Value Added Tax

and Excise
Jeyhun Mammadov
Fall 2018/2019
Principles of VAT
“

3
Value added tax – characteristics

▪ Consumption tax
▪ Independent of the economic success and status of the
taxpayer
▪ It taxes the pure usage of income similar to a transaction tax
▪ In contrast to direct tax, it distinguishes between person who
is liable and on whom it is imposed

These are main characteristics of VAT

4
VAT CONCEPT
VAT is that tax:
• should be charged at each stage of the production and distribution
process
• but the total tax due should be borne by the final consumer of the
product.

5
Value added tax – methods of calculation

▪ Transaction based method (invoice-credit method)

▪ Tax charge is shown on each invoice
▪ Purchaser credits that tax
▪ Entity based method
▪ VAT is calculated on all allowable purchases

Almost all jurisdictions operate on invoice-credit method

6
Concept of VAT
100AZN+18AZN 150AZN+27AZN 200AZN+36AZN 250AZN+45AZN

Payment Payment Payment Payment

Work/Service Work/Service Work/Service Work/Service

+ VAT + VAT + VAT + VAT
Invoice Invoice Invoice Invoice

+18% VAT -18% VAT +18% VAT -18% VAT +18% VAT -18% VAT +18% VAT
18AZN 18AZN 27AZN 27AZN 36AZN 36AZN 45AZN

STATE BUDGET

a) Taxpayers, who are registered for VAT are required to charge VAT on their sales
and must account for this output tax to state authorities, but
b) Such taxpayers are allowed to recover from state budget the input tax which they
pay to their own suppliers, so that
c) in effect, VAT registered taxpayers suffer no VAT and the total VAT is borne by
the consumer at the end of the distribution chain. 7
VAT concept in Azerbaijan

Output Value Input VAT Payable Value Added Tax

Added tax
The amount of tax
- The tax amount which is
creditable according to
submitted electronic tax
The difference between Output VAT
calculated from taxable amount and Input VAT amount.
turnover invoices or documents reflecting
the payment of VAT at import.

8
Concept of VAT – example

A Ltd owns a quarry, where it extracts stone and sells it to B Ltd for 10,000AZN plus VAT. B Ltd converts
all of the stone into paving slabs and sells these slabs to C Ltd for 18,000AZN, plus VAT. C Ltd owns a
garden centre, where the paving slabs are sold to the general public for a total of 32,000AZN, plus VAT.
Show how VAT is charged and collected at each stage of this process, assuming that VAT is to be
calculated at 18% throughout.

Cost price Selling price Output Paid to the

before VAT Input VAT before VAT VAT state
A Ltd - - 10,000 1,800 1,800
B Ltd 10,000 1,800 18,000 3,240 1,440
C Ltd 18,000 3,240 32,000 5,760 2,520
5,760

9
Worldwide VAT rates
Can – Rus–
5% GST 20%
EU avg –
9.7%-21% Kz–
Az, Geo, Jap – up
US – 2,5% 12%
Tur – 18% to 5%
to 8% ST Ch –
6%-17%

