Tax Code of Azerbaijan Republic: 2023 Tax Amendments
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- Tax Code of Azerbaijan Republic: 2023 Tax Amendments
According to the amendment to Article 13.2.16.14-1 of the Tax Code, during the payments made to countries or territories subject to preferential taxation, the clause of transferring (giving) the net profit of the non-resident's permanent representative office to the non-resident is added to the list of income which is not considered as gained from the Azerbaijani source during the payments made to countries or territories subject to preferential taxation.
Starting from January 1, 2023, taxes will be calculated based on the market price if documents on the provision (receipt) of goods (works, services) are not submitted (not available) by the taxpayer during the measures on tax control.
Also, starting from the above-mentioned date, there is no requirement to send electronic invoices for payments made by advocates and advocacy organizations to the Bar Association of the Republic of Azerbaijan.
With the exception of taxpayers who are functioning in the oil and gas field or belong to the public sector, as well as those who use the "Green Corridor" release system, other taxpayers must provide the following information to the tax authority where he is registered about the goods to be imported in the form approved by the body (institution) determined by the relevant executive power body until the time when the goods leave the customs control (within 1 working day from the time the goods transported by air leave the customs control):
- about the place where the goods used on the basis of ownership, lease or other property rights and (or) registered as an economic subject (object) in the tax authorities will be stored (unloaded);
- in case the goods are given to responsible protection or storage in places belonging to other persons, the contract concluded between the parties and the place of storage of the goods;
- if the goods are delivered on the basis of an order, about the persons who placed the order (TIN, if the customer is a taxpayer, name, surname, patronymic, and FIN, if the customer is a natural person) and the amount of the order for each customer;
If the taxpayer has an economic entity (object) registered with the tax authority, the information form provided in this article shall not be submitted to the tax authority. In this case, the imported goods are considered to be released to that economic entity (object).
In order to obtain relevant information or documents in connection with the mobile tax audit conducted on the taxpayer, within the framework of the international agreements to which the Republic of Azerbaijan is a party, when the representative of the tax authority participates in the tax audit on the territory of a foreign state, when the competent authority of a foreign country is contacted, until the audit conducted in the foreign state is completed, the next or extraordinary mobile tax inspection is suspended.
- According to the decision of the head of the tax authority (his deputy), a financial sanction of 40 manats is imposed on the taxpayer for failure to submit the tax report within the specified period by the taxpayer who conducts taxable or tax-exempt (non-taxable) transactions and is the object of taxation during the reporting period.
- In the financial year, if the group of multinational companies whose total income exceeds the manat equivalent of 750 million euros, within the framework of the international agreements to which the Republic of Azerbaijan is a party, the enterprise that is part of the group of multinational companies and is a resident of the Republic of Azerbaijan do not submit a report in the period, form and manner approved by the authority (institution) in order to implement automated information exchange with the authorities of other states, a financial sanction in the amount of 10,000 manats are applied to the taxpayer for not submitting the report.
- The limitation of keeping company documents to 5 years is canceled and they must be kept for at least 5 years from January 1, 2023.
- VAT payers, as well as legal entities and budget organizations whose more than 50 percent of registered and non-registered shares belong to the state, should pay VAT within 1 working day based on the electronic invoices issued to them when purchasing goods, services (works), as well as the persons buying residential and non-residential from the persons engaged in building construction activities within 1 working day;
- the amount paid in advance in the advance payment check;
- the number of the amount to be paid for the loan sale and the sequence number of the payment, as well as the symbols described in the fiscal signs of the sale (loan) check (unique identifier);
- state registration mark of the buyer's vehicle on the sales receipt for fuel provided by gas stations to taxpayers on the basis of a fuel card (voucher).
- In addition, cancellation, advance (advance) payment, and payment information on loan sales should be recorded on the check.
Some changes have also been made to the provisions related to the controlled foreign corporation and its taxation. Thus, it will not be taken into account whether the enterprise is registered in countries (territories) with preferential taxation, and regardless of which country the enterprise is a resident of, if it is not a resident of the Republic of Azerbaijan for taxation purposes, its profit will be taxed in the cases determined by legislation.
In addition, the requirement has been made strict that the actual profit tax paid by that enterprise, set for taxation of the profit of the controlled foreign enterprise, should be 2 times or lower than the profit tax payable in accordance with the legislation of the Republic of Azerbaijan. Thus, if the actual profit tax paid by the enterprise is equal to 75% or less of the profit tax payable in accordance with the legislation of the Republic of Azerbaijan, the profit of the controlled enterprise will also be taxed in the Republic of Azerbaijan.
