Aze.US
A draft amendment to Azerbaijan’s Tax Code would require foreign online service providers earning more than $10,000 annually from customers in the country to register with tax authorities and pay VAT directly, aligning local rules with global digital taxation trends.
Azerbaijan is considering new tax rules for foreign companies engaged in electronic commerce, as lawmakers review amendments designed to bring overseas digital service providers into the country’s formal tax system.
Under the proposal, non-resident companies that sell digital goods or services to customers in Azerbaijan would be required to register with the tax authorities within 30 days if their annual turnover from the country exceeds the equivalent of $10,000. Firms below that threshold could register on a voluntary basis.
The central aim of the reform is to ensure that value-added tax is paid directly by the foreign provider, rather than effectively falling on local consumers or remaining outside the tax net. Officials frame the move as part of a broader effort to strengthen tax compliance, level competition between domestic and foreign businesses, and capture revenue from the fast-growing digital economy.
The draft also clarifies which activities fall outside the definition of electronic commerce. Individualized professional services – including legal, financial, accounting, design, engineering, and real-time educational instruction – would not be treated as standard digital services for VAT purposes because they involve direct interaction between provider and client.
While deadlines for filing tax declarations would remain unchanged – due by the 20th day of the month following the reporting period – the payment deadline for VAT by non-residents would shift to the last day of that month, reflecting the practical timing of cross-border transactions.
Lawmakers propose a six-month transition period to allow foreign digital providers to adapt their accounting, reporting, and payment systems to the new requirements. The initiative is presented as consistent with international approaches to taxing the digital economy, where governments increasingly seek to capture revenue from cross-border online services delivered without physical presence.
What it really means
If adopted, the rules could affect a wide range of global platforms – from online marketplaces and app stores to streaming and subscription services – though the law would require tax registration rather than physical offices in Azerbaijan.
For consumers, the impact will likely depend on whether companies choose to absorb VAT costs or pass them into prices, meaning some online services could become marginally more expensive. For the government, the change represents a step toward closing long-standing gaps in the taxation of cross-border digital trade while aligning Azerbaijan with evolving global standards.