels shall be compensated from the state budget. A special regulation specifying mechanisms for the allocation of funds for the compensation of investor's costs shall be adopted by March, 2019. The compensation payment shall equal to:

UZS 40,000,000 (approximately USD 4, 820) per room for 3-star category hotels; and UZS 65,000,000 (approximately USD 7, 832) - for 4-star category hotels. The compensation fee is subject to annual indexation. The compensation program shall run until the state target of creation of additional 50,000 hotel rooms is achieved.

To qualify for the compensation program, the following conditions shall be met:

New-built hotels shall be put into operation until January 1, 2022; 3-star hotels shall have at least 50 rooms and 4-star hotels - at least 100 rooms. At the same time, the State Fund for the Support of Entrepreneurship Development under the Cabinet of Ministers of Uzbekistan shall compensate small business enterprises interest payments under local bank loans directed at the financing construction and reconstruction of tourist infrastructure objects, including hotels and sanitary facilities.

Royalty Fee Financing

The Decree also covers the issue of royalty financing. Legal entities, residents of Uzbekistan, paying royalties under franchise agreements concluded with any of the top 50 global hotel brands, may be partially financed by the state budget for the first 3 years of the franchise agreement.

The overall state financing of royalty payments is limited to USD 10,000,000 and shall be distributed annually as follows:

First 50 newly-built 3-star hotels shall receive USD 200 per room ; First 30 newly-built 4-star hotels shall receive USD 400 per room. Purchase of Land

Under the Decree, a land parcel allotted for the construction of a hotel, may be sold to the investor after the hotel construction is completed.

This rule does not apply to agricultural land and territories, where cultural heritage sites are located. Such...