Amendment to Tax Legislation

The amendment to the Tax Code which came into force on January 1, 2017 has introduced a number of significant changes into the tax legislation of the Republic of Azerbaijan. Below we provide you with a general overview of the said changes:

Legal entities and individual entrepreneurs will have to pay simplified tax in the amount of 1% of cash withdrawals from bank accounts;

Tax authoritities are now authorized to obtain any information on bank accoutns of taxpayer bank customers by simply providing a written notice (under the previous edition of the Tax Code the tax authorities used to meet certain conditions).

The amounts transferred by residents of the Republic of Azerbaijan to electronic wallets of non-residents and to offshore territories are now subject to 10% withholding tax.

Provision of online services and works  by non-resident will be subject to VAT and such VAT will be withheld from payments to non-residents by persons not registered as a tax payer.

Annual depreciation rate for machines and cars has been decreased from 25% to 20%. Depreciation rate for high technology calculation machines on the other hand, remained at the rate of 25%.

Sale of toxic assets within the framework of restructurisation and rehabilitation of insolvent banks has been exempted from VAT for the period of 3 years.

VAT for the retail sale of agricultural products produced on the territory of the Republic of Azerbaijan shall be calculated not on the whole price of such products, but only on the retailer’s margin.

Amendments have been introduced in relation to transfer pricing. Taxable amount of transactions between certain individuals is going to be established by tax authoritites in compliance with the Tax Code.   

Individuals enagaged in certain types of activities without hiring employees (musicians, housemaids, private chauffeurs, private photographers, etc.) shall be subjected to a monthly simplified tax (depending on the region of activity with the application of 0.5-2 coefficitent 5-30 manats).

Refund period for overpaid taxes has been reduced from 45 to 20 days.

Rates and counting methods for sanctions imposed on banks have been altered.

The procedure for adoption of decisions on advance determination of tax obligations has been established. Under this procedure, provided that state fee in the amount of 500 manats is paid, taxpayers may apply to tax authorities with the purpose of advance determination of on tax obligations concerning transactions in the amount exceeding 10 000 000 manats.

Sale and purchase of land plots is now subject to simplified taxation.

A concept of tax avoidance scheme has been introduced, according to which economic essence of the transactions rather than their legal structure will be taken into consideration. 

Cash register receipts or other receipts are not considered a document confirming deductable expences in connection to the purchase of the good.

Excise duty rates on import of vehicles, platinum, gold and diamonds have been increased approximately by two times, excise rates on fur import have been applied and established in the amount of 10% of its market value.

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