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Taxation and VAT obligations on services provided by non-residents
Taxation and VAT obligations on services provided by non-residents
We inform you that, in accordance with the provisions of Article 125.1.5 of the Tax Code, other income of a non-resident, determined as income from sources in the Republic of Azerbaijan under Article 13.2.16 of the Tax Code and not related to the permanent establishment of the non-resident in the territory of the Republic of Azerbaijan, received from performing work or providing services, is subject to a 10 percent withholding tax at the source of payment without deducting expenses.
We also inform you that, under Article 169.1 of the Tax Code, if a non-resident 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 of this Code (excluding services related to hotel bookings and airline tickets outside the borders of the Republic of Azerbaijan in the framework of e-commerce), the performance of such work or provision of such services for the purposes of this chapter is subject to taxation in accordance with this Article.
A non-resident who performs work or provides services without VAT registration and is required to be taxed in accordance with Article 169 of the Tax Code is considered a taxpayer for such work or services.
A VAT-registered taxpayer has the right to offset the VAT calculated on the amount payable to the non-resident for the services provided if the VAT has been paid to the state budget, 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 calculated tax, in accordance with the provisions of Article 175 of this Code, serves as a document that grants the tax agent the right to offset the VAT amount, and such a document is an electronic invoice.
We also inform you that, in accordance with Article 169.3 of the Tax Code, when applying Article 169.1, the time of the taxable transaction is considered the time of payment. If the payment is made before the transaction is executed, the transaction is considered to have occurred at the moment of payment.
Accordingly, VAT on services provided by a non-resident is calculated based on the exchange rate on the day the payment for the services is made to the non-resident and is reflected in the VAT declaration for the month in which the payment was made.
Additionally, we recommend that, to obtain a precise position on the issues raised in the inquiry, you contact the tax authority where the taxpayer is registered, providing the actual circumstances of the transaction and relevant supporting documents.
We inform you that, in accordance with the provisions of Article 125.1.5 of the Tax Code, other income of a non-resident, determined as income from sources in the Republic of Azerbaijan under Article 13.2.16 of the Tax Code and not related to the permanent establishment of the non-resident in the territory of the Republic of Azerbaijan, received from performing work or providing services, is subject to a 10 percent withholding tax at the source of payment without deducting expenses.
We also inform you that, under Article 169.1 of the Tax Code, if a non-resident 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 of this Code (excluding services related to hotel bookings and airline tickets outside the borders of the Republic of Azerbaijan in the framework of e-commerce), the performance of such work or provision of such services for the purposes of this chapter is subject to taxation in accordance with this Article.
A non-resident who performs work or provides services without VAT registration and is required to be taxed in accordance with Article 169 of the Tax Code is considered a taxpayer for such work or services.
A VAT-registered taxpayer has the right to offset the VAT calculated on the amount payable to the non-resident for the services provided if the VAT has been paid to the state budget, 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 calculated tax, in accordance with the provisions of Article 175 of this Code, serves as a document that grants the tax agent the right to offset the VAT amount, and such a document is an electronic invoice.
We also inform you that, in accordance with Article 169.3 of the Tax Code, when applying Article 169.1, the time of the taxable transaction is considered the time of payment. If the payment is made before the transaction is executed, the transaction is considered to have occurred at the moment of payment.
Accordingly, VAT on services provided by a non-resident is calculated based on the exchange rate on the day the payment for the services is made to the non-resident and is reflected in the VAT declaration for the month in which the payment was made.
Additionally, we recommend that, to obtain a precise position on the issues raised in the inquiry, you contact the tax authority where the taxpayer is registered, providing the actual circumstances of the transaction and relevant supporting documents.