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Tax and Taxation

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Tax and Taxation

Tax is a compulsory, individual, and non-refundable payment transferred to the state and local budgets by taxpayers from their property funds to financially support the activities of the state and municipalities.

Tax reports must be prepared and submitted correctly every year. This is important for business owners’ financial planning and productivity. Since tax regulations are regularly updated, professional financial services—such as those provided by Abacus Audit—can be crucial. Abacus Audit offers services to effectively manage your tax reports and financial operations.

Some types of taxes include:

  • Personal Income Tax: A tax calculated on an individual’s income, such as salary, undocumented income, and additional earnings, which must be paid to the state.

  • Corporate Profit Tax: A tax that legal entities, such as enterprises and organizations not owned by municipalities, must pay on their income.

  • Simplified Tax: A taxation regime that simplifies tax reporting and payments, especially applied to small and medium-sized businesses.

  • Value Added Tax (VAT): A government tax added to the value of goods produced or sold by enterprises or individuals.

  • Excise Taxes: Government taxes that enterprises and individuals must pay when purchasing or selling certain goods.

If you want to gain deeper knowledge about taxes and properly manage your finances, it is advisable to use professional assistance. Abacus Audit can help you fulfill your tax obligations and manage your financial responsibilities with their professional financial services.

Audit Compliance Evaluation Financial Statement Concept

Financial, Accounting, and Audit Services of “Abacus Audit and Consulting” Limited Liability Company

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Financial, Accounting, and Audit Services of “Abacus Audit and Consulting” LLC

Our company offers professional financial reporting, accounting, and audit services to enterprises. These services help our clients manage their financial processes and prepare accurate financial statements. The most important benefit we deliver is financial security and reliability. Our team consists of skilled professionals who ensure high-quality financial-accounting support and assist clients in managing their financial processes efficiently.

Our primary goal is to ensure that our clients’ financial statements are prepared accurately, legally, and according to applicable standards. We continuously stay up-to-date with the latest financial regulations and International Financial Reporting Standards, applying this knowledge for the benefit of our clients.

Our financial, accounting, and audit services include:

  • Daily accounting services in compliance with national and international standards

  • Advising on accounting policies and assisting in their development

  • Support in preparing financial statements under IFRS

  • Assistance in restoring unmonitored accounting records

  • Audit (accounting review) services

  • Preparation and optimization of management reports

  • Support in preparing tax reports

  • Fixed asset inventory and preparation of depreciation schedules

Audit Compliance Evaluation Financial Statement Concept

What Is an Audit and Why Is It Important?

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24An audit is a security process that evaluates a company’s financial and operational procedures, verifying the accuracy and reliability of information. This process ensures that a company’s activities and financial policies are secure and meaningful. The most significant benefit of an audit is its ability to provide accuracy and transparency in business operations.

An auditor’s opinion—a formal document signed and stamped by the auditor (or audit firm)—reflects an assessment of the audited entity’s financial condition, the legality of its financial transactions, the correctness of its annual financial statements, and the overall state of accounting. It holds legal significance for all legal and natural persons, government and regulatory bodies, as well as courts.

There are two types of audits:

  1. Mandatory (Statutory) Audit

  2. Voluntary Audit (initiated by the company)

Mandatory Audit
A statutory audit is required under the rules of the Azerbaijan Audit Chamber for closed and open joint-stock companies, as well as limited liability companies (LLCs). It must be conducted annually. For LLCs with more than 50 employees or annual turnover exceeding 3 million AZN, a statutory audit is mandatory. Failure to comply triggers legal penalties. Audit services allow companies to verify the accuracy and reliability of financial data. This enables precise financial policy management, accurate reporting, and informed decision-making.

Now, let’s explore the key advantages of audits for Azerbaijani companies:

  • Detailed Analysis and Assessment: Audits offer thorough analysis of financial data, processes, and operations. This helps identify issues and potential risks early. Auditors ensure that financial information is scrutinized accurately, aiding in forecasting efficiency improvements.

  • Legal Compliance: Through auditing, adherence to standards and requirements set forth by the Azerbaijan Audit Chamber and international norms is verified. This confirms the company operates legally and meets quality benchmarks.

