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Innovation in the tax system: who in Azerbaijan will not be subject to financial sanctions?
Innovation in the tax system: who in Azerbaijan will not be subject to financial sanctions?
According to the amendments made to the Tax Code, the implementation of “horizontal monitoring” has been launched in Azerbaijan as of this year. The new monitoring mechanism enables taxpayers to disclose tax risks to the relevant authority in advance. This means that on-site tax audits will only be possible in exceptional cases.
From next year, income tax will be withheld from these individuals under new rules — CONFIRMED.
This was announced by Member of Parliament Vugar Bayramov in a post on his social media account.
Innovation in the tax system: who in Azerbaijan will not be subject to financial sanctions?
The MP noted that, in practice, the new rules will further minimize the number of on-site tax audits:
“Overall, a decrease in the number of on-site audits has been observed in recent years. For instance, in 2024, only 384 on-site tax audits were conducted with respect to more than 800,000 active taxpayers. The number of such audits decreased by 29% compared to 2023 and by five times compared to 2018.
One of the key aspects of the new monitoring system is the non-application of financial sanctions in certain cases. According to the new amendments, if risks are disclosed to the tax authority in advance, no financial sanctions will be applied. A financial sanction of 25% is envisaged only when undisclosed risks are identified by the tax authority.”
During the period covered by “horizontal monitoring,” the tax authority will electronically monitor the information submitted:
“The main advantage of the new system is the reduction of tax risks through a pre-consultation mechanism. Participants in ‘horizontal monitoring,’ which will contribute to improving financial discipline and corporate governance, will also be given the option to calculate depreciation on fixed assets using either the declining balance method or the straight-line method.
Medium and large-sized enterprises that maintain automated accounting systems and implement internal control mechanisms may join ‘horizontal monitoring.’ This is also characterized as a mechanism of transparent cooperation between tax authorities and medium and large taxpayers.”
According to the amendments made to the Tax Code, the implementation of “horizontal monitoring” has been launched in Azerbaijan as of this year. The new monitoring mechanism enables taxpayers to disclose tax risks to the relevant authority in advance. This means that on-site tax audits will only be possible in exceptional cases.
From next year, income tax will be withheld from these individuals under new rules — CONFIRMED.
This was announced by Member of Parliament Vugar Bayramov in a post on his social media account.
Innovation in the tax system: who in Azerbaijan will not be subject to financial sanctions?
The MP noted that, in practice, the new rules will further minimize the number of on-site tax audits:
“Overall, a decrease in the number of on-site audits has been observed in recent years. For instance, in 2024, only 384 on-site tax audits were conducted with respect to more than 800,000 active taxpayers. The number of such audits decreased by 29% compared to 2023 and by five times compared to 2018.
One of the key aspects of the new monitoring system is the non-application of financial sanctions in certain cases. According to the new amendments, if risks are disclosed to the tax authority in advance, no financial sanctions will be applied. A financial sanction of 25% is envisaged only when undisclosed risks are identified by the tax authority.”
During the period covered by “horizontal monitoring,” the tax authority will electronically monitor the information submitted:
“The main advantage of the new system is the reduction of tax risks through a pre-consultation mechanism. Participants in ‘horizontal monitoring,’ which will contribute to improving financial discipline and corporate governance, will also be given the option to calculate depreciation on fixed assets using either the declining balance method or the straight-line method.
Medium and large-sized enterprises that maintain automated accounting systems and implement internal control mechanisms may join ‘horizontal monitoring.’ This is also characterized as a mechanism of transparent cooperation between tax authorities and medium and large taxpayers.”