CESD offers a tax exemption for e-trade

CESD offers a tax exemption for e-trade

The 5th Tax Forum was taken place in Baku, Azerbaijan on February 10th, 2016. Chairman of the Center for Economic and Social Development (CESD) Vugar Bayramov, who addressed the forum, has proposed to exempt e-commerce within the country from VAT. “The matter rests in entrepreneurs who sell their products only through the Internet,” he said. He also noted that it is possible to set a limit in the amount of 1,000 manats ($630.7) for cash payments within a single transaction.
CESD chairman has also recommended applying an investment tax system in order to support business in Azerbaijan.

Current trends in the economy, reduction of oil price on world markets and devaluation of the national currency, negatively influenced the oil exporting nation. Thus, to ensure more transfers from non-oil sector, stimulate the economy and attract more investment to the country, the Azerbaijani government announced its intention to cut several taxes, examine reform options and in some cases cease the tax to support entrepreneurs. Deputy Taxes Minister Sahib Alakbarov, addressing the Tax Forum in Baku on February 10, said the government is working over protection of the population from negative effects of the global crisis.

“To make this strategy to be a long-lasting one, it is necessary to increase the income of the state budget, and, of course, entrepreneurs and businessmen should do a serious job regarding that,” Alakbarov said, adding that they must fully comply with tax obligations in a timely manner, keep accounting well and mustn’t evade taxes.

He noted that the economic reforms carried out in the regions of Azerbaijan with a view to improve the efficiency of tax administration measures, tax revenues from the region over the past five years have almost doubled, reaching 622.1 million manats ($392.4 million).

Speaking about the challenges before the tax system, Alakbarov reminded that the total volume of tax debts in Azerbaijan hits 2.4 billion manats or $1.5 billion as of January 2016.

The tax debt can be seen in every area, and about half of them are in the public sector.

Alakbarov further said that despite sharp decline in energy prices, Azerbaijan’s GDP in 2015 grew by more than one percent, while the non-oil sector grew by 8.4 percent. In 2015, the country’s economy received nearly $20 billion of investment, with half being foreign capital.

WB Baku office head Larisa Leshchenko, for her part, noted that the development of non-oil sector is especially important, given the fact that it’s not worth waiting for increase in oil prices in the near future.

“In previous years Azerbaijan took serious steps to ensure stability of the economy. Even with oil prices at $60 per barrel in the first half of 2015, Azerbaijan achieved significant economic growth of 5.7 percent, and in the second half of 2015, despite an even further fall in oil prices, the country was able to ensure GDP growth, though at a slower pace,” Leshchenko added.

She believes difficulties caused by low oil prices are at the same time good opportunity to hold serious reforms and strengthen economic resilience.

Leshchenko welcomed the steps taken by Azerbaijan to improve the tax system, appraising the application of simplified tax for companies with a turnover of capital of up to 200,000 manats.

She said that this will seriously affect the development of non-oil sector of the country’s economy.

The updated procedures will increase the number of taxpayers using simplified taxation. If earlier the volume of taxable transactions exceeded 120,000 manat ($114,231) with imperative registration for VAT per month, this amount brought up to 200,000 manat ($190,386) in 2016.

Thus, from now on companies with turnover of up to 200,000 manat ($190,386) will benefit from a simplified tax system, providing for the payment of 4 percent in tax with turnover registered in Baku and two percent outside of the capital. Legal entities using simplified tax system are exempt from VAT, income tax and property tax, and individuals do not pay VAT and income tax.

Small and medium-sized enterprises represented as objects of trade and public catering will have an advantage to pay using simplified tax system next year regardless of the size of their turnover.

New simplified tax rates applied in this segment will be 6 percent for entrepreneurs engaged in trading activities, and 8 percent for entrepreneurs engaged in catering.

Speaking about lowering of Azerbaijan’s sovereign rating by international rating agencies, Leshchenko said the Bank does not consider that this could have a negative impact on attracting additional investment to the country.

“Private investors consider a variety of factors and a rating fall is only one of them. They take into account in particular the business climate in the country, how much they can make money, whether they can take capital out of the country, etc.,” she explained.

She emphasized that the manat devaluation had a positive impact in this regard, because it allowed making Azerbaijan’s economy more competitive.


Chairman of the Center for Economic and Social Development (CESD) of the country Vugar Bayramov, who addressed the forum, has proposed to exempt e-commerce within the country from VAT.

“The matter rests in entrepreneurs who sell their products only through the Internet,” he said.
He also noted that it is possible to set a limit in the amount of 1,000 manats ($630.7) for cash payments within a single transaction.

Meanwhile, work on the creation of the National Payment System of Azerbaijan will be completed in the first quarter of 2016.
This system will make it possible to develop non-cash payments in the country and reduce the cost of services on card transactions, Deputy Director of Payment Systems and Settlements Department of the Central Bank of Azerbaijan Vahid Gurbanli said.

He further noted that Azerbaijan will switch to direct debit – direct withdrawal from bank accounts in 2016, which will be applied if the amount of non-cash transactions is small.

A direct debit or direct withdrawal is a financial transaction in which one person withdraws funds from another person’s bank account. Formally, the person who directly draws the funds (“the payee”) instructs his or her bank to collect (i.e., debit) an amount directly from another’s (“the payer’s”) bank account designated by the payer and pay those funds into a bank account designated by the payee. Direct debits are typically used for recurring payments, such as credit card and utility bills, where the payment amounts vary from one payment to another.

There were also offered to apply a broad tax amnesty in Azerbaijan. Nuran Kerimov, a representative of the American Chamber of Commerce in Azerbaijan (AmCham), Deloitte partner in Azerbaijan said this can help to return the funds that entrepreneurs took out of the country.

Russia currently applies this, and it is necessary to see what results they will achieve before bringing this experience in Azerbaijan, he said.

“We need to explore the possibility of applying in Azerbaijan international agreements on protection of investments. The investor must be sure that, after rules of the game will not change making investment, and the tax burden will not increase,” Karimov said.

He also noted the importance of exempting enterprises processing agricultural products from taxation. “In case huge investments made, then a reprieve on payment of taxes on imports of raw materials can be granted,” he said.

Gulgiz Dadashova

Leave A Comment