AMENDMENTS TO THE TAX CODE OF THE REPUBLIC OF AZERBAIJAN
Code of the Republic of Azerbaijan for 2022 was discussed in the second reading in the Milli Majlis, and we have already provided with a brief overview in our earlier distributions.
We would like to bring to your attention the main provisions of the draft Tax Code, proposed for the third reading.
- According to the new Article 16.1.11-11 of the Tax Code the following information on imported goods (with the exception for taxpayers operating in the oil and gas sector or belonging to the public sector, as well as using the “Green Corridor” issuance system) is required to be submitted by taxpayers to the tax authority at the place of registration of goods before they leave customs control:
- on the contract concluded between the parties and the place of storage of goods in case of transfer of goods for responsible protection or storage in places belonging to other persons.
- information about the ordering persons if the goods were delivered on the basis of the order (TIN if the customer is a taxpayer, then name, surname, middle name and PIN if the customer is an individual) and the amount of the order for each customer
It should be noted that in draft discussed in the second reading it was also required to provide the tax authority with information on the place of storage (unloading) of goods used on the basis of property, lease or other property rights and/or registered with the tax authorities as business entities (objects).
- In the draft discussed in the second reading, the desk tax should have been carried out in the course of 90 working days in respect of the profit and income tax return (excluding income tax withheld at the source of payment and the private notary's income tax return), but in the new draft this period was reduced to 60 days.
- If the draft discussed in the second reading proposed to tax individuals who are not registered at the tax authorities as a taxpayer a tax rate of 5% without deducting expenses from the income from the provision of goods specified in Article 3.5 of the Law of the Republic of Azerbaijan "On non-cash settlements" rate remains the same at 2%.
- If the draft discussed in the second reading provided for the tax exemption for up to 40,000 manats of financial assistance to individuals to pay for medical treatment abroad, including surgery, in the new draft this amount was increased to 50,000 manat.
Tax exemption is also provided for financial assistance received by family members of martyrs in the amount up to 20,000 manat, and up to 20,000 manat for financial assistance received by servicemen and civilians with disabilities identified as a result of military operations for freedom, sovereignty and territorial integrity of the Republic of Azerbaijan.
It should be noted that in the draft discussed in the second reading, this amount was proposed in the amount of 10,000 manat.
- According to the new Article 102.1.25-1 of the Tax Code, income from the write-off of debts to credit institutions to the participants of the Patriotic War and persons who received the status of martyr families as a result of military operations and military provocations during the Patriotic War, as well as after the Patriotic War for the territorial integrity of the Republic of Azerbaijan is exempt from tax.
It should be noted that in the draft discussed in the second reading, this exemption applied only to those become a martyr or wounded in the Patriotic War.
- If the draft discussed in the second reading envisaged the calculation of VAT on trade surcharges in the wholesale and retail sale of agricultural products (local and foreign origin) for a period of 2 years from January 1, 2022, in the new edition the proposed period is 3 years
- According to the new Article 164.1.41-2 of the Tax Code, the exemption from VAT for import of second and third level electric chargers for electric vehicles was proposed for a period of 3 years from January 1, 2022, in the new draft the sale of these goods is also exempt from VAT within the specified period.
- According to the new draft, the persons specified in Articles 218.4.1 and 220.10 of the Tax Code, will be issued a "Distinction mark" or "Receipt for the payment of a fixed amount of simplified tax, compulsory state social insurance and compulsory medical insurance”, after simultaneous payments of taxes, compulsory state social insurance and compulsory medical insurance, respectively.
Company (LLC) registration in Azerbaijan (Innovation in registration of an LLC)
As EKVITA, we provide services in multiple areas of law (corporate, labor, migration, tax, litigation, etc.), as well as accounting, audit, business development and accompany our clients starting from early stages of their businesses. In this regard, putting it simply, I would like to speak about “opening the company”. That is, what is the most appropriate organizational form for starting a business in Azerbaijan, its advantages, necessary procedures in the registration process and etc. As you know, there are several organizational forms for the establishment of a company in the legislation. However, today I would like to tell you about the Limited Liability Company (LLC), which is the most acceptable and simple one among the rest in terms of procedural and legal requirements. If we refer to the definition of LLC – a limited liability company means company established by one or more persons (natural persons and (or) legal entity), the charter capital of which is divided into shares, the sizes of which are specified by the charter. As can be seen from mentioned definition, the legislation does not set limits regarding the number of founders of the LLC. In other words, the founder can be one or more persons, including a foreign citizen. It should be noted that in the case of foreign citizens, the legislative or documentation requirements are the same as for Azerbaijani citizens, i.e. there are no additional or special requirements. Another benefit of the LLC is the absence of any restrictions regarding its charter capital in the legislation. In other words, there is no minimum or maximum limit, the charter capital may be settled in any amount. Therefore, in many cases, when establishing the LLC, the charter capital is formed in the amount of 10-100 manats. It also should be noted that the registration process of the LLC is notable for its simplicity, and it would be appropriate to emphasize the innovative policy pursued by the Ministry of Taxes in this sphere. Thanks to it, Azerbaijan has established itself in 9th place in terms of the “Starting a Business” indicator among 190 countries this year, according to the annual Doing Business Report of the World Bank.Powered by Froala Editor
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