When taxpayers apply to credit institutions and the national operator of postal communication (hereinafter - persons conducting banking transactions) with the right to open and maintain bank accounts to open an account after tax registration, persons conducting bank transactions open accounts for taxpayers (cases that justify a refusal to open an account by law taking into account) and the information form approved by the authority (institution) on the opening bank account is sent to the tax authority for registration of opened accounts (except for non-resident accounts not related to entrepreneurial activity) with the tax authority electronically within 1 business day from the date of account opening.
The opened account is automatically registered by the tax authority in real time on the basis of the received information, and a registration notification is sent to the persons conducting banking transactions. It is forbidden to carry out bank transactions on the account until the registration notification is received.
Along with the notification of the registration of the account by the tax authority, on the same day, an order is sent on that account in accordance with Article 65 of the Tax Code, and this is mentioned in the notification in the event that the taxpayer in whose name the account was opened has debts to the state budget and extra-budgetary funds for taxes, compulsory state social insurance, unemployment insurance and compulsory medical insurance fees, interest and financial sanctions and the period determined by Article 65.1 of the Tax Code has expired.
Persons carrying out bank transactions on an account with a note that the order of the tax authority will be sent to the account are restricted from carrying out spending transactions in the amount of 105 percent of the amount specified in the order until the order of the tax authority is received on that account. In the event that there are funds from the account that exceed the limit of spending, until the order of the tax authority is received by the persons conducting banking operations, the payment orders of the taxpayer, which provide for the spending of such excess funds from the account, are executed. After the order of the tax authority is entered into that account, the operations on the account are executed in accordance with the rules and sequence provided by the law.
During the transfer of accounts belonging to taxpayers between the persons carrying out the bank transaction themselves, branches or structural divisions, the persons carrying out the banking transaction shall provide information to the body (institution) determined by the executive authority on the transferred accounts in the form determined by the body (institution) determined by the relevant executive power body in the appropriate electronic manner within 1 working day from the date of transfer of the account.
When accounts belonging to taxpayers are closed by persons conducting bank transactions, those persons send information about this electronically to the body (institution) determined by the relevant executive authority within 1 working day from the date of closing the account.
If the persons conducting the bank transactions shall open accounts for physical or legal persons or conducts financial services, the requirements of international agreements of the Republic of Azerbaijan shall be complied with the requirements of international agreements in the Republic of Azerbaijan, as well as the exchange of tax and financial information.
From January 1, 2023, an individual who has not submitted an application for registration with the tax authority shall be registered by the tax authority on its own initiative and shall notify him of the registration within 5 days.
- dividend income of physical persons who are participants of resident legal entities engaged in the production of agricultural products (including by industrial method) - exempted from tax for a period of 1 year from January 1, 2023;
In addition, the following incomes of individuals are reduced from the amount to be taxed up to the corresponding amounts:
- the monthly income of the parents, widows (husbands) and children of persons granted the status of martyr's family, which must be taxed from any salaried work, is up to 800 manats;
- full value of prizes received in the form of items in competitions and contests. The value of prizes received in the form of money in international competitions (except for sports competitions) and competitions is up to 4000 manats, and in republican, regional, city and district competitions (except for sports competitions), it is up to 200 manats;
- The full value of prizes given by the organizers of international and cross-country sports competitions, as well as the value of prizes given 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 50,000 manats .”
- 50 percent of the income of individual entrepreneurs producing food (food) products, whose list is approved by the body (institution) determined by the relevant executive authority, to replace imported goods with locally produced (processed) goods – for the period of 7 years from the year of approval of the relevant list;
- In accordance with Article 10 of the Law of the Republic of Azerbaijan "On the use of renewable energy sources in the production of electricity" from the transmission of electricity produced by an active consumer included in the population group at the expense of renewable energy sources up to the power limit of 150 kW (including 150 kW) to the electricity supply network income
Additional exemptions to corporate profit tax adopted:
- non-sales income of legal entities engaged in the production of agricultural products (including by industrial method), subsidies given to legal entities in connection with the production of agricultural products at the expense of the state budget, as well as dividend income of legal entities that are participants of resident legal entities in this field - for a period of 1 year from January 1, 2023.
