en
az
ru
tr
Refund of Overpaid Taxes and Financial Sanctions
Under Article 15.1.4 of the Tax Code of the Republic of Azerbaijan, taxpayers have the right to claim a refund of overpaid taxes, interest and financial penalties, or to offset these amounts against future tax liabilities. This mechanism plays an important role in protecting taxpayers’ rights and ensuring financial discipline. How does it work in practice? Specialist Fidan Bayramova explains.
Under Article 85.5 of the Tax Code, taxpayers are entitled to request a refund of overpaid taxes, interest and financial penalties within five years.
To do so, taxpayers must submit an application using the form approved by Cabinet of Ministers Resolution No. 313 dated 16 July 2019.
Reasons for tax overpayments
Amended tax returns: A reduction in tax liabilities following the submission of an amended tax return.
Erroneous payments: Incorrect bank details or payment amounts entered in a payment instruction.
Court decisions: The cancellation of assessed penalties or interest by a court.
Advance tax payments: Current tax payments made during the year exceeding the final tax liability calculated at year-end.
The remaining amounts of overpaid taxes, interest and financial penalties are refunded within 45 days upon the taxpayer’s written application. In cases covered by Article 179.1 of the Tax Code, the refund period is 20 days, while cases covered by Article 179.2 are subject to a period of up to four months.
Amounts paid incorrectly as a result of incorrect payment details or improperly executed payment transactions are refunded within 20 days under Article 87.5 of the Tax Code, provided the taxpayer has no outstanding debt. For compulsory state social insurance, unemployment insurance and compulsory health insurance contributions, the refund period is 45 days.
Under Article 87.1 of the Tax Code, overpayments may be used to settle outstanding liabilities relating to other taxes, interest, financial penalties and administrative fines. With the taxpayer’s consent, these amounts may also be offset against future liabilities.
Example 1. Where there are no outstanding debts
“AA” LLC made current corporate income tax payments totalling AZN 39,000 during the year. According to the corporate income tax return submitted at year-end, the company’s actual tax liability amounted to AZN 27,000.
As a result, an overpayment of AZN 12,000 arose in the company’s tax account.
Under Article 85 of the Tax Code, the tax authority first checks whether the legal entity has outstanding liabilities for other types of taxes. If no other tax debts exist, the full overpaid amount is transferred to the company’s official current bank account.
Where outstanding debts exist
Under the same circumstances, assume that “AA” LLC has an outstanding value-added tax (VAT) liability of AZN 2,450 and a financial penalty of AZN 180. The total outstanding debt is AZN 2,630.
In this case, the amount transferred to the company’s bank account is calculated as follows:
AZN 12,000 − AZN 2,630 = AZN 9,370.
Example 2. An erroneous tax payment
A taxpayer is required to pay AZN 380 in tax but mistakenly pays AZN 3,800 due to a technical error.
In this case, the refund is processed within 20 days. A period of 45 days applies to compulsory state social insurance, unemployment insurance and compulsory health insurance contributions.
Under Article 179.1 of the Tax Code, taxpayers whose taxable turnover for the reporting period consists of at least 50% of transactions subject to the zero VAT rate are entitled to a refund of the excess of deductible input VAT over calculated VAT within 20 days of submitting an application to the tax or customs authority.
Under Article 179.2, for other taxpayers, the excess of deductible input VAT over calculated VAT is refunded no later than four months after the electronic application is submitted to the tax or customs authority.
Example 3. Refund of excess VAT
A taxpayer has deductible VAT of AZN 78,000 for March, while the VAT calculated for the same reporting period amounts to AZN 43,000. The services supplied by the taxpayer are transactions subject to the standard VAT rate of 18%.
The excess amount is calculated as follows:
AZN 78,000 − AZN 43,000 = AZN 35,000.
In this case, the excess amount of AZN 35,000 is refunded no later than four months after the application is submitted to the tax or customs authority.
Example 4. Refund of excise tax paid for unused mandatory excise stamps
“X” LLC, a company engaged in the production of alcoholic beverages, pays AZN 40,000 in excise tax to the state budget in advance and obtains the corresponding number of mandatory stamps for marking its products.
