Entrepreneurs in Azerbaijan received a new powerful incentive for both the production and export of products - from now on, goods produced for export will be exempt from VAT.
The Cabinet of Ministers published the corresponding decision yesterday.
First of all, there are several points to be clarified.
First, what is a product intended for export?
These are goods for which the exporter receives a unique "receipt for the sale of goods marked for export." In turn, the exporter must provide the manufacturer and the state tax service with the form "on the export of goods sold with the mark" for export.»
Secondly, who can be an exporter?
There are only two requirements for exporters. An exporter of such products can be a company that already has with at least one year of experience in import-export operations.
Also, exporters should provide the manufacturer with security (bank guarantee or deposit) to fulfill their treasury obligations. Such collateral must be presented even if the company did not export these goods.
Besides, you cannot export weapons. It also excludes goods exported through barter transactions and re-export goods.
Thirdly, who can become a manufacturer of export goods that can qualify for a zero VAT rate?
The goods must be produced in the territory of Azerbaijan. Moreover, the place of production should not be a particular economic or special zone. Goods brought to Azerbaijan for transit purposes also do not fall under this rule.
The zero rates can be obtained only for non-oil products. The manufacturing company must not be bankrupt or have any tax, social security, unemployment, or compulsory health insurance liabilities. The file of the producer must not include a criminal record for tax evasions.
The state's share in the share capital of such a company should not exceed 50 percent. Contractors or operating companies operating under production-sharing agreements also cannot claim a zero VAT rate for such goods.
Fourth, how is the process of selling and exporting such goods carried out?
The application, recording, and use of the "Receipt for the sale of goods marked for export" is carried out based on the "Rules for the application, recording, and use of invoices" dated March 14, 2017.
Companies are given three months to export goods. In any natural disasters, technological accidents, or epidemics, companies can apply for an extension of the export period for another three months.
The State Tax Service monitors compliance with these rules.
Notably, the coronavirus has caused severe damage to many companies around the world. Some were forced to close, some suspended operations or cut most of their employees.
Unfortunately, COVID-19 did no bypass Azerbaijan. During this year, the government has already taken several comprehensive measures to support entrepreneurs and the General population.
The current decision of the Cabinet of Ministers can be assumed as a logical continuation of such measures. After all, the coronavirus has also seriously affected international trade. Exporters in Azerbaijan can save money since the goods they buy for export will not be subject to VAT and cost less.