On October 20, 2015 the Law on amendments to the Tax Code of the Republic of Azerbaijan (the "Amendments") was adopted, which will come into effect on January 1, 2016.

Limitation of travel abroad

Under the Amendments, a right to leave the country may be limited as a way to ensure payment of tax debts and interests, as well as financial sanctions occurred due to a breach of the tax legislation. This limitation is applied both to individuals and management of a legal entity. Interestingly, there is no differentiation of tax breaches (for instance, minor tax breaches or tax breaches triggering criminal liability) is given for application of this  limitation.

Increase of the VAT registration threshold

Several changes were made to the provisions regulating value added tax ("VAT"). Pursuant to the Amendments, taxpayers shall apply to register for VAT purposes when its taxation operations in any month during previous consecutive 12-month period exceeds AZN 200,000 as opposed to AZN 120,000 applicable now.

Update of Simplified Tax payers circle

The Amendments revisited the circle of (i) persons who are payers of the simplified tax ("ST"); and (ii) persons who have a right to use ST regime. At the same time, the monetary threshold of taxation operation of an enterprise which may be subject to ST is increased to AZN 200,000. This is favourable for small businesses having relatively small turnover. However, the Amendments provide an increased financial sanctions for a violation of cash payment transaction rules, which is applied to subjects enjoying the ST regime.

The Amendments also provides the updated ST regime for persons engaged in construction of buildings, depending on a location zone of a given construction. Actual tax liability depend on a ratio determined for each zone within Baku or Azerbaijan.

Other notable amendments  

  • Sports bidding prizes will be subject to taxation;
  • Personal income tax relief in the amount of the statutory minimum cost of living will be extended to persons earning less than AZN 2,500 per month and AZN 30,000 per year as opposed to AZN 250 and AZN 3,000 available now;
  • Sale of residential (except where a person resides in such property for longer than 5 years) and non-residential real estate will be subject to ST at special rates;
  • Persons engaged in trade and public catering (including restaurants) will be subject to increased rates of ST;
  • Subsoil Use Tax rates are increased;
  • List of VAT tax exemptions is broadened.