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Azerbaijan Ministry of Tax Studies Control Within Special Economic Zones

Business Materials 12 April 2007 11:36 (UTC +04:00)

Azerbaijan, Baku / corr. Trend I.Khalilova / Akif Musayev, head of the Tax Policy Department and strategic research of the Azerbaijani Ministry of Tax reported that the taxation system in the Azerbaijani legislation allows privileges up to 30% of the existing tax potential.

If the forecast for tax bodies comprises some AZN 4bln, then up to AZN 1.5bln is for privileges. The agrarian sector of the country is almost free of taxation, whereas special weight of agriculture in GDP constitutes 7.5%.

At present the Taxes Ministry carries out research in connection with plans to establish special economic zones, where there are also plans to inject a special tax system. In this respect data from the world leading countries with a wealth of experience in this sector, are collected, Misayev noted. Such a tax system is divided into two groups, constant and temporary tax privileges. Major research will be carried out on their application after identifying the special economic zone areas. On the other hand, it is very important to define these zones. Any privilege actually leads to misappropriation by taxpayers, who are not entitled to a privileged tax regime. With this in mind it is necessary to establish more control.

Depending upon the zone, the privileges can be at a level of 30%, 50% and 70%, while in some countries the 100% duty-free system applies. "However, Azerbaijan needs this system, as the simplified tax regime has been applied even in the oil sector. Amid the 22% rate of profits tax established throughout the county, only 4%-5% taxes are applied within the framework of oil contracts. It is planned to introduce a more simplified tax regime in special economic zones than those applied with the oil companies," Musayev stressed.

He said that the tax regime will depend upon the area, the infrastructure and potential of the zone, as well as its area of activities. The privileges may be applied on profit taxes, VAT, income tax and in particular, to property tax.

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