As of 1 January 2026, all nonresident entities providing digital services to individuals in Azerbaijan must comply electronically with value-added tax (VAT) registration requirements.

Background

Effective from 5 December 2023, nonresidents supplying digital services to individuals in Azerbaijan were given the option to voluntarily register for VAT. This was accompanied by the adoption of the "Rules on Electronic Tax Registration, Re-registration and De-registration of a Non-Resident Conducting Electronic Trade through the Internet Information Resource" in November 2023.

Under the current framework, nonresidents supplying digital services to individuals in Azerbaijan may voluntarily register for VAT electronically via the dedicated VAT portal made available by the tax authorities.

Impending changes

Although registration currently remains voluntary, there is an intention to make it mandatory effective 1 January 2026. However, the legislative amendments required to introduce this mandatory registration have not yet been formally adopted.

According to an informal communication from the tax authorities, electronic VAT registration will become mandatory starting from 1 January 2026 for all nonresident entities conducting such activities.

As a result of this amendment:

• All nonresidents supplying digital services to individuals in Azerbaijan will be required to register for VAT electronically via the tax authority portal.
• Failure to comply with this requirement by the effective date may result in administrative penalties and tax liabilities under Azerbaijani law.

Implications

To ensure timely compliance with the new requirements, nonresident businesses that provide digital services to customers in Azerbaijan should begin preparing now for these changes. Early registration under the existing voluntary regime may help streamline the transition process and avoid operational disruptions.