LAW OF THE AZERBAIJAN REPUBLIC

of December 3, 2021 No. 406-VIQD

About introduction of amendments to the Tax Code of the Azerbaijan Republic

Being guided by Item 15 of part I of article 94 of the Constitution of the Azerbaijan Republic, Millie DECIDES: Majlis of the Azerbaijan Republic

Article 1

In the Tax code of the Azerbaijan Republic (Collection of the legislation of the Azerbaijan Republic, 2000, No. 8 (book I), Article 583; 2001, No. 7, Article 454, No. 9, Article 576, No. 12, Article 734; 2002, No. 5, Article 249, No. 12, Article 707; 2003, No. 8, article 425, No. 12 (book I), Article 671; 2004, No. 1, Article 1, No. 11, Article 887, No. 12, Article 980; 2005, No. 2, Article 61, No. 8, Article 688, No. 12, Article 1081; 2006, No. 12, Articles 1005, 1026; 2007, No. 1, Article 4, No. 6, Article 597, No. 8, Article 745, No. 11, Article 1053, No. 12, Article 1192; 2008, No. 7, Article 602, No. 11, Article 960; 2009, No. 7, Article 506; 2011, No. 1, Article 14, No. 7, Articles 588, 603, No. 12, Article 1115; 2012, No. 6, Articles 500, 513, No. 7, Article 652, No. 9, Article 841, No. 12, Article 1226; 2013, No. 2, Article 91, No. 4, Article 366, No. 11, Article 1278, No. 12, Articles 1483, 1486, 1495; 2014, No. 2, Articles 94, 98, No. 6, Article 608, No. 7, Article 770, No. 8, Article 957, No. 10, Article 1158, No. 12, Article 1525; 2015, No. 1, Article 11, No. 12, Article 1433; 2016, No. 2 (book I), Article 207, No. 3, Articles 396, 402, No. 5, Article 848, No. 6, Articles 973, 974, 1015, No. 7, Article 1245, No. 10, Article 1603, No. 11, Articles 1752, 1792, 1793, No. 12, Articles 2001, 2037, 2046; 2017, No. 2, Article 146, No. 5, Articles 695, 723, 737, No. 6, Article 1055, No. 7, Article 1304, No. 8, article 1509, No. 12 (book I), Articles 2219, 2251, 2270; 2018, No. 2, Article 149, No. 5, Article 863, No. 6, article 1193, No. 7 (book I), Articles 1414, 1427, No. 10, Article 1962, No. 11, Articles 2186, 2210, No. 12 (book I), Article 2498, 2509; 2019, No. 1, Article 30, No. 4, Article 590, No. 5, Articles 796, 801, 804, 812, 814, No. 8, Articles 1364, 1373, 1378, No. 12, Article 1894; 2020, No. 5, Article 522, No. 6, Articles 668, 678, No. 7, Article 832, No. 8, Article 1013, No. 11, Articles 1328, 1334, No. 12 (book I), Article 1439, 1441, 1454, 1455; 2021, No. 3, Article 211; No. 6 (book I), Articles 541, 551, 555, No. 7, Articles 698, 711, No. 8, Article 894; the laws of the Azerbaijan Republic of September 30, 2021 No. No. 378-VIQD and 380-VIQD) to make the following changes:

1.1. in Article 6.1.5 after words of "legal entities" to add with the words "and physical persons, except for case, stipulated in Article 198.1 of this Code";

1.2. under Article 8.1:

1.2.1. in Article 8.1.2 after words of "legal entities" to add with the words "and physical persons, except for case, stipulated in Article 198.1 of this Code";

1.2.2. repeal Article 8.1.3;

1.3. under Article 13:

1.3.1. state Article 13.2.16.14-1 in the following edition:

"13.2.16.14-1. direct or indirect payments to persons founded (registered) in the countries or the territories with the preferential taxation, stipulated in Article the 128th of this Code, including to their branches or representations in other countries, and also on their bank accounts in the countries and the territories with the preferential taxation permanent missions of residents and nonresidents in the Azerbaijan Republic and also the physical resident persons who are not staying on the registry in tax authority;

Payments to the countries or the territories with the preferential taxation, do not belong to the income from the Azerbaijani source for the purposes of this Article in the following cases:

1. in case of repayment of the main amount of debt on the obtained loans (except for percent);

2. when carrying out payments on the correspondent accounts opened by resident banks;

3. in case of return of the funds paid according to Article 13.2.16.14-1 of this Code for the bank account of person paying from the account in the country with the preferential taxation during 1 year, including date of return into the account from payment date;

