The Tax Code of the Republic of Azerbaijan (2001) determines the system of taxes, the general principles of taxation, the rules of the establishment, payment and taxation, et cetera. Presently, there is a unified legislative and regulatory framework for taxation:
- The number of regulations and compliance with laws and regulations governing tax relations has decreased;
- The number of taxes has decreased, which simplifies settlements for taxpayers;
- The tax burden is reduced, which allows the tax system to play a regulatory (stimulating) role.
The most progressive element of the Tax Code is the application of simplified tax rates. So, under Article 218.1.1 of the Tax Code, persons who are not registered for VAT purposes and whose taxable transactions amount to AZN 200 000 or less in any month (months) of a consecutive 12-month period have the right to pay the simplified tax rate. According to Article 219.5 of the Tax Code, a legal entity that pays simplified tax is not a payer of VAT, profit tax, and an individual (including an individual engaged in entrepreneurial activity without establishing a legal entity) is not a payer of income tax and VAT. According to article 220.10 of the Tax Code, the monthly fixed amount of the simplified tax for individuals engaged individually (without employees) in weddings, celebrations and other cultural events individually (without hiring employees) is AZN 20. Since January 2006, enterprises outside Baku pay tax at 2% and those registered in the capital pay tax at 4% of total turnovers. Registration of enterprises is submitted to the tax department and is usually implemented within three days.
The Ministry of Taxes is also constantly expanding its coverage of electronic services provided to taxpayers. So, in 2006, the Automated Tax Information System (AVIS) was established. In 2007, the Internet Tax Administration (www.e-taxes.gov.az) began to exchange electronic documents with banks, and a system of electronic submission of tax returns by legal entities and individuals has been established. Furthermore, since January 1, 2010, the use of electronic invoices began.
Given that tax policy is one of the essential tools for attracting finance and investment in culture and crucial to improving culture and art workers’ social status and welfare, there is a need to develop a package of cultural legislation, and this process is undergoing. So, there is good news for enterprises, departments and organisations operating in the field of culture. Tax exemption criteria for enterprises, departments and organisations working in science, education, health, sports and culture were approved by the Decision No. 88 of the Cabinet of Ministers dated March 12, 2020. Legal organisations (except for commercial legal entities) that organise artistic and cultural events, prepare and distribute publications, and produce films for promotion and development of national culture and cultural heritage are exempt from tax. The same applies for legal organisations that function as a theatre, library or museum.