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Can micro-entrepreneurship entities benefit from tax incentives?
Can micro-entrepreneurship entities benefit from tax incentives?
One of the issues that interests business owners is clarifying the criteria for entrepreneurship entities. When determining whether a taxpayer qualifies as a micro-entrepreneurship entity, is the value of goods and services provided, including Value Added Tax (VAT), counted as part of the annual income? Expert Anar Bayramov provides clarification.
In practice, we often encounter taxpayers whose annual income is below 200,000 manats, but the value of the goods and services they provide, including VAT, exceeds 200,000 manats. They are VAT payers. In such cases, can these taxpayers be considered micro-entrepreneurship entities? According to the Tax Code, are they eligible for a 75% exemption on income and profit taxes?
Suppose a VAT-registered taxpayer provides goods and services throughout the year with a base value of 180,000 manats and VAT amounting to 32,400 manats, making a total turnover including VAT of 212,400 manats.
According to the “Criteria for Classification of Micro, Small, Medium, and Large Entrepreneurship Entities” approved by Cabinet of Ministers Resolution No. 556 dated December 21, 2018, when determining the criteria for an entrepreneurship entity, the annual income includes the value of goods provided, work performed, and services rendered during the reporting year, as well as non-sales income.
It should be noted that when determining the value of goods provided, work performed, and services rendered, VAT is not included. That is, in the example above, although the total value of goods and services including VAT is 212,400 manats, the annual income is considered to be 180,000 manats.
In this case, the taxpayer qualifies as a micro-entrepreneurship entity and, taking into account the other requirements of Articles 102.1.30 and 106.1.20 of the Tax Code, can benefit from a 75% exemption on income and profit taxes.
One of the issues that interests business owners is clarifying the criteria for entrepreneurship entities. When determining whether a taxpayer qualifies as a micro-entrepreneurship entity, is the value of goods and services provided, including Value Added Tax (VAT), counted as part of the annual income? Expert Anar Bayramov provides clarification.
In practice, we often encounter taxpayers whose annual income is below 200,000 manats, but the value of the goods and services they provide, including VAT, exceeds 200,000 manats. They are VAT payers. In such cases, can these taxpayers be considered micro-entrepreneurship entities? According to the Tax Code, are they eligible for a 75% exemption on income and profit taxes?
Suppose a VAT-registered taxpayer provides goods and services throughout the year with a base value of 180,000 manats and VAT amounting to 32,400 manats, making a total turnover including VAT of 212,400 manats.
According to the “Criteria for Classification of Micro, Small, Medium, and Large Entrepreneurship Entities” approved by Cabinet of Ministers Resolution No. 556 dated December 21, 2018, when determining the criteria for an entrepreneurship entity, the annual income includes the value of goods provided, work performed, and services rendered during the reporting year, as well as non-sales income.
It should be noted that when determining the value of goods provided, work performed, and services rendered, VAT is not included. That is, in the example above, although the total value of goods and services including VAT is 212,400 manats, the annual income is considered to be 180,000 manats.
In this case, the taxpayer qualifies as a micro-entrepreneurship entity and, taking into account the other requirements of Articles 102.1.30 and 106.1.20 of the Tax Code, can benefit from a 75% exemption on income and profit taxes.