Amendments to Tax Code exempt some services from VAT

By Ofeliya Afandiyeva

Medical services provided as part of compulsory medical insurance and sales of animal and poultry meat will be exempt from value-added tax (VAT) in Azerbaijan, according to the December 25 presidential decree on Amendments to the Tax Cod of Azerbaijan.

According to the amendment, medical services provided under the compulsory medical insurance are exempt from VAT for a period of one year and the sales of the mentioned types of meat - for four years.

Moreover, the amendments also envisage certain benefits for individuals and legal entities cooperating with the relevant executive authorities in line with the Formula 1 and Formula 2 races.

Along with it, the aforementioned decree stipulates decreasig the simplified tax rates for hosts, musicians, dancers and singers, performing at weddings and other entertainment events.

The simplified tax rate for this category of taxpayers has been decreased by one third and been set at $11 (20 manat), compared to the current rate of $17 (30 manat).

In addition, the simplified tax rate for individuals rendering private photo, audio and video services (excluding photo studios) has been reduced two times and set at $8 (15 manat).

Furthermore, the Decree “On Amending Azerbaijan’s Tax Code” entails the growth of the excise tax rates on alcoholic, tobacco products and energy drinks produced in the country.

In accordance with the amendments, the excise rate on alcoholic beverages has been set at $1.8 (3.2 manat) per liter of spirit, vodka, strong alcohol, liquor and alcoholic beverages, increasing by 60 percent compared to the current excise rate of $1.1 (2 manat).

The excise rate on champagne has been increased by 4 percent - from $1.4 (2.5 manat) to $1.5 (2.6 manat), wine and wine products - twice, from 5 cents (0.1 manat) to 11 cents (0.2 manat), alcoholic beer and drinks with beer content - twice, from 11 cents (0.2 manat) to 23 cents (0.4 manat). For other light alcoholic drinks, the excise rate has been set at 23 cents (0.4 manat) per liter.

At the same time, the excise tax rate on cognac and cognac products has been decreased almost twice - from $3.5 (6 manat) to $1.8 (3.2 manat) per liter.

The excise rate on tobacco products has been set at $18.2 (31 manat) for 1,000 cigarettes, cigarillos and tobacco substitutes, increasing by 55 percent compared to the current rate of $12.3 (2.1 manat).

The excise rate on energy drinks has been set at $1.8 (3.1 manat) per liter, increasing by 3.3 percent compared to the current rate of $1.7 (3 manat).

The amendments to tax code are aimed at strengthening the fight against tax evasion, reducing the administrative burden and tax burden of entrepreneurs, expanding the tax base, increasing the competitive environment and ensuring supervision of high-risk taxpayers.

It should be noted that earlier Azerbaijani Economy Minister Mikayil Jabbarov stated that the amendments to the Tax Code will ensure transparency in economy, develop entrepreneurship and simplify the accounting system for tax payments.

He mentioned that the amendments to the Tax Code cover seven major fields.

1) Ensure a transparent environment (fight against taxpayers conducting non-trade transactions with the conclusion of false transactions, strengthening control over taxpayers of risk groups, strengthening the fight against cases of tax evasion);

2) Improve the administration of VAT;

3) Reduce the administrative burden of entrepreneurs and encouraging entrepreneurship;

4) Decrease financial (tax) burden of the population through social preferences;

5) Reduce the tax burden of business entities;

6) Expand the base of taxation;

7) Fulfillment of obligations on international taxation and information exchange.

In general, 162 changes, which will enter into force on January 1, 2020, have been applied to the Code.

Note that the last amendments to the Tax Code were approved by the presidential decree in December 2018 and entered into force in January 2019.