In –
Nig– 5%-28%
5%

Ken–
16%

Md–
20%

SA– Aus – 10%

Ag– 17% GST
21%

10
Taxable person -
VAT payer

11
Taxpayer for VAT

▪ Any person registered or to be

registered for VAT purposes
▪ A person importing taxable goods
▪ Non-resident person who
performs work and services in
Azerbaijan
▪ Unincorporated Partnership
▪ Producers of excise goods
▪ Person engaged in construction
activity, who doesn’t exercise a
12
right for simplified taxation
VAT REGISTRATION
Revenue limit
Entities engaged in business
activity, whose volume of taxable
operations in any month of
consecutive 12-month period
exceeds 200,000 AZN.
Application for
registration
10 days after the first day of the
following month when total value
of operations exceeds 200,000
AZN
Transactional
registration
If the volume of a transaction
exceeds 200,000 AZN, that
transaction is VAT-able and a
party for that transaction shall
be registered for VAT
Registration timing
Before the date of the VAT-able
transaction
Voluntary registration
A person engaged in business who
does not need to be registered
may voluntarily apply for
registration with the purposes of
VAT.
Effective date
▪ On the first day of the following
month when application
submitted; or
▪ From the indicated in the
application (should not exceed
3 years backdated period) 13
VAT registration – exercises
Examples
(a) Jale is a sole proprietor with a
taxable turnover of 115,000AZN per
annum. Is she required to register for
VAT?
(b) Parviz and Davud are in partnership,
operating a business with a taxable
turnover of 250,000AZN per annum. Is
anyone required to register?
(c) Sevil is a sole proprietor with a
taxable turnover of 100,000AZN per
annum. She is also in partnership with
Sevinj, operating a business with a
taxable turnover of 130,000AZN per
annum and sharing profits equally. Is
anyone required to register?
📖
Solution
(a) No. Jale's taxable turnover does not
exceed the registration threshold.
(b) Yes. The partnership of Parviz and
Davud is one "person" for VAT
purposes and has a taxable turnover
exceeding the registration threshold.
Therefore the partnership must
register.
(c) No. Sevil as a sole proprietor is one
person, whilst the partnership of Sevil
and Sevinj is another, quite separate,
"person". Neither of these persons has
a taxable turnover exceeding the
registration threshold so neither of
them is required to register. 14
VAT registration – Exercise

Kazim begins trading on 1 January 2016 . Taxable turnover during the first two years of trading
is as follows:
2016, AZN 2017, AZN
January 4,800 January 13,800
February 5,100 February 16,400
March 5,800 March 16,100
April 6,600 April 17,600
May 7,400 May 18,100
June 7,900 June 18,900
July 8,300 July 18,200
August 8,500 August 18,900
September 9,200 September 19,800
October 10,500 October 20,100
November 11,900 November 20,300
December 11,200 December 22,700
The VAT registration threshold is 200,000 AZN. State the date on which Kazim must register for 15
VAT.
VAT registration – Exercise
At the end of each month, cumulative taxable turnover during the previous 12 months (or
since the start of trade, if less) are as follows:

2016, AZN 2017, AZN

January 4,800 January 126,200
February 9,900 February 137,500
March 15,700 March 147,800
April 22,300 April 158,800
May 29,700 May 169,500
June 37,600 June 180,500
July 45,900 July 190,400
August 54,400 August 200,800
September 63,600 September 211,400
October 74,100 October 221,000
November 86,000 November 231,400
December 97,200 December 242,900
The registration threshold is passed at the end of August 2017 . Kazim must notify the tax 16
office by 10 September 2017. Registration will probably take effect from 15 September 2017.
Deregistration from VAT

• If the taxpayer ceases to provide with VAT-able transactions, the

taxpayer is obliged to apply to the tax administration on cancellation of its
VAT registration;
o Deregistration is effective from the last day of ceasing VAT-able
transactions.

• If the volume of VAT-able transactions are less than 100,000 AZN for the
preceding 12 calendar month period, taxpayer may apply for the
deregistration, once 1 year period passes after initial registration;
o Deregistration is effective from the day of application for
deregistration.

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TAX BASE

• Provision of goods, works and services;

