Azerbaijani Parliament Limits Cash Payments

The Azerbaijani parliament on Friday passed a law "On non-cash transactions," which provides for limits on cash.

According to the law, a limit is put on cash payments in the amount of 30,000 manat for the objects of trade and public catering registered as VAT payers whose annual turnover exceeds 200 thousand manat. The limit for all other taxpayers is 15,000 manat a month.

Points of law for taxpayers with an annual turnover above 200 thousand manat shall enter into force on 1 January 2017, and for the rest - from April 1, 2017.

In addition, by law, administrative fines, financial penalties, taxes, customs duties and fees, interest and receivables on leasing operations and loans, insurance payments, services and duties of state agencies, state-owned and state-financed organizations, scholarships, financial aid, compensation, utilities and etc. must be paid in non-cash form.

According to the law, taxpayers in the sphere of trade, public catering and services, whose annual turnover exceeds 200 thousand manat must pay salaries in non-cash form.

For the first violation within a year the size of the financial sanctions will be 10% of the volume of transactions, for the second - 20%, for the third and subsequent - 40%.

In addition, the capacity of entrepreneurs to cash money in banks is limited. Banks and postal operators for cash withdrawals from the bank accounts of legal entities and private entrepreneurs will keep a tax of 1% of this amount.

These restrictions apply only to legal entities and individuals engaged in entrepreneurial activities.

Commenting on the innovation, the economist Samir Aliyev noted that the adoption of the law on the one hand will encourage entrepreneurs to hide some of their cash flow, and on the other hand a large part of the population will lose.

The expert noted that even that part of the population that owns bank cards is not used to using them. In addition, he drew attention to the fact that there is a large mass of unemployed or people not having a formal job.

"Naturally, these people have no salary card. Banks that previously stimulated the growth of credit cards among the population after the devaluations began to limit themselves in this regard. All this affects the overall level of the population using bank cards," he said.

The economist said there is the practice of promoting the growth of non-cash settlement in the world, by way of benefits and limitations. However, our legislation provides only limitations

“On the simplified taxation entrepreneurs pay 6% of revenue. Under the new restrictions should increase the level of use of POS terminals for services which increase business costs by 1%. It would be possible to reduce the simplified taxation to 4% to make overall business expenditure account for about 5% of revenue. But we have no discounts provided,” said Aliyev.

The economist believes that without some training, the operation of this law seems vague.   ------71D