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Application of VAT to non-resident advertising services
Application of VAT to non-resident advertising services
We would like to inform you that the taxation of income derived from Azerbaijani sources by a non-resident who does not have a permanent establishment in the Republic of Azerbaijan is regulated by Article 125 of the Tax Code, while the scope of income considered to be from an Azerbaijani source is defined by Article 13.2.16 of the Tax Code.
Accordingly, income obtained by non-resident social media platforms—without a permanent establishment in Azerbaijan—from advertising services provided through electronic commerce is not subject to withholding tax at the source.
However, advertising services provided by such non-resident social media platforms to resident individuals or entities of Azerbaijan are subject to VAT at the rate of 18%.
According to Article 168.1.5 of the Tax Code, for the purpose of VAT, the place of performance of work or provision of advertising services is considered to be the place where the recipient of the services is located or registered.
Please note that if the tax agent is registered for VAT purposes, the calculated tax must be paid when submitting the VAT declaration for the month in which the transaction occurred. The payment document confirming the tax payment is an electronic invoice issued in accordance with Article 175 of the Tax Code, granting the tax agent the right to offset the VAT amount.
If the tax agent is not registered for VAT purposes, they are obliged to pay the calculated tax within 7 days after making the payment to the non-resident and submit the VAT declaration in the prescribed form by the 20th day of the following month.
Under the Tax Code, the amount payable by the tax agent to the non-resident is not considered a taxable transaction requiring VAT registration. When the tax agent calculates and pays VAT on the amount payable to the non-resident, they must include an appropriate note in the payment documents indicating that the tax was calculated based on the amount paid to the non-resident.
We would like to inform you that the taxation of income derived from Azerbaijani sources by a non-resident who does not have a permanent establishment in the Republic of Azerbaijan is regulated by Article 125 of the Tax Code, while the scope of income considered to be from an Azerbaijani source is defined by Article 13.2.16 of the Tax Code.
Accordingly, income obtained by non-resident social media platforms—without a permanent establishment in Azerbaijan—from advertising services provided through electronic commerce is not subject to withholding tax at the source.
However, advertising services provided by such non-resident social media platforms to resident individuals or entities of Azerbaijan are subject to VAT at the rate of 18%.
According to Article 168.1.5 of the Tax Code, for the purpose of VAT, the place of performance of work or provision of advertising services is considered to be the place where the recipient of the services is located or registered.
Please note that if the tax agent is registered for VAT purposes, the calculated tax must be paid when submitting the VAT declaration for the month in which the transaction occurred. The payment document confirming the tax payment is an electronic invoice issued in accordance with Article 175 of the Tax Code, granting the tax agent the right to offset the VAT amount.
If the tax agent is not registered for VAT purposes, they are obliged to pay the calculated tax within 7 days after making the payment to the non-resident and submit the VAT declaration in the prescribed form by the 20th day of the following month.
Under the Tax Code, the amount payable by the tax agent to the non-resident is not considered a taxable transaction requiring VAT registration. When the tax agent calculates and pays VAT on the amount payable to the non-resident, they must include an appropriate note in the payment documents indicating that the tax was calculated based on the amount paid to the non-resident.