【From CFTInet, Beijing 08/24/2000】 CORPORATE TAXES
SIGNIFICANT DEVELOPMENTS
Since last year's publication there have been two significant developments in the area of corporate taxation. First, the corporate profits tax rate was reduced from 32% to 30% effective January 1, 1 999. Second, the tax authorities are in the process of drafting a new Tax Code, which will ignificantly improve the overall tax legislation. It is expected that the new code will be released in late 1999 and be effective January 1, 2000.
TAXES ON CORPORATE INCOME
From January 1, 1999 there is a uniform tax rate for all legal entities of 30% of taxable profits, with the following exception. Income (revenue) of retail outlets is taxed at 3% of gross revenue.
It was formerly possible for Azeri legal entities engaged in restaurant operations, retailing or purveyance of other services to purchase a license as an alternative to paying 1)profit tax. This option was removed effective March 1, 1999.
CORPORATE RESIDENCE
Wholly foreign-owned Azeri legal entities (WFOALEs) and joint ventures with foreign participation (JVs) are considered Azeri legal entities for taxation purposes.
A permanent representative office (RO) or a branch office (BO) of a foreign legal entity is subject to taxation in accordance with the legislation of Azerbaijan. An RO/BO is any office, bureau, agency or other place where activity' is undertaken in connection with the processing of natural resources or the carrying out of work stipulated by contracts for construction, installation, assembly repair, equipment servicing etc. Azeri
organizations and citizens serving as representatives of foreign legal entities are also considered ROs/BOs.
OTHER TAXES
value-added tax/The uniform VAT rate is 20%. For trade operations, VAT of 16.67% is applied on the margin. VAT on equipment and intangible assets used for production purposes can be offset against output VAT.
Import value-added tax/The uniform k/AT rate is 20%. k/AT 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 gotxls, work and services. Excisable items sold for export to non-CIS countries are not subject to the tax.
Property tax/All legal entities in the Azerbaijan Republic, including ROs/BOs of foreign legal entities, are currently subject to properly tax.
Property tax at a rate of 0.5% is levied on the average annual value of the fixed assets on the statutory balance sheet.
Land tax/All legal entities that own and use land are to pay land tax. Rates are set by Azerbaijan's Cabinet of Ministers in a range from AZM.3,000 to AZM I 65,000 per hectare, depending on the land's purpose. location, etc.
Road fund/Road fund tax is levied as follows.1.15% on sale price of fuel and lubricants (petrol, diesel, oil, compressed gas, etc.), less VAT
2.Annual levy on road users, as follows:
a. Total vehicle usage by unions, companies other than trade companies, enter-prises, and organizations-0.05% of annual turnover;
b. 0.3% of annual turnover for trade companies.
3. 2% of purchase price of vehicles.
4 .5% of established minimum wage for each horsepower of engine capacity of each vehicle owned.
5.At rates depending on vehicle type, cargo and load weight, tax on foreign-owned vehicles entering or crossing (transit tax) the territory of Azerbaijan.
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. The import duty rate may be 1 5%, 5% or 0%, or exemption may apply, depending on the type of property. Effective March 1,1999 new groupings are established at 15%, 10%, 5%, 3%, or 0%.
Payroll taxes/Employer payments as a percentage of gross wages are as follows.
%
Social insurance fund &n
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