What is known and what is not known about “VAT refund”.
“VAT back” platform has been operating in Azerbaijan for at least two years. Thus, citizens can get back a part of the money they paid for products subject to additional income tax. According to the current conditions, 15 percent of the product’s VAT for non-cash payment, and 15 percent for cash payment 10 interest is returned to customers. VAT in Azerbaijan is 18 percent.
The government is trying to reduce tax evasion by implementing this mechanism. After all, customers asking for checks forces sellers to formalize that transaction. The “VAT refund” mechanism also helps to increase cashless payments. This factor also creates opportunities for the government to reduce the scale of the shadow economy. It should also be known that it is possible to immediately refund part of the VAT on new generation cash registers.
State Tax According to the latest statement of the service, about 1 million 900 thousand people during eight months of this year Azerbaijan citizen is registered on that platform. This means approximately 25 percent of the population over 18 years of age in Azerbaijan. In total, more than 732 million cashier’s checks were entered into that platform and a total of 306 million manats were returned to citizens. In the first eight months of 2022 alone, more than 303 million checks were entered into the platform. This year, the amount of VAT returned to citizens reached 134 million manats. Therefore, the use of “VAT refund” has been increasing in recent times. In addition to this increase, more people are taking advantage of “VAT refund”, rise in price also causes According to the latest official statement, food in Azerbaijan prices it has increased by 21 percent compared to the same period last year. These increases, of course, also increase the amount of VAT paid.
At the end of last year Tax After the changes to the Code, it was determined that the VAT paid on alcoholic beverages and tobacco products will not be refunded.
It is interesting that, although the decision has been in force since January 1, it is still new execution was done. State Tax In today’s statement of the service, it was stated that since October 1, VAT on alcoholic beverages and tobacco products is non-refundable. The institution based its decision on the fact that the mentioned products are harmful to health and abuse cases. However, it has not been stated what these cases are.
It is interesting that, although the decision has been in force since January 1, it is still new execution was done. In today’s statement of the State Tax Service, it was stated that since October 1, VAT on alcoholic beverages and tobacco products is non-refundable. The institution based its decision on the fact that the mentioned products are harmful to health and abuse cases. However, it has not been stated what these cases are.
Spending on tobacco and alcohol products funds occupies a large place in the total expenditure of the population. According to the report of the State Statistics Committee (SSC), during the first eight months of this year, the turnover of retail trade (single sales) in Azerbaijan was 30 billion It was 875 million manats. 1 of those funds billion 480 million was directed to alcoholic beverages and tobacco products. So, to alcoholic beverages and tobacco products every month in Azerbaijan 200 million manats are spent. After the implementation of the new decision, citizens will be deprived of the opportunity to reclaim part of the value added tax they paid for those products. Another 51.6 percent of the population’s expenses were spent on food products, and the remaining 43.6 percent were spent on non-food products.
Let us also note that Changes to the “VAT refund” mechanism are expected from 2023. In the new changes, 15 percent of the refundable part of VAT for non-cash payments 20 percentage increase is planned. In case of cash payments, on the contrary, the refundable part of VAT 10 percent will be reduced to 5 percent. Government officials often say they are taking this step to reduce the impact of inflation on the population. However, it should be taken into account that VAT will not be refunded on the sale of alcohol and cigarettes, which also occupy a large part of the payments. In this regard, the new change will not cost the government much.
On the other hand, the amount of VAT refunded for non-cash payments will increase, but will decrease for cash payments. The State Tax Service does not disclose how much of the returned funds were made in cash and how much was due to non-cash payments in its statements regarding the “VAT refund” mechanism. It is for this reason that it is difficult to know how many people will be affected by the reduction in refunds for cash payments. According to the Tax Code, in addition to tobacco and alcoholic beverages, oil and gas products, as well as part of the VAT paid for cars is not refundable.