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Criteria for risky transactions and risky taxpayers

The new definition of risky taxpayers was included in the Tax Code of the Azerbaijan Republic (Article 13.2.82) effective after 1 January 2020, however, criteria for risky taxpayers were not defined yet.  
Decision No. 265 of the Cabinet of Ministers of the Republic of Azerbaijan dated 28 July 2020 on approval of the “Criteria for risky taxpayers, including risky transactions” determines such criteria. We hereby provide you summary. 
 
Criteria for risky transactions
 
The following operations performed by a taxpayer are considered risky:

  1. when it is discovered that different types of goods purchased or imported rather than electronic invoices submitted by taxpayers;
  2. when it is discovered that taxpayers supply goods in excess of the volume of goods purchased or imported (in respect of goods already supplied in excess).

 
Criteria for a risky taxpayer
 
A taxpayer who meets at least one of the following criteria is considered a risky taxpayer:

  1. if a person conducting risky operations as stated above;
  2. if it is discovered that the taxpayer is conducting non-commodity transactions;
  3. in the absence of a warehouse (including a leased warehouse) or other economic object (area) registered with the tax authority of a person or discrepancy between an area of a registered warehouse or other economic object (area) with volume of imported or purchased goods (with certain exceptions); 
  4. if it is discovered that goods obtained by a taxpayer and not conforming to the type of activity of a taxpayer (with the exception of office supplies, inventory and other similar assets) are submitted without documentation during tax control;
  5. the volume of goods imported or purchased by the taxpayer for the purpose of sale is more than at least 3 times than the turnover during last 6 months (with the exception of seasonality and other conditions stipulated in the agreements/contracts); 
  6. a legal entity in which the natural person who is a risky taxpayer is the founder (shareholder) or head of the executive board; 
  7. a legal entity who’s founder (shareholder) or head of executive board is shareholder or head of executive board of a risky taxpayer;
  8. individuals who are the head of the executive board of more than five legal entities and legal entities in which they are the head of the executive body.
30 JUL, 2020