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trNew VAT rules for digital services have come into effect in Azerbaijan — $10,000 turnover threshold
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New VAT rules for digital services have come into effect in Azerbaijan — $10,000 turnover threshold
New developments have begun in Azerbaijan regarding the taxation of foreign companies providing digital services.
According to AZE Finance, as of September 1, 2026, tax registration has become mandatory for non-resident companies that provide electronic services to individuals and whose annual turnover in Azerbaijan exceeds USD 10,000. The new mechanism is implemented through an electronic platform established by the State Tax Service.
The rule mainly applies to B2C digital services, meaning services provided by businesses to end consumers. These include software, the downloading of e-books, music, videos and games, online advertising services, as well as a number of other internet-based services.
It should be recalled that under the Law “On Electronic Commerce,” the downloading via the internet of e-books, music, audio-visual materials, graphic images, virtual games and software, as well as the placement of advertisements and similar works and services, fall within the scope of electronic commerce.
The main change concerns the payment of VAT. Previously, when Azerbaijani citizens purchased services from foreign companies, VAT was separately withheld by the bank from the payment.
Going forward, when services are purchased from a company registered for tax purposes, VAT will no longer be separately withheld. The foreign service provider will calculate the tax itself and pay it to the state budget of Azerbaijan.
This change will also simplify the work of banks, as they will no longer have to calculate and withhold VAT separately for each customer.
The State Tax Service uses several criteria to determine whether a customer is located in Azerbaijan. These include making a payment through an Azerbaijani bank or payment service, an Azerbaijani IP address, the +994 mobile code, and the customer’s residential or registration address.
New developments have begun in Azerbaijan regarding the taxation of foreign companies providing digital services.
According to AZE Finance, as of September 1, 2026, tax registration has become mandatory for non-resident companies that provide electronic services to individuals and whose annual turnover in Azerbaijan exceeds USD 10,000. The new mechanism is implemented through an electronic platform established by the State Tax Service.
The rule mainly applies to B2C digital services, meaning services provided by businesses to end consumers. These include software, the downloading of e-books, music, videos and games, online advertising services, as well as a number of other internet-based services.
It should be recalled that under the Law “On Electronic Commerce,” the downloading via the internet of e-books, music, audio-visual materials, graphic images, virtual games and software, as well as the placement of advertisements and similar works and services, fall within the scope of electronic commerce.
The main change concerns the payment of VAT. Previously, when Azerbaijani citizens purchased services from foreign companies, VAT was separately withheld by the bank from the payment.
Going forward, when services are purchased from a company registered for tax purposes, VAT will no longer be separately withheld. The foreign service provider will calculate the tax itself and pay it to the state budget of Azerbaijan.
This change will also simplify the work of banks, as they will no longer have to calculate and withhold VAT separately for each customer.
The State Tax Service uses several criteria to determine whether a customer is located in Azerbaijan. These include making a payment through an Azerbaijani bank or payment service, an Azerbaijani IP address, the +994 mobile code, and the customer’s residential or registration address.