THE TAX CODE OF THE REPUBLIC OF AZERBAIJAN (2000) (unofficial translation, excerpt)

Chapter I. General Provisions

Article 13. Main definitions used in this Code

13.2.27 Non-commercial activity- it is a conduct of legal activity the purpose of which is not generation of profit and that stipulates the use of income received in non-commercial purposes only, including the purposes of its charter. Otherwise such activity shall be considered as commercial (...)

13.2.35 Charity shall be defined as that activity natural person and/or charity organization performs, which consists of rendering assistance, to include the transfer of monies, without compensation, to physical persons in need of material or other assistance (aid), or to organizations and charitable organizations that directly provide such assistance (aid), including charity organizations. Scientific, educational activities performed in the public interest shall be considered charity except where otherwise stipulated in this Code. Assistance (aid) given shall not be construed as charity if:

13.2.36 Charity organization- non-commercial organization conducting charity activities.

Chapter IV. Tax Control

Article 36. Tax inspections

36.1. Inspections conducted by tax authorities can be on-site and off-site inspections.

36.2. During tax inspections tax authorities and their officials shall clarify all circumstances that can be important for making of right decision including the circumstances in taxpayer’s favor.

36.3. On site tax inspection shall cover the period of no more than 3 calendar years in taxpayer activities for taxes on profit, income, property and land. On other taxes- the taxpayer activities for the period of no more than 3 years, including the year of inspection.

If during the performance of tax inspection tax authorities have documented evidences in the necessity of receiving the information on the taxpayer which is connected with other persons and is relevant to the inspection, tax authorities may require such persons to provide documents related with inspected taxpayer’s activity. For such actions the motivated decision of tax authority is necessary.

36.4. It is not allowed to tax authorities to have on-site inspections on the same taxes, paid or to be paid by the taxpayer for already checked tax period with exception of cases when such inspection is conducted in connection with liquidation of legal taxpayer person or application of physical entity, carrying out business activity without establishment of the legal entity concerning termination of entrepreneur activity, and in cases stipulated by Article 38.3. of this Code. (3)

36.5. Taxpayers who disagree with the results of tax inspection may ask for the out of turn inspection. In such case the additional tax inspection shall not be conducted by the officials of tax authority who had conducted the previous inspection.

36.6. Taxpayers hold the right to apply to courts for the reasons of inspections conducted by tax authorities.(6)

Article 37. Off-site tax inspection

37.1. An off-site tax inspection shall be carried out without site visits on the basis of documents in the possession of the tax authorities, provided by taxpayer as well as other documents that reflect the calculation and payment of taxes, and documents on taxpayer’s activity.

37.2. Off-site tax inspection shall be conducted within 30 days from the date when documents providing basis for tax calculation and payment are provided by the taxpayer.

37.3. If unmatched or mistaken information is found in documents submitted to tax authorities for implementation of desktop inspection, tax authority shall be entitled to enquire the taxpayer to submit additional information, documents and explanations.

37.4. If incorrect tax calculation in tax declaration is found during desktop inspection (increased of decreased amount of tax) notification shall be sent to the taxpayer within 5-day period in accordance with form established by the relevant state executive authority. The notification shall include reasons of calculation and taxpayer’s right to appeal in accordance with Article 62 of this Code.

37.5. Until application from the taxpayer is submitted in accordance with Article 15.1.13 of this Code on implementation of new chronometer inspection, the results of last chronometer inspection can be taken as basis for calculation of taxes.

37.6. If during the off-site tax inspection the tax authority does not follow the rules established in articles 37.3. and 37.4. of this Code, the taxpayer holds the right to remedy mistakes within 30 days (including the incorrect calculation of taxes, reduction of tax amounts and other) that were allowed during the inspection and can be established during desktop inspection, and within this time period the taxpayer does not hold any responsibility (with exception of payment of interests) for violations of tax legislation.(6)

Article 38. On-site tax inspection

38.1. On-site tax inspection shall be conducted on the basis of decision by the tax authority.

The on-site tax inspection can be planned or not planned. The tax authority shall inform the taxpayer in writing about the planned tax inspection not later than 15 days before the date of the inspection.

