Photo: gazeta.uz
A subsidiary of the French multinational Lactalis in Uzbekistan has been fined 5.3 billion soums (approximately $419,000) over a discrepancy in bottled water stock worth just 1.5 million soums (about $118), according to company representative Doniyor Najimitdinov. The incident was discussed during an open dialogue between Chamber of Commerce and Industry Chair Davron Vakhabov and leaders of industrial associations, Spot.uz reports.
The fine was issued under two articles of Uzbekistan’s Tax Code:
Article 223, for concealment (understatement) of the tax base, and
Article 227−1, which covers violations of mandatory digital labeling regulations.
Najimitdinov explained that during a recent tax audit, inspectors recorded a shortfall of bottled water at several warehouse locations. Despite Lactalis’s nearly 1 trillion soum ($79 million) turnover, tax authorities treated the missing water as illicitly sold merchandise and applied a penalty equivalent to 2% of the company’s net quarterly revenue — resulting in a fine over 3,500 times larger than the shortfall itself.
He described the penalty as “a shock to the foreign investor.” In response, Chamber head Vakhabov stated the punishment “applies equally to all.”
Najimitdinov emphasized that the Tax Code does not explicitly state that any inventory discrepancy should automatically be treated as a digital labeling violation. Previously, tax authorities simply imposed VAT, assuming missing items were sold. However, under new digital labeling rules, even minor discrepancies are now interpreted as labeling breaches, carrying significant financial penalties.
Chair of the Tax Committee Sherzod Kudbiyev acknowledged that imposing a digital labeling fine over a 1.5 million soum discrepancy was inappropriate. He ordered an internal review of the case and summoned the inspector who filed the act against Lactalis.
“When a 1.5 million soum shortfall results in a fine equal to 2% of net quarterly revenue, it defies common sense,” Kudbiyev said.
Article 227−1 of Uzbekistan’s Tax Code, introduced in 2022, governs violations related to digital product labeling, fiscal tags, automated tracking systems, and integration with tax authorities. It applies to producers, importers, and sellers of alcohol, tobacco, beer, soft drinks, pharmaceuticals, appliances, and other regulated goods.
Initially, violators faced fines of 100% of net quarterly revenue, which drew strong backlash from businesses. In 2024, the government reduced first-time penalties to 2%, with 20% fines for repeat violations within a year. A presidential decree also canceled 98% of previously issued fines under this article.
From 2026, tax authorities will be authorized to conduct remote audits focused on digital labeling compliance. The first two violations will result in warnings; subsequent breaches within a year will trigger fines ranging from 0.2% to 2% of net quarterly revenue.
Lactalis, a private French conglomerate founded in 1933 by the Besnier family, is the world’s third-largest dairy producer and Europe’s leading cheese manufacturer. The company operates over 200 factories and is active in 148 countries. It entered the Uzbek market in 2019 by acquiring Nestlé’s water and dairy businesses, including two factories in Namangan.
