SIGNIFICANT DEVELOPMENTS
The new Tax Code of the Azerbaijan Republic is effective from January1, 2000.
TAXES ON CORPORATE INCOME
From January 1, 2001, there is a uniform tax rate for all entities of 27% of taxable profits, with the following exception.The Code stipulates payment of taxes on a simplified system for enterprises not registered as VAT payers, except for enterprises producing excisable goods, credit and insurance organizations and investment funds, and professional participants of the securities market. The rate of the tax is
2% of the amount on the gross revenue.
CORPORATE RESIDENCE
A resident enterprise is any legal entity incorporated and performing its commercial activity in accordance with the legislation of the Azerbaijan Republic or a legal entity with the place of management in the Azerbaijan Republic.
A permanent establishment (PE) of a foreign legal entity is subject totaxation with respect to the income attributable to such PE. A PE is an establishment of a foreign legal entity, through which it fully or partially performs commercial activity (for these purposes, a PE may be considered a management unit, office bureau, agency, construction site,
etc.) for not less than 90 consecutive days within any 12-month period.
Activities of auxiliary or preparatory nature (e.g., exclusively storing or exhibiting goods or products belonging to a nonresident entity,purchasing goods, or collecting date by a nonresident enterprise for own purposes, etc.) do not create a PE.
OTHER TAXES
Branch profit tax/Foreign legal entities carrying out business activities through a representative office or branch office are subject to branch profit tax at 10% on their net profits when such profits are repatriated.Value added tax/The new VAT provisions of the Tax Code are very similar to the provisions of the Sixth Directive of the EU on VAT.The uniform VAT rate is 18%.
Any person engaged in entrepreneurial activity and whose axable
operations during the period of the preceding three months xceed a volume equal to 1,000 times minimum nontaxable salary (i.e., approximately US$25) shall be obliged to file an application for the registration with tax authorities for tax purposes within 10 days from the end of this period.
REVERSE CHARGE VAT
If a nonresident that is not required to be registered for VAT purposes performs work or provides services in the territory of the Azerbaijan Republic for a tax agent (any person registered for the purposes of VAT),such supply shall be subject to reverse charge VAT. The tax agent must collect tax from the amount to be paid to the nonresident.
Import value added tax (IVAT)/The uniform IVAT rate is 18%. IVAT is payable at the point of entry on the customs value of imported goods. IVAT incurred is recoverable.
Excise tax/Excise tax rates vary, depending on the type of excisable goods (e.g., alcohol, tobacco, etc.).
Property tax/All legal entities in the Azerbaijan Republic, including ROs/BOs of foreign legal entities, are currently subject to property tax. Property tax at a rate of 1% is levied on the average annual residual value of the fixed assets on the statutory balance sheet (excluding auto transport). Annual property tax for auto transport for each cubic centimeter of engine is 0.01% for passenger vehicles, 0.02% for cargo-carrying transport facilities, and buses.
Land tax/All legal entities that own and use land are to pay land tax. For industrial purpose lands, rates are set in a range from AZM60 to AZM300 per square meter, depending on the land’s location.
Road tax/Tax on motor vehicles owned by nonresidents entering the territory of the Azerbaijan Republic as transit shall be subject to tax varying from one payment of US$15 (passenger cars) up to US$30 to US$180 per day depending on the type of car and its loading capacity.
Import (customs) duties/In general, import duties are payable by legal entities engaging in import operations with respect to commodities, equipment, products, and other tangible goods that will be brought into Azerbaijan. Effective March 1, 1999, new groupings are established at 15%, 10%, 5%, 3%, or 0%. The new rates of import duties are currently under discussion in the government.
Payroll taxes/Employer payments as a percentage of gross wages are as follows.
Social insurance fund……………………………………………………30%*
Employment fund ……………………………………………………… 2%
*Plus withholding of an additional 1% of employees’ salaries.
Mining tax/All those involved in the recovery of minerals specified by the Cabinet of Ministers within the Azerbaijan Republic are subject to this tax. The list of minerals and tax rates are defined by the new Tax Code. The tax is assessed on the wholesale price of the useful minerals. Tax calculation and payment terms are determined by the Tax Code.
INCOME DETERMINATION
Profit tax is computed
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