Understanding Vat In Azerbaijan: A Comprehensive Guide

Azerbaijan has a federal tax called Value-Added Tax (VAT) that is collected by the State Tax Service under the Ministry of Taxes. VAT is levied on the supply of goods and services in Azerbaijan, as well as on the import of goods. The standard rate of VAT in the country is 18%. This means that businesses are required to charge VAT on their sales and can also claim back any VAT that they have paid on their purchases. The VAT amount paid on goods not designed for production or business purposes can be refunded to foreign citizens when departing from Azerbaijan.

Azerbaijan's standard VAT rate is 18%

Azerbaijan has a federal tax called Value-Added Tax (VAT) that is collected by the State Tax Service under the Ministry of Taxes. The standard VAT rate in Azerbaijan is 18%. This means that for most goods and services, VAT is applied at an 18% rate during each stage of production and distribution. Businesses in Azerbaijan are required to register for VAT if their annual taxable turnover exceeds the government-set threshold, which is currently AZN 200,000 (approximately USD 117,000). Once registered, businesses must charge VAT on their sales but can also claim back any VAT that they have paid on their purchases.

There are some exceptions to the standard VAT rate in Azerbaijan. Certain goods and services are exempt from VAT, and there is also a zero-rated VAT category. Zero-rated VAT applies to the exportation of goods and services, the importation of goods under specific regimes, and certain other transactions as defined by the government. For example, the supply of gold and other valuables to the Central Bank of Azerbaijan is zero-rated for VAT.

It is important to note that VAT in Azerbaijan is levied on the supply of goods and services, as well as on the import of goods. The taxable base for VAT is determined by the value of the goods and services, excluding VAT but including any applicable customs duty and excise duty. The amount of VAT to be paid or refunded is calculated as the difference between the VAT received on taxable sales and the VAT paid on purchases necessary to generate those sales.

VAT refunds are available in Azerbaijan under certain conditions. For example, foreign citizens, mainly tourists, can receive a VAT refund on their purchases made in the country. To be eligible, the cost of the goods, including VAT, must be above a certain threshold, and the goods must be taken out of Azerbaijan within a specified time frame.

VAT is levied on the supply of goods and services in Azerbaijan

Value-added tax (VAT) is levied on the supply of goods and services in Azerbaijan, as well as on the import of goods. The standard rate of VAT is 18%.

VAT is applied to the value of goods and services at each stage of production and distribution. Businesses are required to register for VAT if their annual taxable turnover exceeds the threshold set by the government, which is currently AZN 200,000 (approximately USD 117,000). Once registered, businesses must charge VAT on their sales but can also claim back any VAT that they have paid on their purchases.

The standard VAT rate of 18% applies to most goods and services in Azerbaijan. However, there are certain cases where different VAT treatments come into play. These include zero-rated supplies, VAT exemptions, and specific transactions listed below.

Zero-rated VAT applies to the following:

• Exportation of goods and services
• Importation under specific regimes with a VAT exemption certificate
• Importation of goods and the supply of goods, works, and services to grant recipients funded by financial aid from abroad
• International and transit cargo and passenger transportation, as well as related services
• Investment of fixed assets in the form of shares in the charter fund, provided it is not for the acquisition of other property
• Supply of gold and other valuables to the Central Bank of Azerbaijan

In addition to the zero-rated supplies, specific transactions are exempt from VAT. These include:

• Provision of financial services
• Sale of participation interests or shares of a legal entity
• Provision of paid educational services
• Investment of property (excluding fixed assets) in the form of shares into the charter fund, except for imported property if not related to the acquisition of other property
• Imports of fixed assets under leasing agreements
• Turnover of agricultural product producers for the sale of their agricultural products for a 13-year period starting from 1 January 2014
• Payment for rent or lease of aircraft and engines from non-residents without a permanent establishment in Azerbaijan
• Industrial and technology equipment imported by taxpayers is exempt for a ten-year period after their registration as residents of the industrial and technological park.

It is important to note that taxpayers are required to register for VAT if their cumulative taxable income or the value of a single taxable transaction exceeds AZN 200,000. The tax refund process for VAT in Azerbaijan can be burdensome and rare.

Businesses must register for VAT if their annual taxable turnover exceeds AZN 200,000

In Azerbaijan, businesses must register for Value-Added Tax (VAT) if their annual taxable turnover exceeds AZN 200,000. This is the threshold set by the government, and it is important to note that this is a cumulative amount over a consecutive 12-month period. If a business's taxable income surpasses this amount, they are required to register for VAT and subsequently charge VAT on their sales.

