iStock_000062980709_Full

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

by Uncategorized

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.

Picture1

Services and Products Eligible for VAT Refund – RESEARCH

by Uncategorized

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.