TODAY.AZ / Business

New mechanism may be applied in taxation of online services

16 June 2017 [14:11] - TODAY.AZ
By Azernews

By Sara Israfilbayova

The Association of Banks of Azerbaijan (ABA), the Financial Market Supervision Body (FMSB) and the Ministry of Taxes discussed reforms in tax legislation affecting the banking sector.

The meeting, which was also attended by members of the ABA expert group on payment systems and alternative services, was held at the office of the Center for Economic Reforms Analysis and Communication.

Particular attention was paid to the taxation of online services purchased abroad.

The participants stressed that there should be established a mechanism to update periodically the MCC codes used to determine the type of electronic services.

 Merchant Category Code is a four-digit number for retail financial services. MCC is used to classify the business by the type of goods or services it provides. MCCs are assigned by merchant type or by merchant name.

The meeting participants also discussed other aspects of tax legislation that affect the banking sector. As ABA President Zakir Nuriyev noted during the meeting, banks and other financial organizations are interested in taking part in the initial stages of discussions on amending the legislation that concerns the sector's activities.

New amendments to the tax legislation have come into force in Azerbaijan since January 1, 2017, including the taxation of electronic commerce. In particular, at this stage, it is about levying value-added tax [the VAT rate in the country is 18 percent] for buying online services, participating in contests and lotteries online. At this stage, there is no provision for the taxation of physical goods that are purchased online.

The only exception is booking hotel rooms and buying tickets outside of Azerbaijan online.

If a buyer of online services, participant of online lotteries, contests and other competitions is a taxpayer, he himself calculates VAT and after transferring these funds to the state budget can refund this amount. If he is not a taxpayer, then a local bank or a branch of a foreign bank in the country that makes payment, calculates VAT and pays these funds to the state budget. In this case, VAT is not compensable.


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