• Margin on sale of agricultural goods produced in Azerbaijan;
• Taxable import;
• Provision of goods, works and services in Azerbaijan by the Partnership;
• Supply of goods, performance of works and provision of services to its
own employees or for non-economic activity;
• Barter (swap) operations;
• The use of goods (works, services) for non-commercial activity, their loss,
damage, write-off of residual value of undepreciated assets or theft of
goods, if the input VAT was paid for them;
• On deregistration, the goods that remain in the ownership at the time of
cancellation are considered as realized at such time and to be a taxable
operation;
• Sale of goods in Azerbaijan that were exempt from VAT on import. 18
VAT exemptions – general rules
Export of goods and
services
Business suppliers which transfer
goods across the border shall not
be subject to additional domestic
VAT to avoid a distortion of the
competition on foreign markets.
Further tax relief on
export
Input VAT relief from former
acquisitions remains in the hands
of the supplier.
Sales subject to other
transactional taxes
Transfer of immovable property:
because the transfer of land and
buildings is basically subject to
real estate transfer taxes.
Insurance and re-
insurance,
as well as the turnover from
betting and lottery activities,
again because of other
transaction taxes.
Due to social, cultural
or economic reasons
Granting and negotiation of
credits, accounts or deposits,
postal services, social security
work, education, etc.
Letting housing space
and health care
the main reason for the
exemption of VAT in tax
regulations is to grant a relief for
private consumers. 19
 Followings are exempt from VAT:
VAT exemption – 1. Purchase of privatized assets. Rent payment for the state owned assets;
2. Financial services;
3. Import or provision of national and foreign currencies, as well as securities;
4. Import of gold by CBAR and SOFAZ, as well as import of other securities by CBAR;
5. Investment of property as the share capital;
6. Payment of fees for permits, licenses and services provided by government authorities or by
special notaries;
7. Publication of media products;
Azerbaijan
8. Publication of education books or literature for kids;
9. Funeral services;
10. Import of goods, provision of services to fulfill obligations of CBAR and SOFAZ;
11. Transfer of any assets to the state authorities according to the Production Sharing
Agreements;
12. Underground transportation services;
13. Education services;
14. Transfer of assets between branches of organization, and from one legal entity to another
one (according to the decision of the state authorities);
15. Import of technologies, equipment and plants by the managing organization or the operator
of the technological park;
16. Import of technologies, equipment and plants by the residents of the technological park for
20
seven years after registration on the technological park;
17. Sale of participating interest in the legal entity, or shares of it;
 18. Sale of agriculture products by farmers – for 5 years since January 1, 2014;
19.
Exemption from Import of defense products, and equipment for production of them;
20. Import of products by humanitarian organizations;
21. Donation or charities made by states, governments or by international organizations;
VAT - continue
22.
23.
Import of goods for personal use (non-commercial import);
Import of goods and equipment for export purpose oil & gas industry;
24. Import of goods into special economy zones (except those that subject to excise tax);
25. Import of fixed assets that subject to lease agreement;
26. Import of technology, equipment and plants by persons obtained investment incentives
document – for 7 years after receiving such document;
27. Import and sale of wheat, production and sale of flour and bread;
28. Import of goods by the resident of industrial park – for 5 years from May 1, 2016;
29. Import and sale of breeding animals;
30. Import and sale of seeds and seeds;
31. Import and sale of mineral fertilizers, pesticides;
32. Import of seeds growing, poultry and beekeeping equipment and machineries;
33. Import of veterinary medicines and drugs;
34. Import and sale of agricultural irrigation systems and other facilities, machinery, equipment;
35. Import of raw materials and materials determined by the relevant executive authority;
36. Provision of non-operating (toxic) assets within the restructuring and recovery measures of
banks that have lost their repatriation – for 3 years from January 1, 2017;
21
37. Sale of poultry meat - for 3 years from January 1, 2017;
38. Import of aircrafts, their spare parts, engines and power equipment for civil aviation purposes.
Tax implications of
exemption from VAT
The tax implications of a supply of goods or services being exempt are as follows:
a) VAT cannot be charged on an exempt supply.
b) A person who makes only exempt supplies cannot register for VAT, charges no
output tax, is not a taxable person and cannot reclaim input tax.
c) In effect, a person making only exempt supplies is in an identical position with regard
to VAT as the final consumer at the end of a distribution chain.
d) Input VAT can be treated as tax deductible for corporate tax purposes

22
Zero rate (0%) VAT

Following work, services and transactions are taxed at 0% rate:

