Baku: Starting January 1, the value-added tax (VAT) exemption for hybrid and electric passenger vehicles in Azerbaijan will expire, APA-Economics reports. This change is expected to increase the cost of these vehicles for consumers as the VAT, an 18% indirect tax, will be reinstated. The VAT is included in the sale price of goods and services, ultimately affecting consumers financially.
According to Azeri-Press News Agency, no proposals have been made to amend the Tax Code regarding this upcoming change. However, it is known that from 2026, a VAT exemption will apply to electric buses imported and sold by residents of industrial parks for industrial production purposes. This exemption will only apply to fully electric buses lacking seats, handrails, or installed monitors.
The history of VAT exemptions in Azerbaijan indicates that the import of vehicles powered solely by electric engines has been exempted from VAT since January 1, 2019. This exemption was later extended to both import and sales stages in 2022, when hybrid vehicles also received similar VAT exemptions. Additionally, under Decision No. 411 of the Cabinet of Ministers dated November 11, 2022, the customs duty on electric vehicles manufactured within the last three years was reduced from 15% to 0%.
With the abolition of the VAT exemption, one of the major concerns for importers and buyers is the potential increase in the prices of hybrid and electric vehicles. For instance, if an individual imports a 2024 model hybrid car with a 2,500 cc engine and a customs value of 40,000 manats, the total cost of the vehicle, including customs duties, excise tax, and other fees, will rise from 48,445 manats to 57,126 manats, reflecting an increase of approximately 8,681 manats or 18%.
Similarly, the import cost of an electric vehicle valued at 40,000 manats would increase from 40,245 manats to 47,445 manats due to the reinstatement of VAT, resulting in an additional cost of 7,200 manats or 18%.
These examples highlight the significant increase in the cost of importing hybrid and electric vehicles starting from 2026. The 2026 state budget projects VAT revenues from imported goods in Azerbaijan at 4.75 billion manats, which is 182 million manats more than the forecast for the current year.
For reference, in 2024, Azerbaijan imported 3,027 electric vehicles valued at 121.6 million USD and 26,197 hybrid vehicles worth 679.5 million USD.