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Attention taxpayers!
Attention taxpayers!
WARNING FROM THE STATE TAX SERVICE UNDER THE MINISTRY OF ECONOMY REGARDING COMPLIANCE WITH LEGISLATIVE REQUIREMENTS BY MAIN CONTRACTORS, SUBCONTRACTORS, AND OTHER PERSONS INVOLVED IN THE IMPLEMENTATION OF PROJECTS FUNDED FROM THE STATE BUDGET!
Dear Taxpayers!
We would like to inform you that in order to prevent or reduce tax violations, particularly non-genuine and risky transactions, the State Tax Service carries out analysis and investigations of taxpayers’ activities.
During analyses and monitoring, several risks and the following violations of the law have been observed in the activities and operations of taxpayers involved in the implementation of projects financed from public funds:
- Transfer and cash withdrawal of funds to persons who carry out unrelated, non-genuine, and risky transactions or who actually import goods on behalf of third parties, rather than using the funds for project-related purposes;
- Engagement of individuals by contractor organizations involved in project implementation to perform work or services without a legally effective employment contract;
- Failure to document acquired goods in accordance with legal requirements through e-invoices, purchase acts, and customs declarations for imported goods, or failure to document them on time.
The aforementioned cases are considered violations of the law and result in the application of liability measures as prescribed by legislation. According to Article 13.2.82 of the Tax Code, the procedure and conditions for the inclusion of a taxpayer in and removal from the list of risky taxpayers are determined by the Cabinet of Ministers of the Republic of Azerbaijan. In this regard, Decision No. 265 of the Cabinet of Ministers dated July 28, 2020, has entered into force. According to this Decision, a taxpayer is considered a risky taxpayer if they meet at least one of the following criteria:
- A person who provides work and services requiring appropriate economic resources (business premises, workforce, fixed assets, raw material inventories, and other resources depending on the nature of the activity) without having such resources or having insufficient resources, or without engaging a subcontractor;
- A person who supplies goods not acquired based on duly executed electronic invoices, purchase acts, or customs declarations in accordance with the law (except for goods documented as non-invoiced during tax inspections, property acquired under notarized contracts and registered in the official register, goods and fixed assets obtained during production or demolition/extraction, and fixed assets contributed to the charter capital);
- A person who engages in non-genuine transactions (as defined in Article 13.2.81 of the Tax Code — transactions carried out to conceal other transactions or formalized without actual delivery of goods, work, or services, solely to obtain profit or income).
According to Articles 109.9 and 175.11 of the Tax Code, expenses incurred under non-genuine transactions cannot be deducted from income, and relevant VAT amounts cannot be credited.
Additionally, we would like to emphasize that involving individuals in the performance of any work or services without a legally effective employment contract results in financial sanctions in accordance with Article 58.10 of the Tax Code and may entail criminal liability under Article 162-1 of the Criminal Code.
The State Tax Service recommends that all parties strictly comply with legal requirements during operations to prevent potential financial losses.
WARNING FROM THE STATE TAX SERVICE UNDER THE MINISTRY OF ECONOMY REGARDING COMPLIANCE WITH LEGISLATIVE REQUIREMENTS BY MAIN CONTRACTORS, SUBCONTRACTORS, AND OTHER PERSONS INVOLVED IN THE IMPLEMENTATION OF PROJECTS FUNDED FROM THE STATE BUDGET!
Dear Taxpayers!
We would like to inform you that in order to prevent or reduce tax violations, particularly non-genuine and risky transactions, the State Tax Service carries out analysis and investigations of taxpayers’ activities.
During analyses and monitoring, several risks and the following violations of the law have been observed in the activities and operations of taxpayers involved in the implementation of projects financed from public funds:
- Transfer and cash withdrawal of funds to persons who carry out unrelated, non-genuine, and risky transactions or who actually import goods on behalf of third parties, rather than using the funds for project-related purposes;
- Engagement of individuals by contractor organizations involved in project implementation to perform work or services without a legally effective employment contract;
- Failure to document acquired goods in accordance with legal requirements through e-invoices, purchase acts, and customs declarations for imported goods, or failure to document them on time.
The aforementioned cases are considered violations of the law and result in the application of liability measures as prescribed by legislation. According to Article 13.2.82 of the Tax Code, the procedure and conditions for the inclusion of a taxpayer in and removal from the list of risky taxpayers are determined by the Cabinet of Ministers of the Republic of Azerbaijan. In this regard, Decision No. 265 of the Cabinet of Ministers dated July 28, 2020, has entered into force. According to this Decision, a taxpayer is considered a risky taxpayer if they meet at least one of the following criteria:
- A person who provides work and services requiring appropriate economic resources (business premises, workforce, fixed assets, raw material inventories, and other resources depending on the nature of the activity) without having such resources or having insufficient resources, or without engaging a subcontractor;
- A person who supplies goods not acquired based on duly executed electronic invoices, purchase acts, or customs declarations in accordance with the law (except for goods documented as non-invoiced during tax inspections, property acquired under notarized contracts and registered in the official register, goods and fixed assets obtained during production or demolition/extraction, and fixed assets contributed to the charter capital);
- A person who engages in non-genuine transactions (as defined in Article 13.2.81 of the Tax Code — transactions carried out to conceal other transactions or formalized without actual delivery of goods, work, or services, solely to obtain profit or income).
According to Articles 109.9 and 175.11 of the Tax Code, expenses incurred under non-genuine transactions cannot be deducted from income, and relevant VAT amounts cannot be credited.
Additionally, we would like to emphasize that involving individuals in the performance of any work or services without a legally effective employment contract results in financial sanctions in accordance with Article 58.10 of the Tax Code and may entail criminal liability under Article 162-1 of the Criminal Code.
The State Tax Service recommends that all parties strictly comply with legal requirements during operations to prevent potential financial losses.