Tax reforms to simplify business doing in Azerbaijan
By Nigar Abbasova
Azerbaijan, which has so far done much to improve its tax system, is currently engaged in the further development of the system in an effort to encourage entrepreneurship.
The recent decree of President Ilham Aliyev on the approval of reforms which will be held in the sphere of taxes in 2016 is expected to provide more favorable value-added tax (VAT) rates for the socially vulnerable layers of the population, reduce the tax burden on small and medium-sized business, and resolve problems during taxation of trade operations.
Oqtay Haqverdiyev, an expert, believes that the decision will open new opportunities for entrepreneurs.
He mentioned that the current tax system, which does not correspond to modern requirements, is obsolete.
“Implementation of tax reforms is of great significance for the country. The changes will stipulate business doing in the country, particularly small and medium-sized entrepreneurship. They will lead to the creation of favorable business environment and increase the number of entrepreneurs in the country,” he said.
Haqverdiyev underlined that the reformation of the tax system is of great importance, taking into consideration the current situation.
“Oil prices in the world market are continuing to fall and such developments negatively influence economies. Therefore, it is very important to take practical measures to support sustainable state of economy,” he said.
The changes envisage that differentiated VAT rates will be applied in the country, while single VAT rate of 18 percent is currently applied in Azerbaijan. One of other changes implies reducing the tax burden, which is aimed at provision of profitability for taxpayers and further improvement of investment climate in the country. Criteria that clearly differentiate the concept of wholesale and retail trade will also be defined, in accordance with the changes.
Special attention is attributed to the taxation during trade operations. A source in the country’s government recently told Trend that retail trade networks had some problems related to taxation, mentioning that the new amendments envisage calculation of the value-added tax on the basis of trade relations, while currently the value-added tax in the retail trade sphere is calculated on the basis of annual turnover.
Current trends in the economy, reduction of oil price on world markets and double devaluation that hit the national currency (the manat), negatively influenced the oil exporting country.
Thus, to ensure more transfers from non-oil sector, stimulate the economy and attract more investment to the country, the Azerbaijani government announced its intention to cut several taxes, examine reform options and in some cases cease the imposition of taxes to support entrepreneurs and introduce new privileges for them.
The country has taken certain measures to improve its tax system, including cancellation of all types of inspections (with certain exceptions) of entrepreneurial activities for a period of two years. Simplification of the licensing procedures has allowed the companies and entrepreneurs to get licenses in a simple way, which in its turn positively affected business environment.
With the approval of amendments proposed to the Tax Code, businessmen in Azerbaijan became eligible to get a document of the investment incentives. Under this document, half of the revenue of an individual entrepreneur, profits of legal entity are exempted from income tax for seven years.
The current decree of the president is considered to be a continuation of these reforms.
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Nigar Abbasova is AzerNews’ staff journalist, follow her on Twitter: @nigyar_abbasova
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