From tax loopholes to a balance of interests Azerbaijan’s new e-commerce policy

Experts at the United Nations Conference on Trade and Development (UNCTAD) warn that global e-commerce growth may slow in certain regions due to geopolitical fragmentation, a downturn in the world economy, and the rise of protectionist policies. Many countries, including those in Europe and the post-Soviet space, are already seeing traditional retail lose ground to digital marketplaces.

In response, fiscal authorities in several states are stepping up oversight and ensuring a more level playing field by equalising the tax burden for e-commerce operators. Azerbaijan is following this trend: the country’s president recently approved a set of amendments to the Tax Code, as well as to the laws “On Banks” and “On the Customs Tariff,” introducing clearer fiscal obligations for non-residents operating on foreign online platforms.

According to forecasts by UNCTAD, the global e-commerce market is set to expand rapidly in the coming years, including in developing countries. UNCTAD also highlights a clear global trend: offline sales of non-food goods and services are declining, while e-commerce continues to capture a growing share of traditional retail.

UN data shows that in 2025, 5.78 billion people worldwide used mobile devices, and 5.56 billion had internet access—significantly increasing the pool of potential digital consumers.

In terms of revenue, the global e-commerce market, including both retail and B2B formats, was estimated at $21.62 trillion in 2025 and is projected to reach $75.12 trillion by 2034. This represents an average annual growth rate of 14.88% between 2025 and 2034. The Asia-Pacific region is expected to account for more than 57% of total revenue in 2024.

Given these dynamics, it is unsurprising that China, Southeast Asian countries, Türkiye, and several other nations—actively developing their non-oil industries and serving as major producers and exporters—are strongly promoting e-commerce as a key channel for growth.

However, the situation is fundamentally different in countries that are primarily importers of goods and services from international marketplaces. The rapid growth of e-commerce has intensified competition between retail formats, and offline retailers, losing out in this competition, have turned to government regulators, urging them to strengthen fiscal oversight of non-resident importers operating on foreign online platforms. 

This conflict between traditional offline retail and marketplaces—often seen as “tax-privileged” and “high-margin” players—has persisted for several years. Governments usually respond with a degree of national protectionism, which is hardly surprising: expanding the range of goods subject to customs duties directly boosts state revenues.

In recent years, many countries have lowered the threshold for duty-free imports to curb grey-market trade, create a level playing field for local producers, and protect offline retailers, which remain under strict tax supervision. Current monthly limits for duty-free imports via courier services from marketplaces are set as follows: China — $288; South Korea — $150; Türkiye — $79; Georgia — $125; Ukraine — €100; Uzbekistan — $200. In EU countries, the limit ranges from $41 to $175, with full VAT applied on top.

Notably, as of January 1, 2026, neighbouring Kazakhstan introduced new e-commerce tax regulations. Under these rules, online platforms must act as tax agents: marketplaces are required to withhold taxes at source and collect social contributions if the seller is not registered as an individual entrepreneur.

For comparison, until recently, Azerbaijan had a very liberal legal framework in this area: monthly duty-free shipments could reach a substantial amount—$1,000—and it was only in 2020 that this threshold was reduced to $300, with goods within this limit exempt from customs duties or other taxes. Overall, according to UNCTAD, Azerbaijan ranked among the top ten countries in the Eurasian region in terms of digital trade facilitation, based on the “UN Global Survey on Digital and Sustainable Trade Facilitation 2025.”

However, in recent years, numerous violations have been recorded in Azerbaijan’s e-commerce sector. Goods imported in the names of individuals (whose import for resale is illegal) were often used as a loophole for commercial shipments—shadow importers split consignments into smaller parcels and arranged delivery through proxy recipients. The surge in shipments of relatively inexpensive goods from international digital marketplaces significantly reduced turnover in the country’s traditional retail sector.

Despite the presence of domestic online portals and e-commerce stores, most Azerbaijani consumers still prefer to purchase goods and services from abroad. This primarily concerns the B2C (Business-to-Consumer) retail segment, connecting major global marketplaces—such as eBay, Amazon, Alibaba, Aliexpress, Trendyol, and Temu—with individual consumers in Azerbaijan. In these transactions, citizens’ money leaves the country, bypassing local offline retail and domestic e-commerce platforms. Meanwhile, locally registered businesses are required to pay taxes, while large foreign platforms enjoy a more privileged position, simply shipping parcels or providing paid services online.

To address such imbalances, many European countries and other states have adopted automated tax collection systems, where VAT and customs duties are charged at the point of purchase rather than at delivery. This approach reduces administrative burdens and gives governments greater control over imports. Azerbaijan has announced plans to implement a similar system in the near future.

In particular, the President of Azerbaijan, Ilham Aliyev, recently approved amendments to the Tax Code, as well as to the laws “On Banks” and “On the Customs Tariff.” Under these changes, non-residents engaged in e-commerce who earn income from providing goods or services to individuals not registered with Azerbaijan’s tax authorities must register electronically for tax purposes within 30 days once their annual turnover exceeds $10,000 (17,000 manats). For non-residents whose turnover remains below this threshold, tax registration will be voluntary.

Certain services, however, will not be considered part of e-commerce. These include consulting, legal, financial, accounting, design, and engineering services delivered via email or other interactive communication tools, real-time online education, and online booking of tickets for scientific, educational, cultural, sports, and entertainment events. The amendments will take effect six months after their publication.

Economist Khalid Karimli explains that these measures are designed to expand Azerbaijan’s tax base while maintaining a balance between international e-platforms and local market participants. “Until now, non-resident platforms selling goods to Azerbaijani citizens did not pay taxes here, even though they sold products worth hundreds of millions of manats annually. Introducing VAT creates a level playing field for local producers and sellers and will help increase budget revenues,” Karimli noted.

Meanwhile, Azerbaijani MP Vugar Bayramov emphasised that the reforms aim to improve the accounting and taxation of online trade. Expenses for non-resident companies providing digital goods and services will rise, while residents offering small-scale services electronically are not expected to face significant changes.

Notably, the Chairman of the Milli Majlis (Azerbaijani Parliament) Committee on Economic Policy, Industry, and Entrepreneurship, Azer Amiraslanov, categorically rejected recent rumours that the duty-free import limit for goods sent by post would be reduced from $300 to $100. “It should be noted that setting a customs allowance of $300 for goods intended for personal use is, in itself, a socially oriented measure. It helps meet citizens’ everyday needs on relatively favourable terms,” the committee head stated, emphasising that this amount was previously justified as the most optimal level, and a threefold reduction could raise serious concerns.