  • Risk Identification and Management: Audits identify existing and potential risks, providing recommendations to manage them effectively. This enhances efficiency and enables more successful strategic planning.

  • Evaluation of Overall Management Performance: Auditing examines management systems and processes. It advises on improving operational effectiveness, supporting organizational development.

  • Stakeholder and Investor Confidence: Audited financials instill confidence among stakeholders and potential investors. Without audit, it’s difficult to establish genuine financial credibility and transparency.

In conclusion, auditing is the most effective way to verify the accuracy and integrity of a company’s financial activities. It helps assess and optimize financial policies and procedures, ensures the reliability of financial statements, and elevates the overall financial quality of a company. By enabling robust monitoring of policies and operations, audits offer crucial support for ensuring financial accuracy, transparency, and effectiveness.

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Free Service from “Abacus Audit & Consulting” LLC

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Accounting and tax reporting are crucial for any company. Accurate and reliable maintenance of these records enhances and strengthens the financial health of the business. Given the complexity and importance of accounting and tax reporting, delegating your financial operations to specialists offers a significant advantage.

“Abacus Audit & Consulting” LLC is a trusted firm composed of professionals who deliver these services with expertise. By collaborating with us, you gain access to an experienced and reliable accounting and audit team.

“Abacus Audit & Consulting” LLC is offering a highly attractive promotional campaign for new clients.

New clients beginning cooperation with us can enjoy our accounting, tax reporting, and consulting services completely free of charge during the first month. This is not just financially advantageous—it also demonstrates our commitment to reliability and quality. Through this campaign, we don’t just provide a free service; we showcase our work quality and the trustworthiness of our company.

With the accounting, tax reporting, and consulting services offered by “Abacus Audit & Consulting” LLC, you can strengthen your business’s financial foundation, make better-informed decisions, and reach your goals more quickly.

Note: The promotion applies to companies starting cooperation with “Abacus Audit & Consulting” LLC in June, July, and August 2023.

Don’t wait—contact us and take advantage of the free service today!

✉️ Email: [email protected] | 📲 Mobile: +994 55 213 4939 | ☎️ Tel: +994 12 310 8659

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The contribution of fixed assets to the company’s charter capital in the form of shares will be subject to VAT at a zero rate.

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As is known, according to the Tax Code, except for imported property, the contribution of any property to the charter capital of an enterprise in the form of shares was considered a VAT-exempt operation. At the same time, according to the relevant article of the Tax Code, the VAT paid on goods (works and services) purchased by persons engaged in VAT-exempt or non-VATable operations is non-refundable. Therefore, according to the requirements of the Tax Code, when an asset is contributed to the charter capital, the VAT amounts paid and refunded for that asset were required to be restored to the state budget.

According to recent amendments made to the Tax Code, to reduce the tax burden of VAT payers and stimulate investment, the contribution of fixed assets to the enterprise’s charter capital in the form of shares will be subject to VAT at a zero rate. Specifically, when fixed assets are contributed as shares without direct acquisition of other property in return, the operation will be taxed at a zero VAT rate, and the VAT paid on these fixed assets will be refundable.

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The minimum monthly salary has been set at 345 manat.

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As is known, according to the Tax Code, except for imported property, the contribution of any property to the charter capital of an enterprise in the form of shares was considered an operation exempt from VAT. At the same time, according to the relevant article of the Tax Code, the VAT amount paid when purchasing goods (works and services) by persons carrying out VAT-exempt or VAT-non-applicable operations is not reimbursed. In this regard, according to the requirements of the Tax Code, when an asset is contributed to the charter capital, the reimbursed VAT amounts paid for that asset were required to be restored to the state budget.

According to recent amendments to the Tax Code, to reduce the tax burden on taxpayers and stimulate investment, the contribution of fixed assets to the enterprise’s charter capital in the form of shares will be subject to a zero VAT rate for such transactions carried out by VAT payers. Specifically, if the contribution of fixed assets in the form of shares is not directly related to the acquisition of other property in return, this operation will be subject to a zero VAT rate, and the VAT amounts paid on these fixed assets will be reimbursed.

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New fees and benefits have been established for foreigners working in the liberated territories.

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President Ilham Aliyev has signed a law amending the Law of the Republic of Azerbaijan “On State Duty.”

