Azerbaijan’s new VAT rules count only half of cashless POS sales when calculating taxable turnover, effectively doubling the registration threshold for businesses using electronic payments.
Azerbaijan’s State Tax Service (STS) has announced changes to the VAT registration threshold for businesses using cashless payments, aiming to encourage the adoption of electronic transactions in retail trade and public services.
The adjustment, effective from 2026, counts only 50% of cashless sales via point-of-sale (POS) terminals when determining whether a business exceeds the VAT registration threshold, while cash transactions continue to be counted in full.
Under current tax legislation, businesses with a taxable turnover exceeding AZN 200,000 over a consecutive 12-month period must register for VAT. With the new approach, companies that operate exclusively through cashless payments will effectively see the registration threshold rise to AZN 400,000. The threshold for businesses handling cash remains unchanged.
For example, an individual entrepreneur with AZN 250,000 in cashless POS transactions and AZN 50,000 in cash transactions would have a VAT-calculated turnover of AZN 175,000, which is below the AZN 200,000 registration threshold. Similarly, a legal services company generating AZN 400,000 solely through cashless POS transactions would have a calculated turnover of AZN 200,000, also avoiding compulsory VAT registration.
The amendments, approved in the third reading by Azerbaijan’s Milli Majlis as part of changes to the Tax Code, are part of broader efforts to stimulate cashless payments and improve transparency in business–population interactions, addressing activities often associated with the “shadow economy.”