4. when obtaining by the physical persons who are not staying on the registry in tax authority, services according to the procedure of electronic trading;

5. when making by the physical persons who are not staying on the registry in tax authority, payments in the countries or the territories with the preferential taxation outside the Azerbaijan Republic in connection with purchase of goods (works, services) for the purpose of private consumption, including personal or real estate in the countries or the territories with the preferential taxation;

6. in case of making payments, the debt securities connected with acquisition;

7. in case of interest payment and dividend incomes on the investments invested in the Azerbaijan Republic and the deposits placed at financial institutions of the Azerbaijan Republic;

8. in case of salary payment and pensions of residents of the countries or the territories with the preferential taxation;

9. in case of making payments in connection with receipt of permissions and certificates in case of payment of duties and other payments in competent state bodies.";

1.3.2. in Article 13.2.62 of the word" (electronic delivery note invoice at the request of the legal entities and physical persons performing business activity)" to exclude;

1.3.3. in Article 13.2.64 to exclude the word "retail";

1.3.4. in Article 13.2.72 of the word "according to the agreement signed between tax authority and the taxpayer in the form determined by body (organization) determined by relevant organ of the executive authority" shall be replaced with words "based on the application submitted during capture for accounting as the taxpayer" and in this Article after the words "created in system", to add with the words "the strengthened digital signature and (or)";

1.3.5. at the end of Article 13.2.84 to replace point with semicolon and to add with Article 13.2.85 of the following content:

"13.2.85. controlled overseas enterprise - the nonresident company conforming to requirements of Article 14-2.1 of this Code and for the purposes of the taxation.";

1.4. under Article 14:

1.4.1. in Article 14.3.3 after the word of "requirements" to add with words ", including the losses arising from scrap within the regulations of natural loss determined by body (organization) determined by relevant organ of the executive authority" after the word "level" - "10 percent in the field of wholesale trade, 20 percent in the field of construction and productive activity, in other fields of activity";

1.4.2. in Articles 14.6.5 and 14.6.6 after the word of "prices" to add with the words "10 percent in the field of wholesale trade, 20 percent in the field of construction and productive activity, in other fields of activity";

1.5. under Article 14-1.2:

1.5.1. in Article 14-1.2.1 after the word "persons" to add with words ", and also any representation, branch and other division of this resident located in other states (territories)";

1.5.2. at the end of Article 14-1.2.3 to replace point with semicolon and to add with Article 14-1.2.4 of the following content:

"14-1.2.4. between resident of the Azerbaijan Republic or permanent mission of the nonresident in the Azerbaijan Republic and nonresident persons, except as specified, specified in Articles 14-1.2.1-14-14.2.3 of this Code provided that:

14-1.2.4.1. persons made transactions with the goods traded at the international commodity exchanges and (or);

14-1.2.4.2. total income of resident of the Azerbaijan Republic or permanent mission of the nonresident in the Azerbaijan Republic within tax year constituted more than 30 million and specific weight of amount of the transactions made with each nonresident person in total income (expenses) constituted more than 30 percent.";

1.6. add with Article 14-2 of the following content:

"Article 14-2. Controlled overseas enterprise and its taxation

14-2.1. For the purposes of the taxation the profit of the company registered in the countries (territories) with the preferential taxation which are not considered as residents of the Azerbaijan Republic is assessed with tax in the Azerbaijan Republic in the following cases:

14-2.1.1. person which is considered as resident of the Azerbaijan Republic itself or together with interdependent resident person or the nonresident has directly or indirectly in overseas enterprise the right to vote more than for 50 percent or owns more than 50 percent of its authorized capital or owns the right to acquire more than 50 percent of profit of this overseas enterprise;

14-2.1.2. if actually paid tax on profit of controlled overseas enterprise twice or is even less income tax which is subject to payment from this profit according to this Code;

14-2.1.3. if part of annual earnings of overseas enterprise in more than 30% consists of the following income:

14-2.1.3.1. percent from financial assets;

14-2.1.3.2. royalty from intellectual property;

14-2.1.3.3. income from sale of shares and shares;

14-2.1.3.4. income from financial leasing;

14-2.1.3.5. income from insurance, banking and other financial activities;

14-2.1.3.6. the income on the companies gaining income from the goods and services which are not creating economic cost.

14-2.2. The form and procedure for submission of the certificate of controlled overseas enterprise by physical and legal resident persons to tax authority affirm body (organization) determined by relevant organ of the executive authority.

14-2.3. In case of the taxation of profit of the overseas enterprise controlled according to this Article in the Azerbaijan Republic double taxation from the same taxation object is not allowed, and the tax amount, paid (withheld) of this profit is considered.

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