VAT in Azerbaijan is a federal tax, overseen by the State Tax Service under the Ministry of Taxes. The standard rate of VAT is 18%, and it is applied to the value of goods and services at each stage of production and distribution. This includes the supply of goods and services within Azerbaijan, as well as the import of goods into the country.

Once registered, businesses have certain obligations to fulfil. They must charge VAT on their sales and can also reclaim any VAT that they have paid on their purchases. This is calculated as the difference between the VAT received on taxable sales and the VAT paid on purchases necessary for generating those sales.

It is important to note that there are certain exemptions and zero-rated supplies for VAT in Azerbaijan. For example, the exportation of goods and services is zero-rated, and specific transactions such as financial services and the sale of participation interests are exempt from VAT. Additionally, certain categories of imported goods may also be exempt, as defined by the Cabinet of Ministers.

VAT refunds are available to foreign citizens at the airport when departing Azerbaijan

Azerbaijan has a standard VAT rate of 18%. VAT refunds are available to foreign citizens at the airport when departing Azerbaijan. This is part of the country's Tax-Free shopping system, which aims to attract foreign tourists and strengthen the competitiveness of the country's tourism industry.

To be eligible for a VAT refund, foreign citizens must shop at stores displaying the Tax-Free signage and spend a minimum of 300 AZN (including VAT) on goods per electronic tax invoice. The goods purchased must not be intended for production or business purposes. Additionally, the goods must be taken out of Azerbaijan within 90 days from the purchase date.

When departing from Azerbaijan, foreign citizens can claim their VAT refund at the airport by presenting their passport and the electronic tax invoice to the customs officials. The amount of VAT refunded will be the total VAT paid minus a 20% handling fee for the services provided by the Operator and any applicable banking transaction fees. The refund can be received in cash or transferred to the buyer's bank card.

It is important to note that VAT refunds are not available for certain types of goods, including excisable goods, foodstuffs, medicines, and medical equipment. The Tax-Free system is also not applicable to Azerbaijani citizens, stateless persons, and foreigners with temporary or permanent residence permits in Azerbaijan.

VAT is a federal tax collected by the State Tax Service under the Ministry of Taxes

Value-added tax (VAT) is levied on the supply of goods and services in Azerbaijan, as well as on the import of goods. The standard rate of VAT in Azerbaijan is 18%.

VAT in Azerbaijan is a federal tax collected by the State Tax Service under the Ministry of Taxes. It is applied to the value of goods and services at each stage of production and distribution. Businesses are mandated to register for VAT if their annual taxable turnover surpasses the government-set threshold, which currently stands at AZN 200,000 (approximately USD 117,000). Once registered, businesses are obligated to charge VAT on their sales and can also reclaim any VAT expenses incurred on purchases.

Businesses must register for VAT if their cumulative taxable income or the value of a single taxable transaction exceeds AZN 200,000. The tax law also permits voluntary registration for VAT purposes. A financial penalty is imposed by the tax authority if a business fails to register when required.

VAT is a consumption tax, and while it is ultimately borne by the consumer by being included in the price paid, the responsibility for charging, collecting, and remitting it to the tax authority falls on the business making the supply or sale. A business registered for VAT as a taxpayer will charge VAT (output tax) on its taxable sales and incur VAT (input tax) on its purchases, including any VAT paid during importation. The net difference between the output VAT and the claimable (offsetable) input VAT in each accounting period represents the VAT liability of the business to the government. If input tax surpasses output tax, any excess can be offset against other tax liabilities or refunded.

The VAT refund process in Azerbaijan is challenging and uncommon. A transaction is typically subject to VAT in Azerbaijan if the following conditions are met:

• It is a supply of goods, works, or services.
• It is an import of goods.
• It occurs in Azerbaijan.
• It is made by a taxable person or entity registered for VAT in Azerbaijan or acting as a tax agent for VAT purposes.
• It is made in the course or furtherance of any business carried on by that person or entity.

There are two rates of VAT applied to goods and services in Azerbaijan: the standard rate of 18% and zero rates. Additionally, some goods and services are VAT-exempt. Businesses with VAT-exempt sales cannot claim input VAT on their purchases, so the VAT paid to suppliers becomes part of their costs. Most goods imported into Azerbaijan are subject to VAT, which must be paid by the importer upon entry. If the importation is for business purposes and the importer is VAT-registered, they can reclaim the import VAT as input VAT.

Frequently asked questions