Rules for returning foreign exchange assets obtained from export transactions to the country
Rules for returning foreign exchange assets obtained from export transactions to the country
Recently, there has been a discussion about imposing strict requirements on the return of foreign exchange to the country during export operations. Entrepreneurs export various goods, products, raw materials, materials, and minerals outside our country, and in return, foreign exchange must enter our country. But within what time periods must importers pay for the value of exported products? What responsibilities are envisaged for the failure of these funds to enter the country? Tax experts clarify the questions.
To clarify the issue, we should look at the Code of Administrative Offenses and the Criminal Code of the Republic of Azerbaijan. Article 483 of the Code of Administrative Offenses states that for failure to return from abroad a small amount of foreign exchange funds obtained as a result of foreign economic activity and subject to mandatory transfer to the accounts of authorized banks of the Republic of Azerbaijan, a fine of 30 percent to 50 percent of the value of the foreign currency that is the direct object of the administrative offense is imposed.
Note: In Article 483 of this Code, the term “small amount” means an amount up to 20,000 manats.
Also, according to Article 208.1 of the Criminal Code, failure to repatriate from abroad a significant amount of foreign currency funds obtained as a result of foreign economic activity and which must be compulsorily transferred to the account of an authorized bank of the Republic of Azerbaijan in accordance with the legislation of the Republic of Azerbaijan is punishable by restriction of freedom for a term of up to 3 years or imprisonment for a term of up to 3 years.
Article 208.2 of the Code states that the same acts:
- when committed in large amounts;
- when committed by a group of persons in prior collusion:
are punishable by imprisonment for a term of 3 to 5 years.
Note: In this article, “significant amount” means the amount of unreturned foreign currency funds exceeding 20,000 manats, but not exceeding 30,000 manats, and “massive amount” means the amount exceeding 30,000 manats.
The main requirement of both the Code of Administrative Offenses and the Criminal Code is the return of foreign currency funds obtained as a result of foreign economic activity and which must be compulsorily transferred to the accounts of authorized banks of the Republic of Azerbaijan.
But within what periods must foreign currency funds obtained from foreign economic activity be returned from abroad? In other words, within what periods must foreign currency funds obtained for the export of exported goods, products, raw materials, materials, and minerals be returned to the country?
To approach the issue more deeply, we should look at the rules “On further liberalization of foreign trade in the Republic of Azerbaijan”, approved by the Decree of the President of the Republic of Azerbaijan No. 609 dated June 24, 1997. According to paragraph 12.1 of the Rules, export of goods (works, services) by legal entities and individuals on consignment is carried out by declaring them to the customs authorities. Export operations on consignment imply payment of funds to the exporter within a certain period of time in exchange for exported goods (works, services) under a contract concluded with foreign persons.
According to paragraph 12.2 of the Rules, legal entities and individuals must ensure that funds in exchange for goods (works, services) exported on consignment are transferred to their accounts in an authorized bank in the Republic of Azerbaijan within 180 days from the date of their declaration.
Paragraph 12.3 of the Rules states that the transfer and import of funds received in exchange for exported goods (works, services) to the Republic of Azerbaijan are controlled, respectively, by the Central Bank of the Republic of Azerbaijan and the State Customs Committee. For this purpose, the State Customs Committee of the Republic of Azerbaijan ensures the transmission of relevant information on exported goods, including customs declarations and export contracts, to the Central Bank through the electronic customs service.
As you know, practically all relations in import-export operations are regulated by contracts concluded between the parties. Settlements are carried out in various forms in both import and export operations. In practice, the most common settlements are the following:
- Full advance payment of the contract amount;
- Partial advance payment of the contract amount;
- Payment within a certain period after the goods are imported or exported;
- Import, export and settlements by consignment;
- Settlements by accreditation.
As I mentioned earlier, the only legislation that provides for a specific period for the return of foreign exchange assets obtained from foreign trade to the country is Decree No. 609 dated June 24, 1997. The decree only sets a period of 180 days for products exported by consignment.
Therefore, if an exporter exports products by consignment and violates the requirements of Article 12 of Decree No. 609 dated June 24, 1997, then he will be liable under Articles 483 of the Code of Administrative Offenses and 208 of the Criminal Code. But how is this period regulated in other cases?
In these cases, the legislation does not set a specific period as a requirement. Therefore, in these cases, as I mentioned earlier, it is necessary to look at the terms of the contract.
Example 1: “AA” LLC is engaged in the export of agricultural products. According to the terms of the concluded contract, 500 tons of agricultural products will be exported to the Republic of Turkey. According to the contract, after each batch of products is exported, its value will be paid within 20 banking days.
As a result of the implementation of the transaction, it appears that the value of 500 tons of agricultural products exported by “AA” LLC was not only paid within 20 banking days, but was not returned to the country at all.
As can be seen, the responsible persons of the LLC become the object of the requirements of Article 483 of the Code of Administrative Offenses and Article 208 of the Criminal Code.
Example 2: Let's consider that “AA” LLC carried out operations as in the example above. It ensured the arrival of the exported products to the country by delaying the value. That is, according to the terms of the contract, it ensured their return not within 20 banking days, but after 3 months. In this case, the responsible persons of “AA” LLC may be required to submit solid grounds, evidence, explanations, and, if necessary, additional documents and agreements to both customs authorities, the Central Bank, and law enforcement agencies. Of course, this will be assessed accordingly.
For these reasons, entrepreneurs are recommended to obtain full or partial advance funds from the counterparty or make settlements in the form of a letter of credit when exporting goods, products, raw materials, materials, minerals, work and services. It is important for entrepreneurs to ensure that foreign exchange resources for exports enter the country on time. This means both strengthening the economy and forming transparent, correct entrepreneurship.