According to the law, foreigners and stateless persons who engage in paid labor activities within the territory of Azerbaijan will be charged the following state duties for obtaining and extending work permits:

  • For a 10-day period, a work permit valid up to 1 year and 6 months or its extension will cost 1600 AZN; for a permit valid up to 2 years or its extension, the fee is 1800 AZN.

  • For a 15-day period, the fee is 1400 AZN for a permit valid up to 1 year and 6 months or its extension, and 1600 AZN for a permit valid up to 2 years or its extension.

  • For a 20-day period, the fee is 1200 AZN for a permit valid up to 1 year and 6 months or its extension, and 1400 AZN for a permit valid up to 2 years or its extension.

The above durations will apply with a reduction of 5 working days for foreigners and stateless persons engaged in paid labor activities in the liberated territories of the Republic of Azerbaijan starting from January 1, 2023, for a period of 5 years.

According to the newly added Article 69.1-1 of the Migration Code, the duration of the work permit for foreigners and stateless persons employed in the labor market of the liberated territories of the Republic of Azerbaijan may be extended, each time for no more than 2 years. Except for those employed in the liberated territories, foreigners and stateless persons are granted work permits under the general rules for a period of 1 year, with extensions not exceeding 1 year at a time.

According to Article 51.5 of the Migration Code, the issuance of work permits is carried out within the quota approved by the relevant executive authority responsible for labor migration. This rule will be applied to foreigners and stateless persons employed in the labor market of the liberated territories of the Republic of Azerbaijan.

The law comes into effect on January 1, 2023.

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Additional 5 Days of Leave Granted to These Individuals – President Approves the Law

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Benefits Established for Specialists Working in Azerbaijan’s Liberated Territories

According to “Qafqazinfo,” this is reflected in the amendments to the Labor Code approved by President Ilham Aliyev.

According to the law, except for persons with special ranks, a specialist working in the liberated territories is a person who holds a state certificate of vocational, secondary specialized, or higher education, has at least 24 months of work experience within the last 60 months, and works under an employment contract in the liberated territories of the Republic of Azerbaijan.

Specialists working in the liberated territories for a period of 5 years—from January 1, 2023, to January 1, 2028—who meet all the following conditions will have the right to use the benefits and privileges provided for in this Code and other laws of the Republic of Azerbaijan:

  • The employer with whom the specialists have signed an employment contract (including a legal entity’s branch or representative office registered for tax purposes under the Tax Code) is registered for tax purposes in the liberated territories of the Republic of Azerbaijan;

  • The specialist’s workplace under the employment contract is located in the liberated territories of the Republic of Azerbaijan;

  • The specialists reside in the liberated territories of the Republic of Azerbaijan.

If any of the above conditions are violated, the application of benefits and privileges will be suspended.

These specialists are classified as employees working under special conditions. In other words, increases (coefficients) will be determined to ensure a higher salary for specialists working in the liberated territories.

At the same time, according to the draft law, specialists working in the liberated territories are granted the right to additional leave; they will be given an additional 5 calendar days of leave regardless of the duration of their main and additional leave.

Granting these specialists benefits, privileges, and additional guarantees in labor relations is not considered discrimination.

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A portal has been launched for the refund of a portion of VAT paid on cashless purchases of residential and non-residential properties.

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As is known, by the Decree of the President of the Republic of Azerbaijan dated May 25, 2022, the “Terms and Conditions for the Refund of Value Added Tax Paid for Residential and Non-Residential Premises Purchased Cashlessly from Persons Engaged in Construction Activities within the Territory of the Republic of Azerbaijan by Individual Consumers” was approved.

In connection with the implementation of this Decree, a relevant portal has been created within the Internet Tax Service (https://new.e-taxes.gov.az/eportal/az/login/) by the Construction Cooperative (MTK) for issuing e-invoices and submitting applications by buyers for the refund of a portion of the VAT paid on residential and non-residential premises purchased cashlessly from persons engaged in construction activities within the territory of the Republic of Azerbaijan. The portal has been in use since November 21, 2022.

