Current changes in the legislation on the Central Bank establish the legal foundation for implementing Islamic finance mechanisms into the national system. In this regard, amendments were made to a number of normative legal acts of the Republic of Uzbekistan in accordance with the Law of the Republic of Uzbekistan No. 1126 dated March 26, 2026, which comes into force on June 29, 2026.
A key innovation is the expansion of the regulator’s competence, which is granted exclusive powers to approve specialized standards, license Islamic banking activities, and form a specialized supervisory body — the Council on Islamic Finance under the Central Bank. At the institutional level, a legal definition of Islamic financial instruments is introduced, which are recognized as equivalent means of liquidity regulation in the money market. Now, the Central Bank is entitled to use these instruments not only within standard operations for the withdrawal or provision of liquidity, but also as a mechanism for emergency liquidity support for credit organizations operating on Sharia principles. This approach also extends to the deposit guarantee system, allowing the regulator to use Islamic financial mechanisms when lending to the relevant Agency.
In the field of banking regulation and supervision, the focus shifts to the specifics of pricing and corporate governance. The regulator sets requirements for the procedure for calculating markups and distributing profit shares within Islamic operations, which replaces traditional interest-based instruments. Special attention is paid to the quality of management, under which the mandatory institution of the Council on Islamic Finance is introduced in commercial banks. The procedure for approving members of the Council is subject to agreement with the Central Bank of the Republic of Uzbekistan; these members bear joint liability for violations on par with the executive management and the supervisory board of the bank, falling under the measures and sanctions of the regulator. The architecture of the reform is completed by the creation of the Council on Islamic Finance under the Central Bank as the highest collegial body. Its functions include not only the development of the methodological and regulatory framework, but also the performance of advisory and arbitration tasks, including providing clarifications on complex issues and issuing conclusions on financial disputes. Thus, a comprehensive management vertical is formed, ensuring the legitimacy and stability of Islamic financial services in the legal field of the republic.
The comprehensive transformation of the legislation of the Republic of Uzbekistan is aimed at eliminating legal barriers and creating conditions for tax neutrality for Islamic financial institutions. The reform covers fundamental norms of civil turnover, banking regulation, and tax administration.
Amendments to the Civil Code have allowed for the integration of specific Sharia principles into classical legal institutions. In particular, the norms on earnest money (earnest deposit) and the liability of a trustee have been revised: the introduction of clauses on the priority of special legislation eliminates the risk of qualifying Islamic operations as “unjust enrichment” and allows for the implementation of partnership schemes (Mudarabah), where the manager does not bear liability for losses in the absence of fault. The transformation of the conceptual apparatus in the articles on bank deposits, where the term “interest” is supplemented with “other income,” legalizes non-interest investment accounts and safe custody accounts (Wadi’ah).
The Law “On Banks and Banking Activities” establishes a two-license system, allowing both specialized Islamic banks and “universal” windows in traditional banks to function, provided there is strict separate accounting. A closed list of permitted operations has been introduced, including trade finance (Murabaha), lease (Ijarah), partnership (Musharakah), and project finance (Salam, Istisna).
Special attention is paid to ensuring “Sharia compliance.” A mandatory independent body — the Council on Islamic Finance — is introduced into the management structure of each Islamic bank. Council members undergo a verification procedure for compliance with the regulator’s qualification requirements (fit & proper) and bear personal responsibility for compliance with Islamic standards. The supervisory board and the management board of the bank are given a direct obligation to ensure the compliance of activities with the approved standards, and an external audit for compliance with these norms becomes annual and mandatory.
A special regime based on the principle of tax neutrality has been introduced into the Tax Code, which prevents double taxation and places Islamic instruments on equal terms with traditional ones.
- VAT: trade markups in Murabaha operations, lease margins in Ijarah, and trust management services are exempt from tax.
- Corporate Income Tax and Personal Income Tax: Income from Islamic certificates (Sukuk) and investment deposits are equated to dividends or interest, while the income of individuals from such instruments is exempt from taxation.
- Property Taxes: When transferring real estate into financial lease (Islamic leasing) within the framework of Islamic financial activity, banks and microfinance organizations (lessors) are recognized as the taxpayers of property tax.
The reform also touched upon social aspects: late payment fines, which according to the canons of Islamic finance cannot be appropriated by the bank, are officially recognized as deductible expenses provided they are directed to charity. Thus, the created legal model ensures the full legitimacy of Islamic financial products.
To ensure the competitiveness of Islamic financial products, the legislation introduces a number of significant benefits in the sphere of state duties and public procurement. A key change is the abolition of double taxation when registering property rights. Now, when implementing Murabaha or Ijarah transactions, the intermediate transfer of property to the bank’s balance sheet is exempt from state notary duty, which reduces the financial burden on the final client.
A special legal regime has also been established for state-owned banks: when carrying out Islamic financial activities (purchasing assets for transfer to clients or attracting liquidity), they are exempt from burdensome public procurement procedures. This allows credit organizations to respond promptly to market demands while maintaining the obligation to comply with general procurement rules for their other economic activities.
The status of a license for the implementation of Islamic banking activities is officially established in national law. The Central Bank acts as the regulator, and the cost of licensing is tied to the scale of the business (0.1% of the minimum authorized capital). The legislation clearly distinguishes institutional forms: from classical banks to specialized Islamic microfinance organizations, creating a flexible ecosystem for participants with different capital volumes.
The reform of the deposit insurance system adapts state guarantees to the specifics of partnership financing:
- Objects of Guarantee: The legislation separates the bank’s obligations into guaranteed (traditional and savings accounts) and investment ones. Depositors under Mudarabah contracts assume investment risk, therefore such deposits are excluded from the state insurance system, which corresponds to the economic nature of Islamic banking.
- Fund Liquidity: The Deposit Guarantee Agency is granted the right to attract liquidity from the Central Bank through Islamic instruments. At the same time, restrictions on the cost of attracting funds now take into account not only interest rates but also any forms of investment income.
- Subject Composition: Members of the Councils on Islamic Finance of banks are recognized as related parties, which limits their rights to insurance compensation and increases their responsibility for the stability of the financial institution.
The transition to the Islamic model requires not only obtaining a license but also deep structural transformation. Key tasks include the implementation of a separate accounting system, the formation of a staff of experts in “Sharia compliance,” and passing a specialized external audit annually.
From June 2026, Uzbekistan offers one of the most comprehensive legal frameworks in the region. The elimination of civil law barriers and the introduction of tax incentives (including the exemption of personal income from tax and the transfer of the burden of property taxes to the bank during leasing) make the jurisdiction attractive for international Islamic capital. A transparent environment is being formed where the client is clearly informed about the risks of investment deposits and the benefits of tax neutrality when using Islamic financial instruments.