Recently, there has been a discussion about imposing strict requirements on the return of foreign exchange to the country during export operations. Entrepreneurs export various goods, products, raw materials, materials, and minerals outside our country, and in return, foreign exchange must enter our country. But within what time periods must importers pay for the value of exported products? What responsibilities are envisaged for the failure of these funds to enter the country? Tax experts clarify the questions.
To clarify the issue, we should look at the Code of Administrative Offenses and the Criminal Code of the Republic of Azerbaijan. Article 483 of the Code of Administrative Offenses states that for failure to return from abroad a small amount of foreign exchange funds obtained as a result of foreign economic activity and subject to mandatory transfer to the accounts of authorized banks of the Republic of Azerbaijan, a fine of 30 percent to 50 percent of the value of the foreign currency that is the direct object of the administrative offense is imposed.
Note: In Article 483 of this Code, the term “small amount” means an amount up to 20,000 manats.
Also, according to Article 208.1 of the Criminal Code, failure to repatriate from abroad a significant amount of foreign currency funds obtained as a result of foreign economic activity and which must be compulsorily transferred to the account of an authorized bank of the Republic of Azerbaijan in accordance with the legislation of the Republic of Azerbaijan is punishable by restriction of freedom for a term of up to 3 years or imprisonment for a term of up to 3 years.
Article 208.2 of the Code states that the same acts:
- when committed in large amounts;
- when committed by a group of persons in prior collusion:
are punishable by imprisonment for a term of 3 to 5 years.
Note: In this article, “significant amount” means the amount of unreturned foreign currency funds exceeding 20,000 manats, but not exceeding 30,000 manats, and “massive amount” means the amount exceeding 30,000 manats.
The main requirement of both the Code of Administrative Offenses and the Criminal Code is the return of foreign currency funds obtained as a result of foreign economic activity and which must be compulsorily transferred to the accounts of authorized banks of the Republic of Azerbaijan.
But within what periods must foreign currency funds obtained from foreign economic activity be returned from abroad? In other words, within what periods must foreign currency funds obtained for the export of exported goods, products, raw materials, materials, and minerals be returned to the country?
To approach the issue more deeply, we should look at the rules “On further liberalization of foreign trade in the Republic of Azerbaijan”, approved by the Decree of the President of the Republic of Azerbaijan No. 609 dated June 24, 1997. According to paragraph 12.1 of the Rules, export of goods (works, services) by legal entities and individuals on consignment is carried out by declaring them to the customs authorities. Export operations on consignment imply payment of funds to the exporter within a certain period of time in exchange for exported goods (works, services) under a contract concluded with foreign persons.
According to paragraph 12.2 of the Rules, legal entities and individuals must ensure that funds in exchange for goods (works, services) exported on consignment are transferred to their accounts in an authorized bank in the Republic of Azerbaijan within 180 days from the date of their declaration.
Paragraph 12.3 of the Rules states that the transfer and import of funds received in exchange for exported goods (works, services) to the Republic of Azerbaijan are controlled, respectively, by the Central Bank of the Republic of Azerbaijan and the State Customs Committee. For this purpose, the State Customs Committee of the Republic of Azerbaijan ensures the transmission of relevant information on exported goods, including customs declarations and export contracts, to the Central Bank through the electronic customs service.
As you know, practically all relations in import-export operations are regulated by contracts concluded between the parties. Settlements are carried out in various forms in both import and export operations. In practice, the most common settlements are the following:
- Full advance payment of the contract amount;
- Partial advance payment of the contract amount;
- Payment within a certain period after the goods are imported or exported;
- Import, export and settlements by consignment;
- Settlements by accreditation.
As I mentioned earlier, the only legislation that provides for a specific period for the return of foreign exchange assets obtained from foreign trade to the country is Decree No. 609 dated June 24, 1997. The decree only sets a period of 180 days for products exported by consignment.
Therefore, if an exporter exports products by consignment and violates the requirements of Article 12 of Decree No. 609 dated June 24, 1997, then he will be liable under Articles 483 of the Code of Administrative Offenses and 208 of the Criminal Code. But how is this period regulated in other cases?
In these cases, the legislation does not set a specific period as a requirement. Therefore, in these cases, as I mentioned earlier, it is necessary to look at the terms of the contract.
Example 1: “AA” LLC is engaged in the export of agricultural products. According to the terms of the concluded contract, 500 tons of agricultural products will be exported to the Republic of Turkey. According to the contract, after each batch of products is exported, its value will be paid within 20 banking days.
As a result of the implementation of the transaction, it appears that the value of 500 tons of agricultural products exported by “AA” LLC was not only paid within 20 banking days, but was not returned to the country at all.
As can be seen, the responsible persons of the LLC become the object of the requirements of Article 483 of the Code of Administrative Offenses and Article 208 of the Criminal Code.
Example 2: Let's consider that “AA” LLC carried out operations as in the example above. It ensured the arrival of the exported products to the country by delaying the value. That is, according to the terms of the contract, it ensured their return not within 20 banking days, but after 3 months. In this case, the responsible persons of “AA” LLC may be required to submit solid grounds, evidence, explanations, and, if necessary, additional documents and agreements to both customs authorities, the Central Bank, and law enforcement agencies. Of course, this will be assessed accordingly.
For these reasons, entrepreneurs are recommended to obtain full or partial advance funds from the counterparty or make settlements in the form of a letter of credit when exporting goods, products, raw materials, materials, minerals, work and services. It is important for entrepreneurs to ensure that foreign exchange resources for exports enter the country on time. This means both strengthening the economy and forming transparent, correct entrepreneurship.