Accordingly, persons engaged in construction activities issue e-invoices to the individual buyer via this portal in accordance with the requirements of the rules, and the buyer checks and confirms the accuracy of the received e-invoice data. After that, the buyer accesses the “Payments for Purchase of Residential and Non-Residential Premises” subsection in the “Utilities” payment section of the Government Payment Portal through a link located in their personal account in order to make payments in accordance with the rules (the buyer also has the option to make the payment individually at a bank). Payments are made by entering the buyer’s FIN and invoice number. Upon full payment, the buyer fills out the relevant application form in their electronic cabinet, attaches confirming documents, and applies for VAT refund through the portal.

The application is automatically submitted to the tax authority, where a relevant risk assessment is conducted. In case of refusal of a partial VAT refund based on the risk assessment results, a substantiated administrative act is issued and sent to the buyer’s electronic cabinet within 2 working days. The buyer may appeal the refusal administratively and through the court.

When there is an extraction of residential and non-residential premises, a notarized sale and purchase agreement is concluded between individuals and persons engaged in construction activities. In this case, in order to ensure the validity and full legal execution of funds related to real estate disposal agreements, the amounts payable between the parties are transferred via a deposit account opened by the notary in a bank. Upon notarization of the sale and purchase agreement, the buyer must present the relevant e-invoice to the notary and require that the payment is made in accordance with the procedure, with the principal amount transferred to the seller’s bank account and the VAT amount transferred to the VAT deposit account.

Citizens must also pay attention to the following points along with the payment form requirements during their application:

  • The buyer must fully pay the value of the residential and non-residential premises to the seller by cashless means, and no later than 90 days after that, must register on the portal, create an electronic cabinet, attach the relevant documents, and submit their application via the electronic cabinet for the VAT refund;

  • If the buyer purchases one or several residential and/or non-residential premises from the same building, the partial VAT refund mechanism applies proportionally to the paid VAT on the portion of the premises not exceeding 500 square meters each;

  • The VAT refund is made only if the value of the purchased residential and non-residential premises has been fully paid to the seller cashlessly;

  • The refunded VAT amount, after deducting service fees for bank operations by the authorized bank, is returned to the buyer through the authorized bank within 30 working days.

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Services and Products Eligible for VAT Refund – RESEARCH

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One of the most popular initiatives in recent years has been the refund of part of the paid Value Added Tax (VAT) on purchased goods and services.

It’s no coincidence that, according to the latest data, nearly 1.9 million users have registered on the www.edvgerial.az portal for VAT refunds. As reported by the State Tax Service under the Ministry of Economy, from the launch of the “VAT Refund” project up to September 2022, consumers registered on the portal submitted 732 ,105,401 receipts and received over AZN 305.5 million in VAT refunds. In just January–August this year, for 303 ,851,384 receipts, more than AZN 133.6 million was refunded.

So, which goods and services are eligible for VAT refunds?

Although the State Tax Service has provided extensive information, some consumers still have questions.

APA conducted research to clarify exactly which services and goods qualify for VAT refunds.

Eligibility requirements:

  • The purchaser or service user must be a natural person, while the seller or service provider must be a VAT payer.

  • The purchased goods or services must be subject to VAT.

  • VAT refunds are only available at outlets using next-generation cash registers.

Note: Until 2024, flour, bread, and animal/poultry meat were VAT-exempt. As of this year, books are also exempt from VAT.

Moreover, for three years starting this year, VAT on agricultural products sold at retail is calculated only on the markup, not the full price—so VAT on these items is lower than on other goods.

However, not all VAT‑applicable goods are eligible for refunds. Article 165.5 of the Tax Code excludes petroleum and gas products, automobiles, alcoholic beverages, and tobacco products.

Since January 1, 2022, under the amended Tax Code, a portion of VAT paid for medical services by natural person consumers is also refundable.

Currently, refunded amounts are:

  • 15% of VAT paid by non-cash methods,

  • 10% of VAT paid by cash.

Starting 2023, it’s expected that 20% of non-cash VAT and 10% of cash VAT will be refunded.

One more exception: starting this year, for residential or non-residential properties purchased non-cash from individuals involved in construction, 30% of the VAT paid is refundable. Under Article 165.6 of the Tax Code, this applies proportionally to up to 500 m² of residential and 500 m² of non-residential space within the same building when purchased by a natural person.