ORDER OF THE MINISTRY OF TAXES OF THE AZERBAIJAN REPUBLIC

of May 20, 2004 No. F-110

About approval of Procedural rules on execution of international treaties on avoidance of double taxation

For the purpose of settlement of the procedures connected with effective implementation of the obligations following from international treaties between the Azerbaijan Republic with other states about avoidance of double taxation concerning tax on the income and the property tax I order:

1. Approve Procedural rules on execution of international treaties on avoidance of double taxation concerning tax on the income and the property tax and the DT-02, DT-03 form and Dt-04, attached to these rules and to put to Procedural rules the DT-1, form the Minister of taxes applied based on the Order of October 2, 2003 No. A-212 (is applied).

2. Charge to all structural divisions of the Ministry of taxes to provide effective fulfillment of Procedural rules.

3. Charge to the head of department on servicing of taxpayers Elchin Mamedov to provide informing taxpayers on application of Rules and placement of the corresponding forms on the Website of the Ministry of taxes.

4. Charge to the chief of Training Center Yashar Kyalbiyev to provide the corresponding training of staff of the tax authorities concerning application of Procedural rules.

5. Charge to the chief of coordination management Sevda Mamedova to provide finishing this Order according to the list of mailing of copies.

6. To impose control of execution of the order on the deputy minister of taxes Natik Gasymov.

No. F-110 are approved by the Order of the Ministry of taxes of May 20, 2004

Procedural rules on execution of international treaties on avoidance of double taxation concerning tax on the income and the property tax

These rules establish procedural rules on ensuring execution of international treaties of the Azerbaijan Republic on avoidance of double taxation concerning tax on the income and the property tax and on prevention of tax avoidance.

I. Concepts

1. The international treaty - the international agreements of the Azerbaijan Republic on avoidance of double taxation concerning tax on the income and the property tax and on prevention of tax avoidance.

2. Based on international treaties:

a) other state - the state which has the international treaty with the Azerbaijan Republic;

b) person - legal entity or physical person;

c) the resident - person who is resident of the Azerbaijan Republic;

d) the nonresident - person who is resident of other state;

e) limited tax liability - restriction of the taxation in the state - source of formation of the income (in case of application of higher tax rates in the domestic legislation, the tax rates cannot exceed the limits set in the international treaty);

f) release - not attraction to the taxation in the state - source or arrangements of the income and property (taxation right availability only at the state which resident is person which is actually the owner of the income or property).

II. Return of excessively paid amounts of taxes

1. If the cases of limited tax liability or release from the taxation then which are excessively paid by nonresidents in the Azerbaijan Republic of the amount of taxes (the taxes collected at nonresidents in payment source) are provided in international treaties are subject to return.

2. Excessively withheld amounts of taxes return based on article 87 of the Tax Code and "Rules of return to the taxpayer of excessively paid amounts of taxes, percent and financial sanctions", approved by the resolution of the Cabinet of Ministers of the Azerbaijan Republic of February 23, 2003 No. 48.

3. For return in source of payment of the amounts of excessively retained taxes by the nonresident the application in the DT-01 form shall be submitted to tax authority in which person paying it the income stays on the registry.

4. Excessive payments are subject to return no later than 45 days from the date of submission of the statement by the nonresident in tax authority.

III. Recognition of residence

1. Depending on the domestic legislation and administrative practice of other state, limited tax liability or release from the taxation according to international treaties can be applied beforehand, or is applied afterwards with return of the amounts of excessively retained taxes.

In such cases by resident the relevant document concerning confirmation of residence of person paying the income to this resident or authorized tax authority shall be submitted.

2. Confirmation is required for confirmation of the fact that the resident really is resident of Azerbaijan and for distribution of action of the international treaty on it (the international treaty concerns only to the resident of Azerbaijan, or other state, or to residents of both states).

3. The residence shall be confirmed with tax authority where the resident stays on the registry. According to the tax legislation if registration of resident - physical person is not provided, the form for confirmation can be provided to tax authority at the place of residence of this physical person.

In the presence of special form of confirmation of residence of other state, the residence is recognized on this form.

In the absence of special form, the resident fills the DT-02, form which after consideration shall be acknowledged as the relevant tax authority.

IV. Confirmation of the paid (withheld) taxes for avoidance of double taxation

1. For avoidance of double taxation concerning residents the taxes paid by residents in other state (or the payments withheld at residents in source taxes) shall be confirmed with authorized tax authorities of this other state.

In the presence of special form of tax payment of other state, tax payment shall be confirmed in the same form.

In the absence of special form, the resident fills the DT-03 form and according to the legislation and administrative practice of other State makes sure the relevant tax authority of this other State.

2. For avoidance in other state of double taxation concerning nonresidents by authorized tax authority in Azerbaijan the taxes (the taxes withheld at nonresidents in payment source) paid in Azerbaijan by nonresidents shall be confirmed.

The taxes paid by nonresidents (the taxes withheld at nonresidents in payment source) shall be confirmed in the DT-04 form.

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