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When should voluntary VAT payers submit their declarations?
When should voluntary VAT payers submit their declarations?
One of the cases we often encounter in practice concerns the periods and deadlines for submitting VAT and profit tax returns by taxpayers who were not initially VAT payers but later voluntarily registered as such.
Altay Jafarov explains, through examples, how these cases should be clarified and which declarations must be submitted.
Example 1: “XX” LLC was a simplified tax payer in 2024. The company submitted all its tax returns to the tax authorities on time. In April 2025, the company’s management decided to register as a VAT payer starting from April 1, 2024. Accordingly, the company submitted an application for VAT registration, and the tax authority registered it as a VAT payer.
Let’s note that the company’s turnover in the first quarter of 2024 was 20,000 AZN, and the total turnover for April–December 2024 was 100,000 AZN. The turnover for January–March 2025 was 30,000 AZN.
Example 2: The same operations occurred as in Example 1, except that “XX” LLC was a profit tax payer in 2024, not a simplified tax payer. In this case, how and for which period should “XX” LLC submit its VAT returns?
To answer this, we must refer to the relevant provisions of the Tax Code.
According to Article 157.3.3 of the Tax Code, VAT registration becomes effective on the date specified in the taxpayer’s registration application, provided that this date is not more than three years prior to the date of application, as stipulated in Article 85.4 of the Code.
Thus, since the company applied to be registered as a VAT payer from April 1, 2024, the tax authority will indicate that date (01.04.2024) in the registration notice.
How should the VAT return be submitted?
Under Article 177.5 of the Tax Code, if registration is carried out retroactively (as per Article 157.3.3), the taxpayer must pay VAT on taxable transactions from the date the registration becomes effective and is entitled to deduct input VAT in the prescribed manner. Such transactions must be reflected in the first VAT return filed by the taxpayer. These transactions are considered to have occurred during the month in which the return is filed. The taxpayer also has the right to issue electronic invoices for these operations.
From this provision, it is clear that even though “XX” LLC’s VAT registration is effective from 01.04.2024, all turnover for the period 01.04.2024–31.03.2025 is considered to have occurred in April 2025. Therefore, in both examples, the company will report the total turnover of 130,000 AZN in the April 2025 VAT return:
100,000 + 30,000 = 130,000 AZN
130,000 ÷ 1.18 = 110,169.49 AZN
110,169.49 × 18% = 19,830.51 AZN
Thus, the declaration will show 110,169.49 AZN (net of VAT) and 19,830.51 AZN as 18% VAT.
How should the profit tax return be submitted?
In the first example,
the company remains a simplified tax payer for the first quarter of 2024 and must pay 400 AZN of simplified tax:
20,000 × 2% = 400 AZN.
The company also submitted and paid simplified tax returns for the 2nd, 3rd, and 4th quarters of 2024 and the 1st quarter of 2025.
Since the company became a profit tax payer from 01.04.2024, it must resubmit the simplified returns for those periods as “zero” amended returns. Otherwise, such actions would constitute double taxation, which contradicts the Tax Code.
Therefore, “XX” LLC must recover 2,000 AZN for 2024 and 600 AZN for the 1st quarter of 2025 paid as simplified tax:
100,000 × 2% = 2,000 AZN
30,000 × 2% = 600 AZN
In this case, the company must submit a profit tax return.
According to Article 149.4-1 of the Tax Code, if the VAT registration of a taxpayer who was not previously a profit (income) tax payer is carried out retroactively under Article 157.3.3, the taxpayer must submit the profit tax return to the tax authorities within 90 days from the date the VAT registration notice was issued.
In the second example, the company was already a profit tax payer from the beginning. Therefore, in its 2024 profit tax return, it must declare a turnover of 120,000 AZN.
How will the situation be regulated in 2025?
In 2025, “XX” LLC will continue to submit a profit tax return as a profit tax payer. Here, the turnover for VAT purposes will be 120,000 AZN higher, while for profit tax purposes, it will be 120,000 AZN lower, since the company already reported this amount once in the 2024 profit tax return.
Naturally, when submitting the 2025 profit tax return, the tax authorities may issue desk audit (cameral) letters regarding discrepancies between the VAT and profit tax declarations. However, these discrepancies can be resolved by providing a simple written explanation.
In the first example, although “XX” LLC applied for VAT registration starting from 01.04.2025, the registration date was retroactively recorded as 01.04.2024. Therefore, the company must submit a profit tax return for the period April–December 2024. In other words, a profit tax return for 2024 must be filed within 90 days of receiving the VAT registration notice.
Accordingly, in this scenario, “XX” LLC must report the turnover of 100,000 AZN (for April–December 2024) in its 2024 profit tax return.
Likewise, when the 2025 profit tax return is submitted, any discrepancies between the VAT and profit tax returns can again be resolved with a simple clarification provided to the tax authorities.
