two young businessmen discussing project at meeting with laptop and smart phone on table

What Is the Difference Between an Individual and a Sole Proprietor?

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Let’s clarify two concepts that are often confused in society:

Individual – According to the legislation of the Republic of Azerbaijan, an individual is a legal subject recognized by law, who can carry out certain legal and financial operations based on an identity document. However, having the status of an individual does not grant the right to engage in official commercial activity.

Sole Proprietor (SP) – A sole proprietor is an individual who has officially registered with the Ministry of Taxes and started entrepreneurial activity. Sole proprietors have taxpayer status and are authorized to enter into contracts, issue invoices, and engage in legal relations through official documentation.

For more detailed information and legal support, please contact us.

Email: [email protected] | Mobile: +99455 2134939 | Tel: +99412 3108659

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Attention for Entrepreneurs Making Payments Abroad with Business Cards!

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Attention Entrepreneurs Making Payments Abroad with Business Cards!

According to Article 169.3 of the Tax Code, if services or work are purchased from a non-resident via electronic commerce, an 18% VAT must be calculated on the payment amount and paid to the state budget.

For instance, when a payment is made via a debit card, it is treated as a transaction by an individual, and the bank automatically withholds the 18% VAT and transfers it to the state budget. However, when a business card is used, the VAT is not withheld, since the business card is tied to the entrepreneur’s account. Therefore, the responsibility to pay the 18% VAT falls directly on the entrepreneur and must be remitted to the state budget in accordance with the regulations.

We recommend that you take this into account to fulfill your financial obligations accurately and on time.

🔎 For more detailed information and legal support, please contact us:

✉️ Email: [email protected] | 📲 Mobile: +994 55 213 4939 | ☎️ Tel: +994 12 3108659

SANCTIONS

Financial Sanction and Administrative Penalty

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  1. According to Article 57.1 of the Tax Code, a financial sanction of 40 AZN is imposed on taxpayers who do not submit their tax report or, if there was no entrepreneurial activity or other taxable transactions during the reporting period, do not submit a certificate instead of the tax report to the tax authority within the established timeframe without valid reasons, based on the decision of the head (or deputy) of the tax authority.
  2. According to Articles 59.1 and 59.2 of the Tax Code, if the tax or current tax payment is not paid within the period established by the Tax Code, an interest of 0.1% of the unpaid tax or current tax payment amount is charged for each overdue day after the payment deadline from the taxpayer or tax agent. This interest is applied to all overdue periods regarding tax payments but not exceeding one year. This interest is applied to tax amounts unpaid on time identified as a result of field tax audits from the day these tax amounts are charged to the taxpayer.
  3. According to Article 461.1 of the Code of Administrative Offenses, failure to submit tax reports related to activities carried out under international agreements ratified by the Republic of Azerbaijan, production sharing agreements approved by law, the main export pipeline agreement, and other similar agreements to the State Tax Service within the established timeframe without valid reasons (except where other rules are stipulated in those agreements) results in a fine of 50 AZN imposed on the responsible officials.
  4. According to Article 461.2 of the Code of Administrative Offenses, failure to submit a report on the collection of state fees in cases and procedures determined by the Law of the Republic of Azerbaijan “On State Fees” to the State Tax Service results in a fine of 50 AZN imposed on responsible officials.
  5. According to Article 467 of the Code of Administrative Offenses, for violation of the rules for payment of state fees, i.e., improper collection of state fees by authorized officials or failure to pay the state fee to the state budget on time or in full, responsible officials are fined between 500 AZN and 700 AZN.