Several months later, the company’s shareholders decide to initiate liquidation proceedings. During the inventory conducted as part of the liquidation process, it is established that stamps worth AZN 25,000 have been applied to products and activated, while stamps worth AZN 15,000 remain unused and have not been activated.
If the company has no outstanding tax liabilities, the unused excise amount of AZN 15,000 is refunded to the taxpayer’s bank account within 45 days in accordance with Article 87.3 of the Tax Code.
Example 5. Excess excise tax paid on raw materials
In February 2026, “İstehsal” LLC (a hypothetical company name) imports raw materials — alcohol — for the production of alcoholic beverages. During importation, the company pays AZN 50,000 in excise tax at customs under the excise rates applicable in 2026.
During February, the company sells part of the beverages produced from these raw materials on the domestic market and calculates total excise tax of AZN 30,000 on the finished products sold.
Excise tax paid on raw materials: AZN 50,000.
Excise tax calculated on sales: AZN 30,000.
Difference (uncredited balance): AZN 50,000 − AZN 30,000 = AZN 20,000.
Since the excise tax paid on raw materials exceeds the calculated excise tax by AZN 20,000, Articles 189 and 87.3 of the Tax Code provide for the following:
The resulting AZN 20,000 excise tax overpayment is first applied to settle the company’s other outstanding tax liabilities.
If the company has no other tax debts, the AZN 20,000 is refunded to “İstehsal” LLC’s bank account by non-cash transfer within 45 days upon application.
Example 6. Excise tax refund upon re-export
“DD” LLC imports tobacco products for re-export and pays AZN 18,000 in excise tax on the products.
The company subsequently exports 40% of the products to a foreign country without processing or otherwise changing them.
Under Article 193 of the Tax Code, AZN 7,200 of the excise tax attributable to the re-exported products must be refunded to the company within 15 days:
AZN 18,000 × 40% = AZN 7,200.
In conclusion, overpaid taxes and financial penalties are not irrecoverable losses for taxpayers; they are financial assets protected by law. Both individuals operating under a taxpayer identification number (VÖEN) and legal entities may use these amounts to settle other tax liabilities or request a non-cash refund to their bank accounts in accordance with the procedures established by law.
Under Article 15.1.4 of the Tax Code of the Republic of Azerbaijan, taxpayers have the right to claim a refund of overpaid taxes, interest and financial penalties, or to offset these amounts against future tax liabilities. This mechanism plays an important role in protecting taxpayers’ rights and ensuring financial discipline. How does it work in practice? Specialist Fidan Bayramova explains.
Under Article 85.5 of the Tax Code, taxpayers are entitled to request a refund of overpaid taxes, interest and financial penalties within five years.
To do so, taxpayers must submit an application using the form approved by Cabinet of Ministers Resolution No. 313 dated 16 July 2019.
Reasons for tax overpayments
Amended tax returns: A reduction in tax liabilities following the submission of an amended tax return.
Erroneous payments: Incorrect bank details or payment amounts entered in a payment instruction.
Court decisions: The cancellation of assessed penalties or interest by a court.
Advance tax payments: Current tax payments made during the year exceeding the final tax liability calculated at year-end.
The remaining amounts of overpaid taxes, interest and financial penalties are refunded within 45 days upon the taxpayer’s written application. In cases covered by Article 179.1 of the Tax Code, the refund period is 20 days, while cases covered by Article 179.2 are subject to a period of up to four months.
Amounts paid incorrectly as a result of incorrect payment details or improperly executed payment transactions are refunded within 20 days under Article 87.5 of the Tax Code, provided the taxpayer has no outstanding debt. For compulsory state social insurance, unemployment insurance and compulsory health insurance contributions, the refund period is 45 days.
Under Article 87.1 of the Tax Code, overpayments may be used to settle outstanding liabilities relating to other taxes, interest, financial penalties and administrative fines. With the taxpayer’s consent, these amounts may also be offset against future liabilities.
Example 1. Where there are no outstanding debts
“AA” LLC made current corporate income tax payments totalling AZN 39,000 during the year. According to the corporate income tax return submitted at year-end, the company’s actual tax liability amounted to AZN 27,000.
As a result, an overpayment of AZN 12,000 arose in the company’s tax account.