One of the cases we often encounter in practice concerns the periods and deadlines for submitting VAT and profit tax returns by taxpayers who were not initially VAT payers but later voluntarily registered as such.
Altay Jafarov explains, through examples, how these cases should be clarified and which declarations must be submitted.
Example 1: “XX” LLC was a simplified tax payer in 2024. The company submitted all its tax returns to the tax authorities on time. In April 2025, the company’s management decided to register as a VAT payer starting from April 1, 2024. Accordingly, the company submitted an application for VAT registration, and the tax authority registered it as a VAT payer.
Let’s note that the company’s turnover in the first quarter of 2024 was 20,000 AZN, and the total turnover for April–December 2024 was 100,000 AZN. The turnover for January–March 2025 was 30,000 AZN.
Example 2: The same operations occurred as in Example 1, except that “XX” LLC was a profit tax payer in 2024, not a simplified tax payer. In this case, how and for which period should “XX” LLC submit its VAT returns?
To answer this, we must refer to the relevant provisions of the Tax Code.
According to Article 157.3.3 of the Tax Code, VAT registration becomes effective on the date specified in the taxpayer’s registration application, provided that this date is not more than three years prior to the date of application, as stipulated in Article 85.4 of the Code.
Thus, since the company applied to be registered as a VAT payer from April 1, 2024, the tax authority will indicate that date (01.04.2024) in the registration notice.
How should the VAT return be submitted?
Under Article 177.5 of the Tax Code, if registration is carried out retroactively (as per Article 157.3.3), the taxpayer must pay VAT on taxable transactions from the date the registration becomes effective and is entitled to deduct input VAT in the prescribed manner. Such transactions must be reflected in the first VAT return filed by the taxpayer. These transactions are considered to have occurred during the month in which the return is filed. The taxpayer also has the right to issue electronic invoices for these operations.
From this provision, it is clear that even though “XX” LLC’s VAT registration is effective from 01.04.2024, all turnover for the period 01.04.2024–31.03.2025 is considered to have occurred in April 2025. Therefore, in both examples, the company will report the total turnover of 130,000 AZN in the April 2025 VAT return:
100,000 + 30,000 = 130,000 AZN
130,000 ÷ 1.18 = 110,169.49 AZN
110,169.49 × 18% = 19,830.51 AZN
Thus, the declaration will show 110,169.49 AZN (net of VAT) and 19,830.51 AZN as 18% VAT.
How should the profit tax return be submitted?
In the first example,
the company remains a simplified tax payer for the first quarter of 2024 and must pay 400 AZN of simplified tax:
20,000 × 2% = 400 AZN.
The company also submitted and paid simplified tax returns for the 2nd, 3rd, and 4th quarters of 2024 and the 1st quarter of 2025.
Since the company became a profit tax payer from 01.04.2024, it must resubmit the simplified returns for those periods as “zero” amended returns. Otherwise, such actions would constitute double taxation, which contradicts the Tax Code.
Therefore, “XX” LLC must recover 2,000 AZN for 2024 and 600 AZN for the 1st quarter of 2025 paid as simplified tax:
100,000 × 2% = 2,000 AZN
30,000 × 2% = 600 AZN
In this case, the company must submit a profit tax return.
According to Article 149.4-1 of the Tax Code, if the VAT registration of a taxpayer who was not previously a profit (income) tax payer is carried out retroactively under Article 157.3.3, the taxpayer must submit the profit tax return to the tax authorities within 90 days from the date the VAT registration notice was issued.
In the second example, the company was already a profit tax payer from the beginning. Therefore, in its 2024 profit tax return, it must declare a turnover of 120,000 AZN.
How will the situation be regulated in 2025?
In 2025, “XX” LLC will continue to submit a profit tax return as a profit tax payer. Here, the turnover for VAT purposes will be 120,000 AZN higher, while for profit tax purposes, it will be 120,000 AZN lower, since the company already reported this amount once in the 2024 profit tax return.
Naturally, when submitting the 2025 profit tax return, the tax authorities may issue desk audit (cameral) letters regarding discrepancies between the VAT and profit tax declarations. However, these discrepancies can be resolved by providing a simple written explanation.
In the first example, although “XX” LLC applied for VAT registration starting from 01.04.2025, the registration date was retroactively recorded as 01.04.2024. Therefore, the company must submit a profit tax return for the period April–December 2024. In other words, a profit tax return for 2024 must be filed within 90 days of receiving the VAT registration notice.
Accordingly, in this scenario, “XX” LLC must report the turnover of 100,000 AZN (for April–December 2024) in its 2024 profit tax return.
Likewise, when the 2025 profit tax return is submitted, any discrepancies between the VAT and profit tax returns can again be resolved with a simple clarification provided to the tax authorities.