Taxation

Azerbaijan has adopted a ‘Destination VAT principle’ and Value Added Tax (VAT) currently set between 16 and 21 per cent, (depending on the products) is payable on the declared value of the goods including assessed import duties and excise tax.

A 0.5 per cent customs clearance fee is applicable to all imports/exports with certain minor exceptions.

All goods are subject to an entry fee of 15 per cent, though a limited number of goods are exempt from the entrance fee (five per cent preferential tariff).

Excise duties are 90 per cent on wine and beer, 65 per cent on other alcoholic beverages and 50 per cent on tobacco. Azerbaijan levies export duties at the rate of 70 per cent on certain products.

A wholly foreign owned Azeri legal entity (WOFOALE) for taxation, currency accounting, reporting and other requirements, is considered an Azeri legal entity.

The World Bank has ranked Azerbaijan 141st of 178 countries for the overall ease of dealing with its taxation system. The Bank has estimated that it will take a company on average 952 hours per year to handle and to follow up on the 38 payments necessary to comply with Azeri taxation requirements. After accounting for various deductions and exemptions, the World Bank estimates that 40 per cent of commercial profit is payable as tax by a company during a second year of operation.

(Source: The Federation of International Trade Associations Azerbaijan, October 2014)