Starting September 1, a new digital economy taxation mechanism will be applied in Azerbaijan. According to amendments to the Tax Code, if the annual turnover of a foreign e-commerce platform providing electronic services to individuals not registered for tax purposes in Azerbaijan exceeds the equivalent of $10,000 in manats, such a company must register for tax purposes electronically within 30 days.
The companies in question are American companies Anthropic, PBC and Aghanim Inc., Swiss eBay Marketplaces GmbH, and Dutch Netflix International B.V. Their registration as VAT payers will take effect on September 1, 2026.
Given that a tax on digital services and registration (when international platforms register with tax authorities upon exceeding the established turnover threshold) has been adopted, it is necessary to consider amendments to the law on targeted financing (redirecting taxes) for the needs of local cinema.
Directing revenue from streaming services to the development of cinematography is practiced in several countries (where mandatory financial contributions from platforms also support national cinema), but in Azerbaijan, Netflix International B.V. has only registered for tax purposes to pay standard VAT on electronic services (which goes to the general state budget without additional financing for the film industry). Budget revenues (VAT proceeds) replenish the country's general budget expenditures.
To protect taxpayers, measures may be taken to ban streams from pirated internet resources, which will affect the growth in the number of official subscribers. Currently, the average number of unique subscribers of the platform in Azerbaijan is about 60,000, and the number of official subscribers to Netflix and other SVOD platforms is expected to grow to 350,000.
