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Leasing Companies Draw up Effective Model on Taxation of Leasing Activity in Azerbaijan

Business Materials 9 June 2008 17:48 (UTC +04:00)

Azerbaijan, Baku, 9 June / corr. Trend I.Khalilova / It is planned to hold a large meeting of the Azerbaijani Leasing Companies Association (ALCA) in the next week to discuss the legislative model- which regulates the activity of leasing sector of Azerbaijan, Teymur Heybatov, the director of the project of the technical assistance of the International Financial Cooperation (IFC) on the Leasing Financing Fond in Azerbaijan and Central Asia, said. This meeting will be held with the participation of the IFC representatives, the members of the ALCA and leasing companies, which are not represented in the association.

The IFC project prepared proposals, which are going to be discussed in the meeting to solve the problem of the operating Azerbaijani leasing companies in the field of taxation. The core of the proposals covers the introduction of the most acceptable mechanism of the application of value-added tax (VAT), and to involve leasing operations to VAT for leasing activities in the country.

A new mechanism will allow consideration of VAT on leasing payments, which is beneficial both for clients and leasing companies. Then as per the current conditions, leasing companies will not impose VAT, and technology and equipments, which are the objects of the leasing, will be involved in taxation.

In correspondence with the Taxation Code, from the very beginning the leasing companies do not to impose this tax because they added on financial services. The technology and equipment for leasing became the objects of taxation as a result of cut in the exempted commodities from the VAT list, ordered by the Cabinet of Ministry. It causes a rise in the cost of the leasing services and at the same time it reflects in interrelations among clients and leasing companies.

According to Heybatov, the issues on enlarging the membership of ALCA will be discussed at the meeting. IFC estimates that the numbers of companies and banks, engaging in leasing, are increased to 20 in the republic. Only 7 companies actively work in this field. This fact accounts for the lack of personnel, specialized in the field of leasing. The enlargement of their memberships is expected, but basically banks cannot solve this problem with establishing departments or subsidiary companies.

The membership of ALCA was reduced from 12 to 9 because of inactive leasing operations. Several of them can be recovered in the membership of association once they are activated. The association was established within the framework of the IFC project on the technical assistance for the development of the leasing in Azerbaijan.

The official exchange rate is 0.8193 AZN/USD for 6 June.

The correspondent can be contacted at [email protected]

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