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How is the time of a taxable transaction for VAT purposes determined?
How is the time of a taxable transaction for VAT purposes determined?
Now let’s clarify how the time of a taxable transaction for VAT purposes is determined. According to Article 166 of the Tax Code of the Republic of Azerbaijan, titled "Time of Conducting Taxable Transactions", the moment when a taxable transaction occurs is established.
Although our VAT-related examples already provide sufficient information about the timing of taxable transactions, we would like to highlight a few important points for our colleagues. In most cases, the cash method is applied when determining the time of taxable transactions.
For instance, a taxpayer delivers goods in February and issues an electronic invoice in the same month. However, the payment is made by the buyer in March. In this case, the time of the taxable transaction is not considered to be the period when the goods were delivered (February), but rather the time when the payment was made (March).
It is important to emphasize that starting from January 1, 2024, a change in the Tax Code has been enacted, under which the payment of the VAT amount is considered as payment for the purposes of Article 166. Accordingly, under Article 166.7 of the Tax Code, for the purposes of this article, "payment" refers to either the payment of the VAT-exclusive value of the delivered goods (services, works) or the VAT amount itself.
For example, a VAT payer delivers goods worth 1,000 AZN (excluding VAT) to another taxpayer in January 2024. The buyer pays the VAT amount of 180 AZN in January and the main value of 1,000 AZN in February. Based on the amendment to the Tax Code, the taxable transaction date will not be considered February (when the main amount was paid), but January — the period in which the VAT amount was paid.
Let’s review another example to better illustrate the new amendment:
Example. A VAT payer provides a service worth 3,000 AZN (excluding VAT) in February 2024. The buyer pays 2,000 AZN of the service fee and 540 AZN as the VAT amount in February. In this case, since the VAT amount is the highest received payment, the full 3,000 AZN will be declared in the VAT return.
Now let’s clarify how the time of a taxable transaction for VAT purposes is determined. According to Article 166 of the Tax Code of the Republic of Azerbaijan, titled "Time of Conducting Taxable Transactions", the moment when a taxable transaction occurs is established.
Although our VAT-related examples already provide sufficient information about the timing of taxable transactions, we would like to highlight a few important points for our colleagues. In most cases, the cash method is applied when determining the time of taxable transactions.
For instance, a taxpayer delivers goods in February and issues an electronic invoice in the same month. However, the payment is made by the buyer in March. In this case, the time of the taxable transaction is not considered to be the period when the goods were delivered (February), but rather the time when the payment was made (March).
It is important to emphasize that starting from January 1, 2024, a change in the Tax Code has been enacted, under which the payment of the VAT amount is considered as payment for the purposes of Article 166. Accordingly, under Article 166.7 of the Tax Code, for the purposes of this article, "payment" refers to either the payment of the VAT-exclusive value of the delivered goods (services, works) or the VAT amount itself.
For example, a VAT payer delivers goods worth 1,000 AZN (excluding VAT) to another taxpayer in January 2024. The buyer pays the VAT amount of 180 AZN in January and the main value of 1,000 AZN in February. Based on the amendment to the Tax Code, the taxable transaction date will not be considered February (when the main amount was paid), but January — the period in which the VAT amount was paid.
Let’s review another example to better illustrate the new amendment:
Example. A VAT payer provides a service worth 3,000 AZN (excluding VAT) in February 2024. The buyer pays 2,000 AZN of the service fee and 540 AZN as the VAT amount in February. In this case, since the VAT amount is the highest received payment, the full 3,000 AZN will be declared in the VAT return.