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Can an individual qualify as a simplified tax payer if they are engaged in both the retail sale of souvenirs and the retail sale of gold?
Can an individual qualify as a simplified tax payer if they are engaged in both the retail sale of souvenirs and the retail sale of gold?
According to tax legislation, individuals carrying out business activities without establishing a legal entity must register with the tax authorities and obtain a Tax Identification Number (TIN) before commencing their activities. Their tax obligations are determined based on the chosen taxation regime and the type of activity performed.
In general, individuals engaged in trading activities may choose the simplified tax regime, provided they meet the relevant conditions. Under this regime, a simplified tax of 2 percent is calculated on the gross turnover without deducting expenses and is paid to the state budget.
However, pursuant to Article 218.5.11 of the Tax Code, persons engaged in the sale of gold, jewelry and other household items made of gold, as well as diamonds, are not entitled to be taxpayers under the simplified tax regime. This restriction applies to all persons carrying out such activities.
Therefore, if an individual is engaged in both the retail sale of souvenirs and the retail sale of gold and jewelry products, they cannot apply the simplified tax regime to one part of their activity and income tax to another. Since they are involved in the sale of gold and jewelry, they must generally operate as an income tax payer.
Under the income tax regime, documented expenses incurred in generating income are deducted from gross income, and income tax is calculated at a rate of 20 percent on the remaining profit. Unlike the simplified tax regime, the income tax system allows taxpayers to deduct eligible business expenses.
Furthermore, if the entrepreneur qualifies as a micro-business entity, meaning that the average number of employees is between 1 and 10 and the annual income does not exceed AZN 200,000, they may benefit from the tax incentive provided under Article 102.1.30 of the Tax Code, provided that proper records of income and expenses are maintained. In such cases, 75 percent of the income derived from entrepreneurial activity is exempt from taxation, significantly reducing the effective tax burden.
Consequently, individuals engaged in the sale of gold and jewelry products cannot qualify for the simplified tax regime, even if they simultaneously conduct retail sales of other goods. They must operate as income taxpayers.
Legal basis: Articles 33.4, 102.1.30, and 218.5.11 of the Tax Code.
According to tax legislation, individuals carrying out business activities without establishing a legal entity must register with the tax authorities and obtain a Tax Identification Number (TIN) before commencing their activities. Their tax obligations are determined based on the chosen taxation regime and the type of activity performed.
In general, individuals engaged in trading activities may choose the simplified tax regime, provided they meet the relevant conditions. Under this regime, a simplified tax of 2 percent is calculated on the gross turnover without deducting expenses and is paid to the state budget.
However, pursuant to Article 218.5.11 of the Tax Code, persons engaged in the sale of gold, jewelry and other household items made of gold, as well as diamonds, are not entitled to be taxpayers under the simplified tax regime. This restriction applies to all persons carrying out such activities.
Therefore, if an individual is engaged in both the retail sale of souvenirs and the retail sale of gold and jewelry products, they cannot apply the simplified tax regime to one part of their activity and income tax to another. Since they are involved in the sale of gold and jewelry, they must generally operate as an income tax payer.
Under the income tax regime, documented expenses incurred in generating income are deducted from gross income, and income tax is calculated at a rate of 20 percent on the remaining profit. Unlike the simplified tax regime, the income tax system allows taxpayers to deduct eligible business expenses.
Furthermore, if the entrepreneur qualifies as a micro-business entity, meaning that the average number of employees is between 1 and 10 and the annual income does not exceed AZN 200,000, they may benefit from the tax incentive provided under Article 102.1.30 of the Tax Code, provided that proper records of income and expenses are maintained. In such cases, 75 percent of the income derived from entrepreneurial activity is exempt from taxation, significantly reducing the effective tax burden.
Consequently, individuals engaged in the sale of gold and jewelry products cannot qualify for the simplified tax regime, even if they simultaneously conduct retail sales of other goods. They must operate as income taxpayers.
Legal basis: Articles 33.4, 102.1.30, and 218.5.11 of the Tax Code.