1. Goods and services intended for use of diplomatic and consular representations;
2. Import of goods; provision of goods, works and services to the recipients of financial aid
(grants) received from abroad;
3. Export of goods; and services as determined by the place of purchaser;
4. International and transit cargo (except for international postal services), and passenger
transportations. Provision of works and services for international and transit flights;
5. Supply of gold and other valuables to the Central Bank of the Azerbaijan Republic;
6. Provision of goods, work and services by contractors to the resident of the industrial parks;
and by sub-contractors to the contractor of the industrial parks.
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Zero rate (0%) VAT – implications

The tax implications of a supply of goods or services being zero-rated are as follows:
a) The supply is a taxable supply but the VAT due is calculated at 0%.
b) A person who makes only zero-rated supplies is usually register as a taxable person.
Having registered (and this may be done voluntarily if taxable turnover is less than the
threshold) the person will then be able to reclaim input tax.

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Timing of the taxable operation

Payment is e-VAT Invoice

made no later issued within 5 Supply of
days after the
than 30 days goods Date of the
NO taxable NO NO
after the transaction, or involves their supply
taxable shipment of shipment
transaction goods
YES

YES

YES
Date of Date of the Date of the
the e-VAT Shipment
payment invoice of goods

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Timing of the taxable operation – exercise

The company AXE provided cleaning services to company BBS on the date
of March 18, 2018. The e-VAT invoice was issued on April 1, 2018 and
company BBS made a payment to company AXE on April 25, 2018.
Determine the date of the taxable operation.

The payment was made later than 30 days (38th day after provision of
services). The e-VAT invoice also was issued later than 5 days after
rendering the service – it was issued on 14th day after the taxable transaction.
Hence, the date of the taxable operation is the date of the transaction – 18th
of March, 2018.

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Place of supply

Supply of goods:
• the place, where they are transferred – where the transportation or shipment starts.
In case of installation involved, the place of installation.
Supply of work and services:
• If work and services directly connected to the immovable property, the place where
immovable property located;
• If works connected to movable property, the actual place of services (works);
• The place where art, cultural, sport, educational and similar type services actually
provided;
• If services connected to the transportation, the place of transportation service
provided;
• Location of the buyer of the services for certain services;
• Place of activity of the supplier of work and services

The place of work and services are determined based on the above order, if more 27
than one applies.
Place of supply – work and services determined by
the location of supplier
Supply of following work and services determined by the location of a supplier:
• transfer of ownership or rights on the use of patents, licenses, trade marks,
copyrights and other similar services;
• provision of advertisement, legal, accounting, engineering services as well as data
processing and similar services;
• provision of workforce;
• leasing of movable property (except of vehicles of transportation companies);
• services of agent who on behalf of the main party of agreement invites legal or
natural persons for the provision of services specified in this article;
• Telecommunication services;
• Radio, TV and postal services;
• Computer, Internet and other electronic network, services provided by e-mail or
other electronic means; or transfer of rights for such services;
• Provision of e-commerce; electronic lotteries, other competitions or contests.
28
tax rate
VAT rate on taxable transactions and taxable
import is 18%

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Value of taxable supply
Value of a taxable operation is:
• Amount, which is paid or payable to taxpayer by customer or any other person;
• Market value of goods, works and services, if taxpayer receives, or is entitled to
receive goods, work or services in exchange for a taxable supply;
• Cost of goods, work or services, in case of:
• (i) their supply to its own employees or for free or in barter (swap)
operations;
• (ii) use of goods (works, services) for non-commercial activity, their loss,
damage, write-off of residual value of undepreciated assets or theft of
goods, if the input VAT was paid for them;
• (iii) on deregistration.
In all above cases the value should be calculated:
o without the consideration of VAT; 30
o including other taxes, fees and other fees, except for the road tax.
Value of taxable supply

• The value of a taxable supply is the amount on which the VAT charge is based and
this is normally equal to the price (before VAT) charged for the supply.
• For example, if supply is made at a price of 1,000AZN plus VAT at 18%, the value
of the supply is 1,000AZN and the "consideration" given for the supply is
1,180AZN.
• The VAT component of the consideration can be found by multiplying the
consideration by the "VAT fraction". With a standard rate of 18%, this is 18/118.

