Azerbaijan: New VAT E-commerce Rules for Non-Residents

As the e-commerce industry continues to develop and grow, more and more countries are introducing rules related to cross-border transactions. Azerbaijan followed this trend and introduced new e-commerce VAT regulations for non-residents in July this year.

The introduction of these new rules was done to secure more fair global taxation conditions, as recommended by the OECD and UN.

Impact on Non-Resident E-commerce Businesses

New regulations amended the Tax Code by adding new articles related to the electronic VAT registration, re-registration, and de-registration of non-residents carrying out e-commerce activities. Foreign businesses involved in e-commerce activities can register through the Tax Office's online platform.

E-commerce activities include enabling the downloading of electronic books, music, audio-video materials, graphic images, virtual games, and software and placing advertisements. In addition, a deemed supplier rule was introduced, requiring foreign e-commerce businesses that act as sellers to register for VAT purposes.

However, these regulations do not apply to non-residents with permanent establishments in Azerbaijan. Those businesses must follow the standard VAT rules.

All non-residential businesses without a permanent establishment in Azerbaijan that have supplied local consumers must register for VAT purposes and submit a VAT return by the 20th day following the reporting period. The obligation to register and submit VAT returns also applies if payments related to e-commerce activities are made through banks located in Azerbaijan.

So, if non-residents are involved in stated e-commerce activities and have consumers in Azerbaijan, they must register for VAT.

Non-residents register for VAT who fail to submit VAT returns or to fulfill tax obligations within 30 days after receiving the notification from the Tax Authority may be de-registered from the VAT system, which will make it difficult for them to continue business activities in the Azerbaijan market. In addition, further fines may apply for non-compliance with VAT rules and the Tax Code.

Conclusion

Since non-residents must register for VAT purposes from July, all foreign e-commerce companies should have checked if new rules apply to them. However, if they have not done this, now is a good time to do it and avoid any potential setbacks or penalties for non-compliance.

Source: State Tax Service Regulation, State Tax Service - Electronic registration, re-registration, and de-registration of a non-resident carrying out electronic trade