BAKU, Azerbaijan, January 7. Instruments and measures were introduced within order of the President of Azerbaijani Ilham Aliyev “On some measures on acceleration of the economic development in the liberated territories” dated December 10, 2021, Trend reports.
The aim is to effectively use rich resources and infrastructure potential of liberated territories, revive the economic activity based on partnerships between the public and private sectors and to create a favorable business environment, ensuring sustainable settlement.
In accordance with the presidential order, tax, social insurance, and other benefits were introduced for entrepreneurs conducting activity in the liberated territories for the creation of processing industry and service infrastructure, additional benefits were provided to the entrepreneurs to stimulate initiatives, improve mechanisms and attract investments.
Besides, for ensuring the implementation of the relevant order of the President, the relevant structures worked out optimal benefits and incentive mechanisms to increase investment attractiveness and improve the business climate in the liberated territories, and also appropriate amendments were made to the Tax Code.
The State Tax Service commenting on the issue said that the main purpose of providing the tax benefits is to attract investments to the liberated territories and to provide state incentives for this area. Therefore, large-scale benefits will apply to entities registered as residents in these territories.
Residents of liberated territories will be exempted from paying income tax (income), property, land and simplified tax for 10 years from January 1, 2023. This will also apply to non-sale income of a resident received in connection with its activities in this territory.
Besides, from January 1, 2023, for 10 years, machinery, technological equipment and installations will be exempted from VAT by branches of economic activity and commodity nomenclature, as well as the import of raw materials and materials by residents which are VAT payers in the liberated territories. For this purpose, a separate approval of the list of branches of economic activity and product range exempted from VAT is envisaged.
Moreover, dividend incomes of shareholders of resident legal entities will be exempted from taxation for 10 years from January 1, 2023. A number of other tax incentives have also been approved to revive economic activity in the liberated territories. Given a wide tourism potential of the territories, along with the general benefits provided for in the field of tourism, VAT paid for hotel services will be refunded to consumers.
So, for accommodation and stay services (except other additional services) provided by hotels located within these territories, a 30 percent VAT refund is envisaged for non-cash payments, and five percent of VAT will be refunded for cash payments by individuals. The VAT refund process, along with business, will lead to increase of citizens’ interest in this area.
The tax benefits won’t apply to such types of activities and operations as financial services, services for the transportation of goods by road and the provision of goods (work and services) by the contractor (except resident contractors carrying out production activities in the liberated territory) at the expense of state funds budget.
In general, the tax benefits cover all areas of the real sector - trade, services, manufacturing, the construction sector, the mining industry and other entities in the liberated territories.