Azerbaijan Republic Tax System
General provisions about tax system
In the Republic of Azerbaijan three type of tax are determined and paid: state tax, tax of autonomous republic, municipal tax.
State taxinfers the tax the payment of which is compulsory throughout the territory of Republic.
Tax of autonomousrepublic infers the tax determined by the legislation of Nakhichevan Autonomous Republic and payable in Nakhichevan Autonomous Republic.
Municipal taxinfers tax and payments, determined and entered into force by the decision of municipalities and payable in the territories of municipalities. Other mandatory payments, applied by municipalities, are determined by relevant law.
Municipalities regulate the following elements of levying tax in their territories: tax concessions, as well as tax staff within the limits allocated by tax legislation.
Tax sums are levied in the following forms:
Directly from the source (deducting tax prior to getting income or salary);
By declaration (deducting tax after getting income or salary).
State tax includes:
1) Income tax
2) Profit tax
3) VAT – value added tax
5) Property tax of legal entities
6) Land tax of legal entities
7) Road tax
8) Industrial tax
9) Tax on simplified system
The limits of all state tax are allocated by legislation. The amount of state tax, allocated for each separate year, may not prevail the amount, allocated annually, while adopting the law about State Budget, these amounts can be revised.
Tax of autonomous republic consist of abovementioned tax, levied in Nakhichevan Autonomous Republic.
Municipal tax include:
1) land tax of individuals
2) property tax of individuals
3) industrial tax for extracting construction materials of local form
4) profit tax of entities and organizations, referring to the property of municipalities
The parties of relations regulated by tax legislation are:
- legal entities and individuals, recognized in relation to tax legislation as taxpayers;
- legal entities and individuals, recognized in relation to tax legislation as tax agents;
- State tax bodies of Azerbaijan;
- Customs bodies of Azerbaijan;
- Financial bodies of Azerbaijan – for resolution the matters, indicated in tax legislation;
- Governmental bodies, municipalities, other competent bodies and official persons.
Tax is mandatory, individual, gratuitous payment levied from taxpayers into state budget, local budgets, as well as target state funds in the form of alienation of money resources belonging to them with a view of financial maintenance of activity of state and municipalities.
Tax is considered allocated in the case, when taxpayers and subsequent elements of taxation are allocated:
1) object of taxation
2) taxable base
3) taxation period
4) tax rate
5) the rule of deducting tax
6) rule and periods of payment of tax
Tax privileges can be made available on the basis provided by tax law during the establishment of tax. The objects of taxation include income, profit, property, land, minerals, added value of presented goods (labor, service) and other objects of taxation.
Taxable baseis quantities expression of taxable part of taxation object.
About Custom Tariff
Special, antidumping and compensatory duties
To protect economic interests of the Azerbaijan Republic, special duties may be temporarily applied to the imported commodities:
- special duties
- antidumping duties
- compensatory duties.
Special duties are applied:
- as a protective measure when commodities are imported to the customs territory of the Azerbaijan Republic in volumes and on terms which cause damage or could cause damage to local producers of similar commodities;
- as a retaliatory measure against discriminatory and other actions of other states and their unions which infringe the interests of the Azerbaijan state.
Antidumping duties are applied in cases of import of commodities to the customs territory of the Azerbaijan Republic at a price lower that their actual cost in the country- exporter at the moment of such import, if such import causes (or could cause) damage to local producers of similar commodities, interferes with organisation of production or expansion of production of similar commodities in the Azerbaijan Republic.
Compensatory duties shall apply to imported commodities, when in production of such commodities or on their export direct or indirect subsidies were used, if such import causes (or could cause) damage to local producers of similar commodities, interferes with organisation of production or expansion of production of similar commodities in the Azerbaijan Republic.
Procedure of formation and use of special duties is established by legislative acts of the Azerbaijan Republic.
By tariff privilege (tariff preference) we shall mean privilege in trade policy of the Azerbaijan Republic, which is granted on conditions of reciprocity or unilaterally, with regard to commodity cleared through the customs border of the Azerbaijan Republic; said preference is realised in the form of return of earlier paid duty, exemption from payment of duty, reduced rate of duty, establishment of tariff quotas for preferential import (export) of commodity.
Exemption from customs duty
The following are exempted from customs duties:
- transport means used for international transportation of cargo, luggage and passengers, and also articles of supplies and accessories, fuel, food and other products required for normal functioning on the road, in stop points, or articles purchased abroad for liquidation of accident (breakage) of said transport means;
- articles of supplies and accessories, fuel, food and other property exported outside the customs territory of the Azerbaijan Republic, in order to provide normal operation of Azerbaijanian vessels leased (rented) by legal entities and physical persons of the Azerbaijan Republic which carry out fishing, and also products of their activity imported to the customs territory of the Azerbaijan Republic;
- commodities imported to the customs territory of the Azerbaijan Republic and exported from this territory for official or personal use by representatives of foreign countries, physical persons having the right for duty-free importation and duty-free exportation of such commodities in compliance with international agreements of the Azerbaijan Republic and legislation of the Azerbaijan Republic;
- currency of the Azerbaijan Republic exported from the customs territory of the Azerbaijan Republic and foreign currency (except that used for numismatics), securities imported to this territory in accordance with legislation of the Azerbaijan Republic;
- commodities which are subject to expropriation in favour of the state in cases envisaged by legislation of the Azerbaijan Republic;
- commodities imported to the customs territory of the Azerbaijan Republic and exported from this territory with the objective of elimination of consequences of accidents and catastrophes, natural calamities or as humanitarian aid, including free text-books for schools, nursery schools and medical institutions;
- commodities imported to the customs territory of the Azerbaijan Republic and exported from this territory as free aid and charity at a level of states, governments, international organisations, including technical assistance, and also money and/or other material assistance, received as grant according to the agreement or resolution on grant provision;
- commodities transported under the control of customs authorities, as a transit, through the customs territory of the Azerbaijan Republic and intended for third countries;
- commodities exported by physical persons from the customs territory of the Azerbaijan Republic for personal use, and not intended for production and commercial activity in accordance with Customs code of the Azerbaijan Republic;
- national cultural valuables, returned back to the territory of the Azerbaijan Republic.
- sport equipment, appliances and goods imported to the country by respective executive power body for training of team.
- mass media — for export of mass media production, and also equipment, required raw materials and other assets, imported by them for organization of their activity;
- for import to the Azerbaijan Republic and export from the Azerbaijan Republic of earned funds of migrant worker and goods, home appliances bought for these means and also tools, required for work at the commencement and termination of the labor activity of migrant worker.
As the trust of foreign investors in the statutory fund of the joint venture or wholly foreign investor delivered to the Republic of Azerbaijan for the establishment of the enterprise is exempted from customs duties and are not subject to import tax.
The property delivered to Azerbaijan for the needs of foreign employees of an enterprise with foreign investments are exempted from customs duties.
Unless mandatory insurance is not provided by the legislation of the Republic of Azerbaijan, the enterprise with foreign investments solves the issue of insuring or not insuring property, production, finance and other risks.
The enterprises with foreign investments, as well as foreign investors pay determined taxes according to the law acts of the Republic of Azerbaijan.