Azerbaijan: Mandatory VAT obligations for nonresident electronic service providers
VAT registration and collection obligations, effective August 23, 2026
Azerbaijan on February 23, 2026, adopted amendments to its value added tax (VAT) legislation introducing mandatory VAT registration and collection obligations for nonresident providers of electronic services supplied to customers in Azerbaijan.
Summary
Azerbaijan has had VAT rules applicable to cross‑border electronic services in place since January 1, 2024. However, under the prior framework, nonresident suppliers were not required to register for VAT or charge Azerbaijani VAT, and compliance was largely addressed through optional VAT registration.
The newly adopted amendments now introduce a direct VAT registration obligation for qualifying nonresident suppliers, aligning Azerbaijan more closely with international trends in the taxation of the digital economy.
Under the amendments, nonresident providers of electronic services will be required to register for VAT starting August 23, 2026, provided the applicable revenue threshold is exceeded.
Key features of the regime
Scope of taxpayers
The regime applies to nonresidents that supply works or services via electronic commerce to customers not registered with the Azerbaijani tax authorities, which will be subject to electronic VAT registration.
Certain services fall outside the scope of “electronic commerce” for purposes of these rules. Excluded services include:
- Consulting, legal, financial, accounting, design, and engineering services provided via email or other interactive communication tools
- Real‑time online educational and training services
- Online ticket booking services for scientific, educational, cultural, sports, and entertainment events
B2B vs. B2C
Nonresident suppliers will be required to charge and collect VAT on supplies made to business-to-consumer (B2C) customers, which are understood to be customers that are not registered for VAT with the Azerbaijani tax authorities.
Registration threshold
Electronic VAT registration becomes mandatory within 30 days after the supplier’s annual gross sales from supplies to customers located in Azerbaijan exceed the AZN equivalent of US$10,000.
When annual gross sales do not exceed the AZN equivalent of US$10,000, VAT registration remains optional.
KPMG observation
Nonresident suppliers that provide digital services to customers in Azerbaijan may need to carefully review whether their activities fall within the definition of electronic commerce under the amended rules, assess the location and VAT registration status of their customers, and monitor their gross receipts from Azerbaijan‑sourced supplies against the applicable registration threshold.
Further amendments to the implementing regulations are expected to provide additional practical guidance on compliance, administration, and reporting mechanics.
For more information, contact a KPMG tax professional:
Philippe Stephanny | philippestephanny@kpmg.com
Chinedu Nwachukwu | chinedunwachukwu@kpmg.com
Ulvi Mehraliyev | umehraliyev@kpmg.az
Rizvan Gubiyev | rgubiyev@kpmg.az