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Is it possible to return the calculated VAT when the advance paid to a non-resident is refunded?
Is it possible to return the calculated VAT when the advance paid to a non-resident is refunded?
According to the Tax Code, when an advance payment is made to a non-resident, the VAT amount must be calculated and transferred accordingly. If we pay a certain amount as an advance to a non-resident, VAT is calculated on that amount and paid to the budget. But how should the refund of VAT, which was calculated and paid to the budget, be processed if the advance paid to the non-resident is refunded for any reason?
The State Tax Service under the Ministry of Economy has stated that, according to Article 169.1 of the Tax Code, if a non-resident who is not registered for VAT purposes provides services or performs work in the territory of the Republic of Azerbaijan for a tax agent mentioned in Articles 169.2 or 169.5 (including, among others, work and services except for hotel services and airline ticket bookings outside the borders of the Republic of Azerbaijan in the manner of electronic commerce), the provision of services or work is subject to taxation in accordance with this article.
A non-resident who performs work or provides services without registering for VAT purposes and is subject to taxation under Article 169 of the Tax Code is considered a taxpayer for those works or services.
A VAT-registered taxpayer who has paid the calculated VAT to the state budget for services provided by a non-resident has the right to offset this amount in accordance with the provisions of the Tax Code.
According to Article 169.4 of the Tax Code, if the tax agent is registered for VAT purposes, the calculated tax is paid when submitting the VAT declaration for the month in which the transaction took place. The payment document confirming the payment of the tax is an electronic invoice, which, in accordance with the provisions of Article 175 of the Tax Code, grants the tax agent the right to offset the amount of VAT.
The State Tax Service also mentioned that, according to Article 169.3 of the Tax Code, the taxable transaction time is considered the moment of payment when Article 169.1 is applied. If the payment is made before the transaction is carried out, the taxable transaction is considered to have been made at the time of payment.
Thus, VAT for services provided by a non-resident is calculated at the exchange rate of the day the payment was made and is reflected in the VAT declaration for the month in which the payment was made.
It was also noted that, according to Article 163 of the Tax Code, turnover adjustment for the taxable transactions of a VAT-paying taxpayer applies in the following cases:
-if the transaction is canceled (in whole or in part);
-if the goods are returned (in whole or in part);
-if there are changes in the nature of the transactions;
-if the agreed compensation changes for specific reasons (e.g., price reduction);
-if there are subsequent grounds for turnover adjustment for the taxpayer who issued the electronic invoice, and the adjustment is made in accordance with the law.
According to Article 163.2.2 of the Tax Code, if the amount of VAT is incorrectly indicated in the VAT declaration, the adjustment is made in accordance with Article 174.2 or Article 175.5 of this code for the reporting period in which changes in the tax base occurred.
According to the Tax Code, when an advance payment is made to a non-resident, the VAT amount must be calculated and transferred accordingly. If we pay a certain amount as an advance to a non-resident, VAT is calculated on that amount and paid to the budget. But how should the refund of VAT, which was calculated and paid to the budget, be processed if the advance paid to the non-resident is refunded for any reason?
The State Tax Service under the Ministry of Economy has stated that, according to Article 169.1 of the Tax Code, if a non-resident who is not registered for VAT purposes provides services or performs work in the territory of the Republic of Azerbaijan for a tax agent mentioned in Articles 169.2 or 169.5 (including, among others, work and services except for hotel services and airline ticket bookings outside the borders of the Republic of Azerbaijan in the manner of electronic commerce), the provision of services or work is subject to taxation in accordance with this article.
A non-resident who performs work or provides services without registering for VAT purposes and is subject to taxation under Article 169 of the Tax Code is considered a taxpayer for those works or services.
A VAT-registered taxpayer who has paid the calculated VAT to the state budget for services provided by a non-resident has the right to offset this amount in accordance with the provisions of the Tax Code.
According to Article 169.4 of the Tax Code, if the tax agent is registered for VAT purposes, the calculated tax is paid when submitting the VAT declaration for the month in which the transaction took place. The payment document confirming the payment of the tax is an electronic invoice, which, in accordance with the provisions of Article 175 of the Tax Code, grants the tax agent the right to offset the amount of VAT.
The State Tax Service also mentioned that, according to Article 169.3 of the Tax Code, the taxable transaction time is considered the moment of payment when Article 169.1 is applied. If the payment is made before the transaction is carried out, the taxable transaction is considered to have been made at the time of payment.
Thus, VAT for services provided by a non-resident is calculated at the exchange rate of the day the payment was made and is reflected in the VAT declaration for the month in which the payment was made.
It was also noted that, according to Article 163 of the Tax Code, turnover adjustment for the taxable transactions of a VAT-paying taxpayer applies in the following cases:
-if the transaction is canceled (in whole or in part);
-if the goods are returned (in whole or in part);
-if there are changes in the nature of the transactions;
-if the agreed compensation changes for specific reasons (e.g., price reduction);
-if there are subsequent grounds for turnover adjustment for the taxpayer who issued the electronic invoice, and the adjustment is made in accordance with the law.
According to Article 163.2.2 of the Tax Code, if the amount of VAT is incorrectly indicated in the VAT declaration, the adjustment is made in accordance with Article 174.2 or Article 175.5 of this code for the reporting period in which changes in the tax base occurred.