Republic of Azerbaijan - Profit Tax

February 2006

Source: Ministry of Taxes of the Republic of Azerbaijan0

Tax return

Accounting period for profit tax is a calendar year. The taxpayers must submit a tax return to the tax authorities not later than March 31 of the year following the accounting year. Taxpayers must carry out final calculations and pay taxes before the date established for the submission of tax returns.
In case the enterprise ceases its entrepreneurial activity in the Republic of Azerbaijan, it must submit the return to tax authorities within 30 days. If this is the case, the accounting period shall cover the timeframe from the beginning of tax year until the day of entrepreneurial activity cessation by the enterprise.
If the legal entity or the permanent establishment of a non-resident is liquidated, the liquidation commission or taxpayer must immediately notify the state tax authorities of such liquidation in the manner established by the legislation.
Legal entities are obliged to make current payments to the state budget no later than the 15th day of the month following each quarter. Enterprises and organizations owned by municipalities pay taxes to local budget.
There are 2 methods to determine the amount of current tax payments:

1. The amount of each payment shall be 1/4 of the tax amount calculated in previous tax year.
2. The taxpayer may determine the amounts of current tax payments by multiplying the volume of his income in relevant quarter to coefficient of tax weight in the gross income for previous year (with no consideration of amounts to be deducted from income).

The taxpayer selects annually by April 15 one of the two methods for calculation of the amount of payable taxes within the year and informs the tax authority. In case if the taxpayer chooses the 2nd method, he should submit the certificate on current tax amounts calculated from income or profit within 15 days after the end of each quarter. Otherwise, the tax authority applies the 1st method. In case, when the taxpayer does not inform about the method applied for calculation of the amount of current tax payments, the tax authority applies the first method.
Current tax payments are included in the amount of tax withheld from the taxpayer within the tax year.

Financial sanctions and interests

A financial sanction is imposed on the taxpayer who fails to submit the tax report in timely manner without valid reasons at the value of 40 times of conventional financial unit which equals 44 manats following the decision of tax authority.
In case the amount of tax (including withholding tax) indicated on tax report is less than the amount to be indicated on the report and if taxpayer fails to submit tax report and evades to pay the required tax amount to the budget, the financial sanction shall be imposed on the taxpayer at the rate of 25 percent of understated or evaded tax amount.
For failure to pay the tax or current tax payment in period stipulated by the legislation, the interest at the rate of 0,05 % of the amount of tax or current tax payment is withheld from the taxpayer or tax agent for each day of delay. This interest is applied in respect to current tax payments for the whole period of delay but not more than for 1 year.

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