Azerbaijan To Start Taxing Cryptocurrencies Profits And Incomes

Azerbaijan is ready to generate significant returns from the booming cryptocurrency business. Reports indicate that that the country's Tax ministry is planning to tax income and profits from cryptocurrencies related investments.

Revenues from cryptocurrency transactions will now be subject to taxation, according to Nidjat Imanov, deputy director of the Department of Tax policy and Strategic Studies at the Ministry of taxes.

Profits from resident enterprises in the country are taxed at a rate of 20%.  Money earned by residents at home and abroad is taxed at a rate of 14% below 2,500 ANZ and 25% above 2,500 ANZ.

“Incomes from operations with cryptocurrencies will be taxed. Formally, this means – corporate profit tax for legal entities and personal income tax for individuals. If someone bought cryptocurrency and then sold it at a higher price, that amount must be reported as income and subjected to taxation,” Imanov explained.

A move by Azerbaijan to tax cryptocurrency investments does not come as a surprise given that the volume of cryptocurrency trading has been growing in recent months.  The country is now looking to bolster its tax returns by focusing on the emerging marketplace.

Azerbaijan is not the first country to move and try to tax the ballooning crypto marketplace. In some countries, cryptocurrency trading, as well as mining activities are recognized as taxable events falling under income or profit laws.

France, for instance, taxes crypto trading activities under the capital gains laws.  The U.S, on the other hand, treats cryptocurrency as property. Purchase, sale, trade, and mining of taxable events, on the other hand, is treated as taxable events. The country’s revenue authority IRS requires crypto exchanges in the country to hand over customer data as it looks to tax individuals handling and trading such assets.

However, a move by authorities in Azerbaijan to tax cryptocurrencies returns comes as a surprise. Despite maintaining a conservative approach on virtual currencies, the country’s central bank has always insisted that they cannot be recognized as legitimate means of payment.  The regulator has gone as far as reiterating that cryptocurrencies are a dangerous instrument for investing, calling for increased regulation.

A recently formed Center for the Study and Development of Cryptocurrency Markets and Blockchain technologies has been tasked with the responsibility of coming up with regulations for governing the sector. The association is to conduct educational work and come up with regulatory proposals while also offering consulting services.