Under Article 85 of the Tax Code, the tax authority first checks whether the legal entity has outstanding liabilities for other types of taxes. If no other tax debts exist, the full overpaid amount is transferred to the company’s official current bank account.
Where outstanding debts exist
Under the same circumstances, assume that “AA” LLC has an outstanding value-added tax (VAT) liability of AZN 2,450 and a financial penalty of AZN 180. The total outstanding debt is AZN 2,630.
In this case, the amount transferred to the company’s bank account is calculated as follows:
AZN 12,000 − AZN 2,630 = AZN 9,370.
Example 2. An erroneous tax payment
A taxpayer is required to pay AZN 380 in tax but mistakenly pays AZN 3,800 due to a technical error.
In this case, the refund is processed within 20 days. A period of 45 days applies to compulsory state social insurance, unemployment insurance and compulsory health insurance contributions.
Under Article 179.1 of the Tax Code, taxpayers whose taxable turnover for the reporting period consists of at least 50% of transactions subject to the zero VAT rate are entitled to a refund of the excess of deductible input VAT over calculated VAT within 20 days of submitting an application to the tax or customs authority.
Under Article 179.2, for other taxpayers, the excess of deductible input VAT over calculated VAT is refunded no later than four months after the electronic application is submitted to the tax or customs authority.
Example 3. Refund of excess VAT
A taxpayer has deductible VAT of AZN 78,000 for March, while the VAT calculated for the same reporting period amounts to AZN 43,000. The services supplied by the taxpayer are transactions subject to the standard VAT rate of 18%.
The excess amount is calculated as follows:
AZN 78,000 − AZN 43,000 = AZN 35,000.
In this case, the excess amount of AZN 35,000 is refunded no later than four months after the application is submitted to the tax or customs authority.
Example 4. Refund of excise tax paid for unused mandatory excise stamps
“X” LLC, a company engaged in the production of alcoholic beverages, pays AZN 40,000 in excise tax to the state budget in advance and obtains the corresponding number of mandatory stamps for marking its products.
Several months later, the company’s shareholders decide to initiate liquidation proceedings. During the inventory conducted as part of the liquidation process, it is established that stamps worth AZN 25,000 have been applied to products and activated, while stamps worth AZN 15,000 remain unused and have not been activated.
If the company has no outstanding tax liabilities, the unused excise amount of AZN 15,000 is refunded to the taxpayer’s bank account within 45 days in accordance with Article 87.3 of the Tax Code.
Example 5. Excess excise tax paid on raw materials
In February 2026, “İstehsal” LLC (a hypothetical company name) imports raw materials — alcohol — for the production of alcoholic beverages. During importation, the company pays AZN 50,000 in excise tax at customs under the excise rates applicable in 2026.
During February, the company sells part of the beverages produced from these raw materials on the domestic market and calculates total excise tax of AZN 30,000 on the finished products sold.
Excise tax paid on raw materials: AZN 50,000.
Excise tax calculated on sales: AZN 30,000.
Difference (uncredited balance): AZN 50,000 − AZN 30,000 = AZN 20,000.
Since the excise tax paid on raw materials exceeds the calculated excise tax by AZN 20,000, Articles 189 and 87.3 of the Tax Code provide for the following:
The resulting AZN 20,000 excise tax overpayment is first applied to settle the company’s other outstanding tax liabilities.
If the company has no other tax debts, the AZN 20,000 is refunded to “İstehsal” LLC’s bank account by non-cash transfer within 45 days upon application.
Example 6. Excise tax refund upon re-export
“DD” LLC imports tobacco products for re-export and pays AZN 18,000 in excise tax on the products.
The company subsequently exports 40% of the products to a foreign country without processing or otherwise changing them.
Under Article 193 of the Tax Code, AZN 7,200 of the excise tax attributable to the re-exported products must be refunded to the company within 15 days:
AZN 18,000 × 40% = AZN 7,200.
In conclusion, overpaid taxes and financial penalties are not irrecoverable losses for taxpayers; they are financial assets protected by law. Both individuals operating under a taxpayer identification number (VÖEN) and legal entities may use these amounts to settle other tax liabilities or request a non-cash refund to their bank accounts in accordance with the procedures established by law.