18
𝑉𝐴𝑇 = 𝐶𝑜𝑛𝑠𝑖𝑑𝑒𝑟𝑎𝑡𝑖𝑜𝑛 ∗
118

31
Value of taxable supply – examples
EXAMPLE A
On 1 August 2017, a supply is made with a value of 200AZN. Calculate the VAT
charged and the consideration for the supply.
Solution
The VAT charged is 36.00AZN (200 x 18%) and the consideration paid for
supply is 236.00AZN.

EXAMPLE B
On 2 January 2018 , a 18%-rated supply is made for a consideration of 1,062AZN.
Calculate the VAT element and the value of the supply.

Solution
The VAT element is 162.00AZN (1,062 x 18/118) and the value of the supply is 900.00AZN.

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Mixed and composed supply

Composed supply
• Supply of goods, provision of work and services that is supplementary to the
main supply shall be considered a part of such operations.
• Provision of work and services by an exporter, which are supplementary to
the import of goods, shall be considered as a part of the import of goods.

Mixed supply
• If the operation that involves independent elements can be divided into
taxable and VAT-exempted operations, those shall be considered as
separate operations.
Or
• A "mixed supply" occurs if a mixture of goods and/or services is invoiced
together at a single inclusive price. 33
Mixed supply – example

EXAMPLE
A VAT-exclusive price of 720AZN is charged for a mixed supply of goods. The
goods concerned consist of 18%-rated goods which cost the supplier 125AZN
(excluding VAT) and zero-rated goods which cost the supplier 55AZN.
Calculate the output tax due, assuming a standard rate of 18%.

Solution
From the information given, the only way of apportioning the price of the mixed
supply into the standard-rated element and the zero-rated element is to split the
price according to the cost of each element to the supplier.
On this basis, the value of the supply represented by standard-rated goods is
720AZN x 125/180 = 500AZN. VAT at 18% of this figure gives 90.00AZN.
Therefore the total price charged should be 810.00AZN. 34
Taxation of non-residents – reverse charge VAT
• If a business receives services (including those provided via e-commerce) in
Azerbaijan from non-resident, the tax-payer must operate the reverse charge
procedure and account for output tax at the appropriate rate for the services
concerned.
• The VAT suffered by taxable persons as a result of this procedure is then treated as
input tax.
• Tax to be paid and reported by 20th of the next month after transaction
• The payment document is assumed as e-invoice, which gives a right for
reimbursement
• If the VAT suffered by non-taxable persons, such turnover is not included into taxable
operations.
o Such tax shall be paid within 7 days after payment to supplier, and
o The tax amount to be reported to tax authorities by 20th of the next month after
35
transaction.
Deductible Input VAT

Deductible input VAT is determined by:

• Received electronic invoices (e-invoices), and
• Cashless payment (or by direct payments made in cash to the bank account)
made to supplier, and
• Payment of VAT amount made to the VAT deposit account of supplier.

The timing of such deductible VAT is:

• On supply of goods, works and services conducted during an accounting period – e-
invoices issued during the period;
• On import of goods during an accounting period - at the time when customs duties
are collected on such goods pursuant to customs legislation;
• If two or more payments made – each payment assumed as separate VAT-able
transaction;
• If supplied goods, works or services are not charged to P&L account – the timing of
goods, works or services charged or assumed to be charged to P&L account.
36
Non-deductible Input VAT

VAT paid for the following supplies are not allowed to be treated as deductible input
VAT:
• Meal and entrainment provided to employees;
• Accommodation cost of employees;
• Other social expenses of employees, (Article 109.3)

If a person provides non-taxable supply or VAT exempt activity only, no deduction is

available for input VAT.

