News

As we mentioned in our previous publication, some amendments and additions to the Tax Code are planned. We would like to bring to your attention a summary of important amendments and changes currently provided for in the draft law on amending the Tax Code.

The following changes have been considered to be made to the Tax Code:

• The transfer of the net profit of a permanent establishment of a non-resident located in countries or territories with preferential taxation to that non-resident will not be attributed to income from Azerbaijan sources.
• Taxes will be calculated based on the market price if the documents regarding the provision (receipt) of goods (works, services) are not submitted (not available) by the taxpayer during the tax control measure.
• The criteria for determining the countries or territories subject to preferential taxation regime have been further expanded. As so, starting from the next year, the following will be considered countries or territories with preferential taxation:
  • countries or territories whose tax rate is 75% or less of the rate specified in this Code and (or);
  • countries or territories that do not exchange information with the Republic of Azerbaijan according to the relevant standards within the framework of international agreements and (or);
  • countries or territories where a law on the confidentiality of information about financial information, or about companies that are allowed to protect the secret of the actual owner of the property or the recipient of income (profit) exist.
• The requirement to obtain a duplicate certificate from the tax authority for opening an account in resident banking organizations will be eliminated.
• Along with the taxpayers who have an activity in the oil and gas field or belong to the public sector, the taxpayers who use the "Green Corridor" release system will also be exempted from providing information about the goods to be imported.
• It is planned to increase the duration of the off-site tax audit from 30 working days to 90 working days in case of receiving relevant information from the competent authorities of foreign countries on foreign income.
• Residents of the liberated territory will be exempted for 10 years from 1 January 2023 from profit (income) tax, property tax , land tax and simplified tax, VAT for the import of raw materials and materials in the areas of production activities approved by the entity (institution) determined by the relevant executive authority and tax on dividend of shareholders (partners) of legal entities who are residents of the liberated territory (with the exception of some types of activities and requirements for the application of the exemptions).
• A number of benefits have been considered related to the income tax of physical persons. Please find below some of important ones:
  • the monthly income of the parents, widows (husbands), and children of persons granted the status of a martyr's family is reduced by the amount of AZN 800;
  • income received from the production of agricultural products (including by industrial method), including non-sale income of natural persons engaged in the production of agricultural products, as well as subsidies are given to natural persons at the expense of the State Budget related to the production of agricultural products;
  • dividend income of natural persons who are participants of resident legal entities engaged in the production of agricultural products (including by industrial method) - for a period of one year from 1 January 2023;
  • the full value of prizes awarded by the organizers of international and cross-country sports competitions, as well as the value of prizes awarded in the form of money by republican sports federations (associations) and sports clubs in connection with domestic (republic, regional, city and district level) sports competitions up to AZN 50,000;
  • 50% of the income obtained from that activity of individual entrepreneurs who produce food (foodstuff) products whose list is approved by the Cabinet of Ministers of the Azerbaijan Republic to replace imported goods with locally produced (processing) goods - for a period of 7 years from the year of approval of the relevant list.
• If the VAT amount is paid within one working day from the date of payment of the value of the goods (works and services) by the taxpayer, financial sanction (50%) will not be applicable anymore;
• VAT refund will be carried out as follows:
• on non-cash payments-17.5% of the paid VAT
• on cash payments- 5% of paid VAT
• overnight and stay services provided by hotels (hotels) within the liberated territories (except for other additional services) to an individual in case of non-cash payment by consumers - 30% of the paid tax and in case of cash payment - 5% of paid VAT
• A mechanism for electronic tax registration is considered for non-residents who provide work and services to residents through electronic commerce without establishing a permanent representative office. After determining the rules, non-residents providing work and services to residents without establishing a permanent representative office in the manner of e-commerce will declare and pay taxes on their own income by registered as a taxpayer.
• A financial sanction in the amount of AZN 10,000 (currently AZN 500) will be applied to the Main Enterprise, Authorized Enterprise, or Intra-Group Enterprises that are residents of the Republic of Azerbaijan and are part of a group of multinational companies, for failure to submit the "Inter-Country Report" in the specified time, form and manner.

We will publish additional information on any major changes to the draft law.

In new year, we will let you know the date, time, location, and agenda for our annual Tax Awareness session. 

Using this opportunity we would like to congratulate you with International Solidarity Day of Azerbaijanis and Happy New Year!  Wish you all Best Wishes and full of success!