38.2. The notification sent to the taxpayer shall include the information on reasons and date of the inspection as well as rights and responsibilities of the taxpayer and tax authorities. Planned on-site tax inspection shall be conducted not more than one time in a year and shall not continue for more than one month. In exceptional cases by the resolution of supervising tax authority the timing for tax inspection can be extended for the period of up to three months.

On the basis of justified decision of the higher tax authority the term of preparation of the report on results of on-site tax inspection may be extended for the period not more than 1 month in the following cases:

38.3. Not planned tax inspection shall be conducted in following cases:

38.4. The on-site tax inspection shall be conducted at taxpayer’s business day and business hours. (…)

Article 39. Documenting the results of on-site tax inspection

39.1. An inspection report shall be prepared on the results of an inspection, such report being signed by a responsible official of the tax agency and the manager (person in charge) of the taxpayer. The taxpayer may include his comments in the report, refuse to sign the report and these shall be registered in the report.

39.2. Inspection report shall include all violations of tax legislation and specific articles of this Code as well as other legislative acts determined during the inspection and proved by documents or absence of any violations.

39.3. The form of tax inspection report and requirements for its filling shall be determined by the relevant executive authority.

39.4 One copy of the Tax inspection act shall be provided to the taxpayer (his authorised representative) in the manner allowing to confirm the date of submission.

39.5. The taxpayer holds the right, if he is not in agreement with the report of tax inspection or any part thereof, within 30 days from the date of receipt of tax inspection report to submit to relevant tax authority in writing the reasons for the refusal to sign such report or his comments for the report or any of its parts. The taxpayer holds the right to enclose to his written comments (objections) the copies of documents that confirm the reasonability of such objections or motives for not signing the inspection report and pass them to the tax authority.

39.6. No later than in 15 days upon the expiration of time specified in article 39.5. of this Code the head of tax authority (his deputy) shall review the documents provided by the taxpayer or collected from the taxpayer in accordance with procedures stipulated by this Code, the tax inspection report, issues of non-compliance with tax legislation and remedial activity on violation determined as well as application of relevant sanctions (penalties).

39.7. If taxpayer provides written explanations or objections on the tax inspection report the materials of inspection shall be reviewed in the presence of taxpayer’s officials or individual entrepreneur and/or their representatives.

The tax authority shall inform the taxpayer on the venue and time of the tax inspection materials revision. If taxpayer, regardless of the advance notification did not show up without excuse, then materials of inspection, including the objections by the taxpayer, explanations, other documents and materials shall be reviewed in his absence.(6)

Article 40. The access of officials of tax authorities to the areas and premises for the performance of on-site tax inspection

40.1. The access of tax authority officials performing the on-site tax inspection on the territory or premises (with exception of living premises) used by the taxpayer for the performance of entrepreneurial activity shall be provided via submission by such officials of their office identification documents, decision of the head of tax authority (his deputy) on performance of on-site inspection or the court order.

40.2. The tax authority officials who perform the inspection shall not be entitled to enter living accommodations (premises) without the consent of natural persons who live there.

40.3. Should any obstruction be caused to the official of tax authority on getting the access to the territory or premises (with exception of living accommodations/premises) specified in article 40.1 of this Code the report shall be made which shall be signed by officials conducting the survey and the taxpayer. On the basis of such report the tax authority shall be entitled to determine the amounts of taxes that shall be paid on the basis of information that he possesses on the taxpayer. Should the taxpayer refuse to sign the report the relevant note shall be included thereof. The copy of the report shall be submitted to the taxpayer.

40.4. Unlawful obstructions to the access of tax authority officials who perform the on-site tax inspection to the territory of premises (with exception of living buildings (areas)) used by the taxpayer for entrepreneurial activity shall be considered as violation of tax legislation and involves the responsibility established by legislation.


Chapter IX. Profit tax from legal persons

Article 106. Exemptions and privileges

106.1. The following shall be exempt from tax:

106.2 Income tax rate for production enterprises owned by social communities of disabled people shall be reduced by 50 percent if not less than 50 percent of employees at such enterprises are disabled people. When establishing the right for the privilege the average number in the list of employees shall not include disabled people who work on contract terms at two jobs, as contractors and other agreements civil legislation.