Accounting services in Azerbaijani Practice

CLC Tax & Accounting Services 

 

Proper and legal accounting is one of the vital issues that every company should pay attention to. The accounting system of a company must be established in accordance with the requirements of the legislation. This requirement applies to both commercial and non-profit entities.

 

Under the law, accounting services can be obtained by each company at the expense of its own resources (through its own accountants and specialists), or by outsourcing to consulting companies.

 

Tax reforms and revenue transparency requirements in Azerbaijan make the need for accounting, as well as transition to 'white accounting' important. The organization of accounting system and accounting policy, especially transit to transparent and fully documented accounting should be carried out on the basis of a joint plan of tax, accounting and law professionals. For example, fixed assets (such as buildings) or equipment that are not on record and are in use for a long time should be taken into balance sheet and recorded, without extra costs and tax liability for the company. This requires teamwork of various professionals. Another example would be when documenting unrecorded costs of a company, a professional team of professionals should undertake a thorough analysis and planning to avoid additional legal risks and excessive tax payments stemming from such documentation.

 

Azerbaijan's accounting standards

 

Azerbaijan's accounting system allows application of IFRS standards. In cases of discrepancies between accounting standards and tax standards, tax standards would prevail for the purposes of calculating tax liabilities. 

 

According to the Law on Accounting, the primary objective of state regulation in the field of accounting in the Republic of Azerbaijan is to ensure the preparation of financial statements and the maintenance of accounting based on the International Financial Reporting Standards (IFRS), International Financial Reporting Standards for Small and Medium-sized Entities (IFRS for SMEs), International Public Sector Accounting Standards (IPSAS), and accounting rules.

The official texts of international standards in the Azerbaijani language come into effect from the date of their publication by the relevant executive authority. After the first publication of the official texts of international standards in the Azerbaijani language, the relevant executive authority revokes the previously approved corresponding National Accounting Standards and accounting rules.

In the event of contradictions between international standards and standards adopted by a specialized international organization, priority is given to the standards adopted by the specialized international organization.

 

Having proper accounting system with the support of professional accountants provide following benefits: 

 

• As the accounting is done correctly, the cases stipulated by the Tax Code, which give the tax authority additional rights, are eliminated. For example, in the event that accounting is not conducted or maintained not in compliance with the law, the tax authority may recalculate taxes based on relevant information (third parties, other companies, etc.). This is a risk for the company;
• The accounting system of the company eliminates risks of administrative offence as specified in the Code of Administrative Offenses;
• Small-scale accounting companies (taxpayers) - micro-business entities (taxpayers with an annual turnover below 200,000 AZN) are exempt from the 5% dividend tax;
• Transparency in the company prevents employee misuse and abuse, and company owners have full control over their incomes and expenses;
• Unless there accounting is in place, undocumented expenses are not accepted and thus, even though there are actual costs, the profit is not reduced and extra tax would have to be paid; 
• The company and the taxpayers are exempt from legal problems, such as tax evasion charges and source of income concerns.

 

Choosing an accounting service (accounting firm provider) in Azerbaijan

 

As noted, accounting services can be provided either through internal resources (company accountants) or through an outside company. The choice of accounting services depends on the availability and professionalism of the company's internal resources. The involvement of an external accounting service or accounting firm along with the ability to obtain professional services also defines responsibility for such a company. That is, it is very difficult (practically impossible) to bring an employee to accountability in the event of an accounting or tax violation, but the accounting service company must be held liable for defects in the provision of services.

 

The followings should be taken into account when choosing an accounting service:

- Professionalism and experience of the company / person providing accounting services;

- In some cases, accounting services shall be supported by tax lawyers (for the pf interpretation of the Tax Code, clarification of questions, administrative or judicial resolution of tax disputes, compliance of accounting documents, especially agreements with the law and tax interests of the company etc)

- List of Major Clients (Accounting and tax experience of such companies with similar business volume and operations)

- Experience in tax dispute resolution and tax questions

- Professional theoretical knowledge and certification (diplomas and certificates)

- The number and professionalism of the specialists (in the absence of the team or unqualified team, a sole professional expert would not be performing good when workload increase or complicated tax issues arise).

Note: Last update: January 2025

CLCTax & Accounting offers bookkeeping, full accounting and tax services as one of the best local companies included in foreign rankings, offering accounting and tax consultancy services with full-time team members, certified with Professional Accounting Certificate provided by the tax authority. In addition, the CLC, with a professional team, makes the transition to 'white accounting' in a fully planned and professional manner, with optimized taxes, minimum costs and eliminated legal risks.

Contact us for questions via:

 [email protected] or tax@caspianlegalcenter.az;  Tel: 00994 50 289 89 73