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The taxation of the amount paid for international transportation
The taxation of the amount paid for international transportation
What taxes should be withheld at the time of payment for amounts paid by a resident company registered in Azerbaijan to a non-resident for international transportation between other countries without entering the territory of Azerbaijan?
According to the State Tax Service under the Ministry of Economy, pursuant to Article 125.1 of the Tax Code, tax is withheld at the source of payment on the gross income of a non-resident determined as income derived from sources in Azerbaijan, and not associated with a permanent establishment in the territory of the Republic of Azerbaijan, without deducting any expenses. Income derived from sources in Azerbaijan refers to the income specified in Article 13.2.16 of the Tax Code.
When international communication or transportation services are provided between the Republic of Azerbaijan and other states, 6% of the payments made by the resident entity or entrepreneur for communication or transportation services are subject to tax. Payments made by a resident entity or entrepreneur for transportation carried out between destinations in other states outside the borders of the Republic of Azerbaijan, as well as for transit transportation through the territory of the Republic of Azerbaijan, are not subject to taxation. Therefore, the service mentioned in the inquiry is not subject to taxation at the source of payment.
Additionally, it is noted that under Article 165.1.4 of the Tax Code, international and transit cargo and passenger transportation, as well as cargo handling services directly related to transit cargo transportation, works performed, services provided directly related to international and transit flights, as well as forwarding services related to international and transit cargo transportation, are subject to VAT at a rate of 0%, excluding international postal services. The concepts of transit and international transportation are regulated by Article 13.2.33 of the Tax Code.
Transit through the territory of the Republic of Azerbaijan is the transportation between two points at the border of the Republic of Azerbaijan through its territory in the manner prescribed by customs legislation. International transportation is the transportation of goods, passengers, luggage, and mail between a point of origin (destination) in the Republic of Azerbaijan and a point of destination (origin) in another state, based on transportation documents.
The transportation mentioned in the inquiry is not considered international or transit transportation and is not subject to taxation for VAT purposes.
What taxes should be withheld at the time of payment for amounts paid by a resident company registered in Azerbaijan to a non-resident for international transportation between other countries without entering the territory of Azerbaijan?
According to the State Tax Service under the Ministry of Economy, pursuant to Article 125.1 of the Tax Code, tax is withheld at the source of payment on the gross income of a non-resident determined as income derived from sources in Azerbaijan, and not associated with a permanent establishment in the territory of the Republic of Azerbaijan, without deducting any expenses. Income derived from sources in Azerbaijan refers to the income specified in Article 13.2.16 of the Tax Code.
When international communication or transportation services are provided between the Republic of Azerbaijan and other states, 6% of the payments made by the resident entity or entrepreneur for communication or transportation services are subject to tax. Payments made by a resident entity or entrepreneur for transportation carried out between destinations in other states outside the borders of the Republic of Azerbaijan, as well as for transit transportation through the territory of the Republic of Azerbaijan, are not subject to taxation. Therefore, the service mentioned in the inquiry is not subject to taxation at the source of payment.
Additionally, it is noted that under Article 165.1.4 of the Tax Code, international and transit cargo and passenger transportation, as well as cargo handling services directly related to transit cargo transportation, works performed, services provided directly related to international and transit flights, as well as forwarding services related to international and transit cargo transportation, are subject to VAT at a rate of 0%, excluding international postal services. The concepts of transit and international transportation are regulated by Article 13.2.33 of the Tax Code.
Transit through the territory of the Republic of Azerbaijan is the transportation between two points at the border of the Republic of Azerbaijan through its territory in the manner prescribed by customs legislation. International transportation is the transportation of goods, passengers, luggage, and mail between a point of origin (destination) in the Republic of Azerbaijan and a point of destination (origin) in another state, based on transportation documents.
The transportation mentioned in the inquiry is not considered international or transit transportation and is not subject to taxation for VAT purposes.