The amount of VAT returned to buyers during the sale of new apartments in Azerbaijan and the main problems in this area have been disclosed.
Publika.az informs that the VAT refund mechanism during the sale of residential and non-residential objects will be introduced in Azerbaijan from November 2022.
In this regard, a special portal has been launched and VAT refunds have been started, as in stores – but in larger amounts and with a more complicated procedure.
So far, 5 million manats of VAT have been returned
According to Telman Mammadov, head of the State Tax Service, more than 6,000 applications have been registered through the portal, more than 2,000 applications have been approved and 5 million manats have been returned to citizens as part of VAT.
Several thousand buyers could not get back the VAT
At the same time, if some citizens buy property, they cannot recover part of the VAT.
According to T. Mamedov, some of the reasons for this are related to technical and procedural issues, and other reasons are related to citizens’ lack of knowledge and improper implementation of some procedures: “Citizens cannot recover VAT for some reasons. As with any project, this project has its share of problems. At the beginning, technical and other problems arise. We have grouped these problems.”
REASON 1: They gave the wrong numbers
According to T. Mammadov, one of the main problems is that citizens do not provide their bank details correctly. It should be noted that a citizen who wants to get a VAT refund must enter the portal and submit an application, as well as specify the bank requisites to which the funds will be transferred: “Often, some citizens determine and show the bank requisites themselves without checking with the banks that serve them. The number of such applications is 940, in this number of cases, the citizen applied for VAT, but it was not possible to return the VAT due to incorrect details. In other words, the specified bank details do not belong to them or the correct symbols are not shown in the details, and as a result, when we apply for the return of VAT to the banks, the banks say that it is not possible to transfer funds to this account or it is the wrong account.
That’s why the official of DVX advises citizens to contact their bank before applying for VAT refund. And check your bank details and enter accurate information on the portal.
New project launched: “Virtual payments”
In addition, the head of the department said that the State Tax Service has started a new project with the authorized banks in order to prevent such situations in the future: “Most likely, the work will be completed in the near future and the project will be put into use.”
The innovation is the creation of a virtual account: “A part of the VAT is returned to the goods purchased in our other areas – trade, healthcare, public catering. There is also a virtual account here, and we will also transfer funds to the virtual account for VAT refund during the sale of real estate in order to solve future problems.”
As a result of this project, during the purchase of real estate, property buyers will get back VAT without any problems: “This process will be solved very soon, within 2 weeks. Currently, technical issues are being resolved and a new project will be launched in the near future.”
REASON 2: The property is not paid for properly
Another serious problem that arises regarding the refund of VAT during the purchase of property and deprives buyers of VAT is related to the method of payment of the value of the property by the buyer.
An official of the Tax Service advises residents to make the payment for the house (or object) in the recommended form: “Make the payment in the manner we recommend – through the Government Payment Portal. When payment is made through the Government Payment portal, that is, by approaching banks, or through the Internet, the main amount is automatically divided by the VAT amount and transferred to the seller’s account. We would advise citizens to use the government payment portal and not encounter any problems with payment,” said T. Mammadov.
REASON 3: Companies do not issue electronic receipts
Another problem that citizens face when receiving VAT is related to the electronic invoice. Thus, a special electronic invoice form has been approved in the VAT refund project for property. In other words, if a citizen buys a house from a seller, for example from MTK or a company like “Crystal Absheron”, the seller must provide him with an electronic receipt.
Problems related to this occur in two forms. First, since the building information form has not been submitted by the person engaged in housing construction, the electronic invoice cannot be submitted either. T. Mammadov states that the tax service informs the persons and companies involved in housing construction.
REASON 4: Citizens do not require electronic receipts
Another problem is related to citizens – they don’t ask for e-receipts, and after they don’t ask for it, they face such problems after making the payment.
The representative of the tax service advises the citizens to be careful in advance to receive the VAT: “That is, when buying an apartment, they should contact the person who is engaged in the construction of the apartment first and clarify whether the VAT will be paid for the house they want to buy?” That is, when the foundation of that building was laid, was the person engaged in the construction of apartments a VAT payer? After clarifying this, it will be clear to the citizens that when they buy a house from them, they will be given an electronic receipt and it will be possible to return the VAT from them or not.”
REASON 5: Some buildings in Baku are not included in VAT
But how can citizens determine whether the construction company is a VAT payer?
According to T. Mammadov, when a person engaged in building construction asks him a question about VAT, he knows exactly whether a building located at any address is a simplified tax payer or VAT.
A company may be a VAT payer, but its premises are not
The interesting point here is when the construction of the building started. True, after 2020, all building construction activities are subject to VAT.
But the houses that were built before 2020 and are still being sold may not be VAT payers: “Therefore, when you ask a company that builds an apartment whether it is a VAT payer or not, it is also necessary to clarify whether it was a VAT payer when the foundation of that building was laid. And the housing construction company or person must submit an electronic invoice. After that, payment must be made.”
REASON 6: Buyers are passing the 90-day period
Finally, in some cases, citizens are simply late, as legislation and regulations stipulate that a property buyer must apply for VAT within 90 days. In some cases, citizens pass this period, and as a result, there is a problem in recovering VAT.
The Tax Service states that if the deadline is exceeded, the application cannot be restored: “This can be considered only if there is any technical and non-citizen case. In other cases, the 90-day period does not change.”
We have also informed the notaries
Another warning to citizens is related to notaries. So, some contracts related to the purchase of property are formalized at a notary, and the mediator between the seller and the buyer is the notary. In this case, the money paid by the buyer is first transferred to the notary’s deposit account, and then to the seller’s account.
T. Mammadov states that when the bill is submitted to the notary, the citizen must demand that when the notary pays the seller, the principal amount of the money paid for the property is transferred to the bank account of the seller, and the amount of VAT is transferred to his deposit account: “This is an unambiguous request, and we have informed the notaries about it. “. (fed.az)
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