LETTER OF THE MINISTRY OF TAXES OF THE AZERBAIJAN REPUBLIC

of March 27, 2001 No. 08/08-25/549-1242

About VAT liability of transport services

The head department on tax policy and strategic researches of the Ministry of taxes reports concerning VAT liability of transport services. According to article 159.2 of the Tax Code of the Azerbaijan Republic rendering services in the territory of the Azerbaijan Republic within business activity is considered taxable transaction. Rendering services outside the republic does not join in taxable transactions.

According to article 168.1.4 of the Code the place of the actual transportation if works (service), are connected with this transportation, is considered the place of performance of works or rendering services.

According to article 165.0.4 of the Code of the VAT for rendering the transport or other services performance of works which are directly connected with provision of the toplivnosmazochny materials and other technical things used for the international freight and passenger traffic and the international flights it is levied on zero (0) to rate. For the purposes of this Article transportation of goods and passengers between the Azerbaijan Republic and other states is recognized international.

According to article 169 of the Code if the nonresident who is not registered for the purpose of the VAT renders services or performs works in the territory of the Azerbaijan Republic, performance of works or rendering services is assessed with tax according to provisions of this Article.

According to the Code provisions stated above:

- transportation of goods and passengers on the territory of the Azerbaijan Republic is considered transaction, liable to VAT;

- The VAT for transportation of goods and passengers between the Azerbaijan Republic and other states is levied on zero (0) to rate;

- the cost of transactions on transportation of goods and passengers outside the Azerbaijan Republic does not join in the cost of taxable transactions;

- the payment withheld (withheld) for the forwarding services rendered in the territory of the Azerbaijan Republic in connection with the organization of freight and passenger traffic joins in the cost of taxable transactions;

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