The 2012 worldwide VAT, GST and sales tax guide

44 A ZERBAIJAN
person for VAT purposes. As a result, the Azerbaijan tax law does
not provide for group registration.
Nonestablished businesses. The provision of services in
Azerbaijan by a foreign legal entity that does not have a permanent
establishment in Azerbaijan (a nonestablished business) and
that is not registered for VAT in Azerbaijan to a person registered
or to be registered for VAT purposes in Azerbaijan (tax agent) is
subject to VAT based on a reverse-charge mechanism. In such a
case, the tax agent must calculate and pay VAT from the amount
to be paid to the nonestablished business.
Late-registration penalties. If a taxpayer subject to VAT registration
does not register for VAT purposes and carries out taxable
activities, the taxpayer is subject to a financial sanction equaling
50% of the VAT amount payable to the state budget for the entire
period during which the taxpayer carried out activities without
VAT registration.
D. VAT rates
The standard rate of VAT is 18%. Certain supplies are zero-rated
or exempt from VAT.
The following tables list examples of goods and services that are
zero-rated or exempt from VAT (these lists are not exhaustive).
Examples of zero-rated supplies
Goods and services intended for the official use of the diplomatic
and consular representative offices of international agencies,
or for the personal use of the diplomatic, administrative and
technical personnel of such representative offices
Exportation of consulting, legal, accounting, engineering, advertisement
and other services
Importation of goods, supply of goods, performance of works
and provision of services to recipients under grants, with the
proceeds of uncompensated financial aid (grants) received from
abroad
International or transit transportation (transportation of goods
through Azerbaijan between two frontier posts of the country) of
cargo or passengers
Examples of exempt supplies
Provision of financial services
Contribution of property to an enterprise’s charter fund (capital)
in the form of participation share, except for imported property
(if the contribution of property in the form of participation share
is not directly connected to the acquisition of other property in
exchange)
Sale or purchase of all types of mass media products and the
publishing of mass media products (except for advertising
activities)
Transportation of passengers by subway
Production of textbooks for schools, literature for children and
state publications funded by the state budget
E. Place of supply
Goods. The transfer of goods is deemed to occur at the place
where they are made available. If the conditions for the supply