International VAT Guides – Azerbaijan

VAT rates in Azerbaijan 

How much is VAT in Azerbaijan? 

The Azerbaijan VAT system is well-organized, modernized, and follows global standards to a great extent. The development of the VAT framework for e-commerce and digital service providers got its first mandatory shape in 2023. 

The State Tax Service is the primary institution responsible for governing tax frameworks and implementing tax legislation, developed in cooperation with other authorities or independently. 

The VAT framework is established primarily under the provisions of the General Tax Code, the VAT Regulations, and the Orders issued by the Ministry of Finance.  

VAT threshold in Azerbaijan

The VAT Azerbaijan Act and Decision of the Cabinet of Ministers from October 2023 define the rules for mandatory VAT registration for non-resident providers of digital services. 

The rules for VAT threshold in Azerbaijan for non-resident digital services providers have been updated on several occasions, and the currently applicable rules indicate the following changes: 

VAT registration threshold for resident businesses: USD 117,000 in any 12 months

VAT registration threshold for non-resident businesses: depends on the type of business activity

VAT registration threshold for foreign providers of digital services: USD 10,000 in any 12 months

VAT Taxable Activities in Azerbaijan

Types of taxable activities that mandate VAT registration:

• Supply of goods and services for consideration;
• Supply of digital services by non-resident providers
• Exports;
• Imports of goods and services; 
• Supply of warehousing services

Tax Representative in Azerbaijan 

In light of the latest developments, non-resident providers of digital services don’t have an obligation to use the services of the local tax agent for VAT registration. 

Tax registration

Non-resident providers of digital services or intermediation platforms should, in most cases, register in Azerbaijan’s VAT system using the simplified registration procedure. The tax portal for the simplified online registration is being prepared. 

VAT on Electronically Supplied Services in Azerbaijan 

Digital Services

Non-resident providers of digital services are, in most cases, required to register for VAT when they exceed the monetary threshold. The threshold is USD 10,000, and is based on turnover over any 12 consecutive months. 

Online vendors or digital platform operators should register only through the simplified vendor registration regime if they provide digital services to local customers. 

When the non-resident digital service provider registers for VAT, it should collect only VAT for B2C supplies. 

How much is VAT in Azerbaijan for Electronically Supplied Services?

VAT rate in Azerbaijan for digital services is 18%. 

Taxable Digital Services in Azerbaijan

The following types of digital services are taxable:

• Audio and video streaming services 
• SaaS services
• Intermediation platform services
• Payment facilitation services
• Cloud computing services and storage

Marketplace and Digital Platform Operators’ Rules

The non-resident operator of a digital platform or marketplace has the same VAT compliance obligations as the direct supplier. There are no special requirements or rules for the marketplace operator. 

Invoicing Rules

Non-resident providers of digital services or digital platform operators have the possibility to issue a simplified tax invoice or sales receipt for B2C supplies. 

The invoice should contain at least the following information: 

The pdf invoice should at least contain the following:

• Name and the TIN of the Supplier
• Description of supply
• Date of supply
• Net Value, 
• VAT charged
• Total sales amount

Foreign Currency Invoice in Azerbaijan  

In most cases, issuing an invoice in a foreign currency is permitted. Simplified VAT returns and tax remittances can also be made in a foreign currency. 

VAT Returns in Azerbaijan

Simplified Return

Non-resident providers of digital services should register under the simplified vendor registration regime. They should also submit a simplified VAT return, following the VAT return template prepared exclusively for this category of vendors. 

A simplified VAT return doesn’t allow foreign providers of digital services to claim input tax credits. They could potentially claim input tax credits, only in cases where their national VAT law permits this under the export of services regime. 

Simplified VAT Return

Penalties for late reporting and omitted declarations 

Penalties for VAT Non-Compliance:

A fine of AZN 40 manat(circa USD 22) is imposed for each reporting period for late submission of VAT returns or for failure to submit them at all. In addition, 0.1% interest is charged for each day of delay if the tax is not paid on time. 

There is a special penalty for the untimely transfer of the VAT amount to the deposit account. 

1stopVAT – Expert Azerbaijan Tax Compliance Services for Hassle-Free Filing

Worldwide coverage

We proudly provide VAT compliance services in 100+ jurisdictions worldwide. With a highly efficient tracking system for VAT filing deadlines, our expert team ensures seamless compliance. We’re continually expanding our global VAT compliance services reach.

Compliance partners

We’ve built a strong network of partners and tax consultants worldwide to manage local requirements with transparency and efficiency. In many regions, we collaborate with local tax agents to ensure seamless VAT compliance for cross-border suppliers.

Reliable monitoring system

Our Reporting team brings extensive expertise in VAT return services, ensuring your business stays compliant. We provide timely notifications about filing VAT returns and deadlines, helping you avoid regulatory breaches.

Certified experts

Our team is combined of more than 40 experts, who can provide wide range of services and are certified members of IVA, AITC and VAT Forum. Currently we have more than 800 clients and knowledge how VAT works in 100 locations.