Azerbaijan may return to patent system of taxation
Azerbaijan, Baku, July 27 / Trend I.Khalilova /
The Ministry of Taxes of Azerbaijan is considering the possibility of extending the patent system and implementing patent tax in respect of all categories of simplified tax payers.
The head of Tax Policy and Strategic Studies Department of Taxes Ministry Akif Musayev said that the patent system of taxation in Azerbaijan has been active till the Tax Code's entry into force in 2001.
The cost of the patent was determined taking into account the types of business activities, which were divided into five groups based on income and place of entrepreneur's activity. In this case, the patent could be granted for a year or a month at the request of entrepreneurs.
After Tax Code's entry into the force, taxpayers subjected to simplified tax regime were divided into two groups. The first group includes those who pay tax from income, and the second includes entities (persons engaged in passenger and cargo transportation, housing) carrying out payment of the tax, based not on turnover and results of activity, but on the type of activity.
In accordance with the Code, persons engaged in passenger and cargo traffic, make a simplified tax payment by obtaining a distinctive sign, which can be regarded as a form of patent tax, Musayev said.
"At present, appropriate studies and discussions of implementation of the patent tax for other categories of simplified tax payers are being carried out," the head of department said.
According to the tax legislation of Azerbaijan, simplified tax is paid by individuals with an annual turnover of no more than 90,000 manats, while the threshold for the simplified tax for legal entities is 150,000 manats per year.
Simplified tax rate for Baku is four percent, and for the regions - two percent.
The patent system of taxation is a special tax regime where the simplified tax payment is made in advance. The tax authorities issue a document called a patent as a confirmation of tax payment fact.
According to Musayev there is not any unified form of patent tax implementation, and each country has its own approach. For example, in Belarus the patent tax replaces the state and local taxes and is applied to business entities, the number of employees of which does not exceed 15 people. In this case the quarterly turnover of small businesses should not be higher than 5000 times amount of the minimum wage.
Patent tax does not apply to persons manufacturing excise goods, to banks, insurance companies and investment funds.
In Kazakhstan, small businesses have the right to choose the procedure for the payment of taxes. The implementation of special tax in this country is carried out in the form of the grant of a coupon or a patent. Coupons are issued if an individual's entrepreneurship activity covers a limited period, and patent tax can be applied to small businesses with an annual income no more than one million tenge (about $5,000). The cost of a patent is determined by the rate of three per cent of the estimated income of the entrepreneur, Musayev said.
According to him, in Lithuania, individuals who are not attracting employees, carry out business activities on the basis of license, the fee for which is replaced by the income tax, VAT and other taxes and payments to the social fund.
A unified tax replacing VAT, revenue taxes, other taxes and in most cases income tax from the salaries of wage laborers is implemented for small business entities in Ukraine.
The patent system of taxation has been used in Russia for a long time, Musayev said. However it is being selected by less than one percent of Russian entrepreneurs, but from January 1, 2013 the government extended the patent system: it included 47 fields. Over the tax period the average number of employees of a businessman must not exceed 15 people for all types of business activities undertaken by an individual entrepreneur, not depending whether it is a patent or not.
The total income of entrepreneurs in all types of activities that are carried out by them on the basis of a patent in a calendar year shall not exceed 60 million rubles ($1.86 million).
The cost of annual patent was lowered from the initial proposal of 20-25 thousand rubles (619-774 dollars) per month to 1.5 thousand (46.4 dollars)/month. In this case the restrictions on the issuance of patents are almost non-existent.
The official exchange rate for July 27 is 0.7843 AZN / USD.