Azerbaijan, taking another step towards the legitimization and mainstream adoption of cryptocurrencies, has declared that the coins are subject to taxation in the country.

Specifically, revenues generated by entities will face ‘profit tax,’ and individuals trading cryptocurrencies will be subject to ‘income tax.’ These clarifications come from Nijat Imanov, deputy director general of the Tax Policy and Strategic Research Department of the Taxes Ministry, who spoke during the second Finance and Investment Forum (FIF) in the country’s capital Baku on May 5 as reported by news agency Trend.

“This is formalized as a profit tax for legal entities and income tax for individuals,” Imanov said. “If someone bought a cryptocurrency and then sold it after its price increased, this amount is recorded as income and therefore should be attracted to taxation.”

Following global trends, Azerbaijan saw a massive increase in the interest and adoption of cryptocurrencies in the second half of last year. Elnur Guliyev, director and founder of Crypto Consulting, said that during this period one could benefit by investing as little as $10 in the coins.

“But this situation does not reoccur very often,” he said. “The cheapest option is to buy Bitcoin and wait for the increase in its cost for resale. This option is still working, but it is hard to say how long it will last.”

Azerbaijan’s Central Bank Eyes Blockchain Technology

Last year, local news organization Azernews reported that the position of Azerbaijan’s Central Bank (CBA) with regard to cryptocurrencies was ‘conservative,’ according to the Elman Rustamov, chair of the CBA, who added that the CBA does not consider cryptocurrencies as an alternative means of payment. The remarks were made November 21 during discussions on the 2018 state budget at the Azerbaijani parliament.

“We think that cryptocurrencies continue to be a dangerous instrument for investing,” Rustamov said at the time.

Despite this more conservative approach to cryptocurrencies themselves, Azerbaijan is on-board with the market’s underlying technology. Speaking about blockchain, the CBA head noted that the advanced technology will contribute to changes in many sectors across the country, in particular finance.

The bank also discussed the potential use for blockchain technology in working with foreign countries — notably neighbors Georgia and Estonia — as well as the possibility of integrating systems of electronic blockchain-based identification into information and payment systems.

“The Central Bank intends to help in studying this technology and its future use in the financial and banking sector of Azerbaijan, and in the future in public services for the population. For this, we have already started negotiations with leading consulting companies. I think that at the first stage, we must create stable technological and legislative infrastructure, and then start introducing this technology,” Rustamov remarked.

Featured image from Shutterstock.