If a person make both taxable and non-taxable (or VAT exempt) supplies, the volume of
deductible input VAT is calculated by proportion of them:

Value of taxable supplies

Residual input tax∗
Value of all supplies
37
Partial exemption – example
Solution
Problem:
Output tax
During December 2017, Nargiz MMC makes supplies Standard-rated supplies 120,000AZN @ 18%=21,600 AZN
as follows:
Zero-rated supplies 80,000AZN @ 0% = 0 AZN
Total Output VAT - 21,600AZN
Standard-rated supplies (excluding VAT) -
120,000AZN Input tax
Zero-rated supplies 80,000AZN Total input VAT 7,500AZN+8,500AZN+12,000AZN= 28,000AZN
Exempt supplies 50,000AZN
Value of taxable supplies 120,000AZN + 80,000AZN =
200,000AZN
The company suffers input tax as follows: Value of all supplies 120,000AZN + 80,000AZN + 50,000AZN =
Attributed to taxable supplies 7,500AZN 250,000AZN
Attributed to exempt supplies 8,500AZN
200,000AZN
Unattributed 10,000AZN 26,000AZN∗ = 26,000AZN ∗ 80% = 20,800AZN
250,000AZN
———
Compute the VAT payable to the government for the Payable tax 21,600AZN - 20,800AZN = 800AZN 38
month.
 Electronic tax invoice

▪ VAT-payers are obliged to issue

an electronic tax invoice to the
receiving party.
▪ An electronic tax invoice to be
Place your screenshot here
issued within 5 days after
supply of goods, work or
services.

39
Tax period
The tax period is a month

Tax declaration deadline

VAT declaration submission deadline for the month is
20th of the next month

Tax payment deadline

Same as the declaration submission deadline – 20th of 40
the following month
Penalties and interest
• Incorrect tax return – a person who submits an incorrect tax return (or do not submit a
return) liable to pay 50% penalty on the understated tax amount;
• Economic activity without VAT registration – a person who performs economic
activity without VAT registration, when it is mandatory liable to pay 50% penalty on the
amount of payable tax during that period;
• Submission of electronic tax invoices – a person who submits electronic tax
invoices before registering for VAT purposes, or after deregistration from VAT, liable to
pay penalty of 100% of the VAT amount applied on the issued invoices;
• Late payment of VAT to the deposit account – 50% penalty applies for the payment
of the VAT amount to the VAT deposit account later than the day of payment for the
supply;
• Late payment of VAT to the state budget– 0.1% interest applies for the late payment
of interest, but not longer than for one year.
41
Principles of Excise
Excise tax

Excise tax
▪ Indirect consumption tax
▪ Included in the product’s price
▪ Applies to particular (luxury) goods or services

43
Taxpayers of excise tax in Azerbaijan

▪ Producers of excise goods in Azerbaijan

▪ Importers of excise goods into Azerbaijan
▪ Tax residents of Azerbaijan, who produce excise
goods outside of Azerbaijan and who are not
registered as a taxpayer in those jurisdictions

44
Taxable operations and its timing

Taxable operations are: Timing of operation:

▪ Release of excise goods ▪ Timing of the release of
from production sites; goods;
▪ Release of goods from ▪ Time of release from
Customs clearance. Customs control.

45
Tax Base

▪ For oil products produced in Azerbaijan – the wholesale value of that

product;
▪ For other goods produced in Azerbaijan – the number of produced
product;
▪ For imported
▫ vehicles, sport and leisure yachts – a volume of their engines;
▫ platinum – weight of them in grams;
▫ gold, and gold-made jewelry – amount of gold in a thousand
weight unit;
▫ Processed, sorted and framed diamonds – their weight in
carats;
▪ For other imported goods – customs value of goods excluding excise,
road tax and VAT; 46
Exemptions
Followings are exempt from excise:
• Import for personal use:
o 1.5 liter of alcohol;
o 200 pieces of cigarettes;
o 20 grams of gold and gold-made jewelries;
o 0.5 carats of processed and framed diamonds;
o fuel in the tank of vehicles;
• Transit goods;
• According to the Customs legislation, temporarily imported goods;
• Gold and other valuables imported by National Bank of Azerbaijan and
by State Oil Fund of Azerbaijan

47
Refund (credit) of paid excise taxes
• Excise tax, which is paid for goods that are used for production
purposes of other excise goods, can be
o Credited against payable excise tax; or
o Refunded from the state budget
• Verification of the excise tax by:
o Electronic invoices from producer of excise goods or raw
materials; or
o Payment document of excise tax at the customs – in case of
import.
• Refund is made within 45 days after submission of documents to the tax
office.

