Azerbaijan.US
Do money transfers between bank cards in Azerbaijan create a tax obligation when one private individual sends funds to another?
Commenting on the issue, lawyer Akram Hasanov said that in most cases such transfers are not subject to income tax. Typically, card-to-card transfers are made for personal reasons – financial help to family members, repayment of a loan, or covering everyday expenses – and these transactions are generally not treated as taxable income.
However, Hasanov pointed out several important exceptions.
If a transfer qualifies as a gift or financial assistance and the recipient is not a close relative or family member of the sender, tax obligations may arise. In particular, if a person receives more than 1,000 manats over the course of a year from a non-relative, that amount may be subject to 14% personal income tax. The core issue, he explained, is that tax authorities often find it difficult to determine the true nature of a transfer – whether it is loan repayment, personal support, or taxable income.
According to Hasanov, when transfers exceed this threshold, tax authorities may classify the funds as income and demand payment of tax. Even if the sender claims the transfer represents repayment of a debt, proving this legally can be challenging. For this reason, a more lenient approach was applied in previous years.
That approach, however, has recently changed.
Hasanov noted that funds credited to personal bank cards of entrepreneurs are increasingly being treated as income derived from business activity. From a legal standpoint, he stressed, the burden of proof lies with the tax authorities, which must demonstrate that the funds were earned through entrepreneurial activity.
Entrepreneurs, for their part, often argue that such transfers represent repayment of personal loans or financial help from friends and acquaintances. Despite this, tax authorities have begun applying a stricter interpretation in practice – a shift that has generated growing public concern.
The lawyer linked the tougher enforcement to the current fiscal pressures facing the state budget. In an effort to increase budget revenues, tax authorities are employing broader control mechanisms. According to available information, around 70,000 citizens have already faced checks related to card-to-card transfers.
In conclusion, Hasanov acknowledged that in some cases funds transferred to bank cards may indeed be related to business activity. The main problem, however, is that in practice neither side can easily prove its position: entrepreneurs struggle to demonstrate that the money is not business income, while tax authorities often lack solid legal grounds to prove that it is.