48
Taxable goods

Following goods are subject to excise tax:

▪ Alcohol, beer and all types of alcoholic beverages;
▪ Tobacco products;
▪ Oil products;
▪ Light vehicles (with exception of those for special
purposes, equipped with special markings and
equipment);
▪ Leisure and sports yachts as well as other floating
transports stipulated for these purposes;
▪ Imported platinum, gold, jewellery, and processed
diamonds. 49
Excise rates
Following goods are subject to excise tax:
▪ Alcohol, beer and all types of alcoholic beverages:
▫▫ Spiritus – 2AZN per liter;
Vodka and other strong alcohols – 2AZN per liter;
▫▫ Cognac – 6AZN per liter;
Sparkling wines – 2.5AZN per liter;
▫▫ Wine and vineyard materials – 0.1AZN per liter;
Beer and beer containing beverages (excluding 0% beer) – 0.2AZN per liter;
▪ Tobacco products – cigarettes 20AZN per 1,000 pcs, and cigars 1AZN each;
▪ Oil products – according to the decree of Cabinet of Minister;
▪ Light vehicles – from 0.2AZN to 60AZN per cubic centimeter of engine;
▪ Leisure and sports yachts – 6AZN per cubic centimeter of engine;
▪ Imported platinum – 4AZN per gram;
▪ Imported gold and jewellery – up to 6AZN per gram;
▪ Processed and framed diamonds – 400AZN per carats (coefficients 2, 3, 4, 5 and 10 applies
for diamonds higher than 1, 2, 3, 4 and 5 carats).
▪ Goods made from natural furs – 10% of customs value.
50
Excise - exercise

Consider a business that produces 10,000 bottles (0.75l) of sparkling

wine, 4,000 (0.5l) of cognac, 7,500 (0.7l) bottles of vodka a month.
Calculate the amount of excise for the month for this business.

Type of Production, in Volume of Production, Total amount of

alcohol bottles bottles (liters) Excise rate excise
Sparkling wine 10,000 0.75 7,500 2.50 18,750
Cognac 4,000 0.50 2,000 6.00 12,000
Vodka 7,500 0.70 5,250 2.00 10,500
Total 41,250

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Reporting period and tax payment

▪ Reporting period – a calendar month;

▪ Tax payment:
▫ to be made before 20th of the next month;
▫ on import – according to customs legislation;
▪ Application for refund (credit) of paid excise taxes is
submitted together with the monthly report

52
Tax control over excise taxes

▪ Excise marks (stamps)

▫ Excise goods to be marked by excise stamps;
▫ Import, storage or sale of excise goods without
excise stamp is forbidden;
▪ Control posts:
▫ Tax authorities to prevent misconduct by producers,
can establish control posts, measurement devices
and put a seal on premises.

53
Penalties and interest

• Late submission of returns – 40AZN penalty on for

late submission;
• Misconduct on excise marks – 5000AZN penalty on
improper action regarding excise administration;
• Incorrect tax return – a person who submits an
incorrect tax return (or do not submit a return) liable
to pay 50% penalty on the understated tax amount;
• Late payment of excise to the state budget– 0.1%
interest applies for the late payment of taxes, but
not longer than for one year. 54
Literature

▪ Taxation Finance Act 2017, chapters 29 and 30

▪ Tax Code of Azerbaijan Republic, chapters XI and XII
▪ Link to EY Worldwide VAT, GST and Sales Tax guide
▪ European Commission, November 28, 2006,
2006/112/EC, on the common system of value added tax
▪ European Commission, February 12, 2008, 2008/8/EC,
amending Directive 2006/112/EC as regards the place of
supply of services
55
THANKS!

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