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How is a non-resident taxpayer taxed for freight transportation services?
Our company has entered into an agreement with an enterprise that is a tax resident of the Republic of Georgia for the provision of international road freight transportation services. According to the agreement, the transportation of goods is carried out from Tashkent, Republic of Uzbekistan, to Baku, Republic of Azerbaijan. Payment for the transportation services will be made by our company to the aforementioned non-resident. The carrier has provided a Certificate of Residence issued by the competent tax authority of Georgia for 2026 and certified with an apostille.
In view of the above, we kindly request clarification on the following questions. Should a 6% withholding tax be imposed, pursuant to Article 125.1.4 of the Tax Code of the Republic of Azerbaijan, on payments made to this company for international road freight transportation services? Is it possible to apply the provisions of the Agreement between the Republic of Azerbaijan and Georgia for the Avoidance of Double Taxation with respect to Taxes on Income and on Capital in this case? In the absence of a permanent establishment of the carrier in our country and provided that a valid Certificate of Residence has been submitted, can our company make the payment without withholding tax at source?
The State Tax Service under the Ministry of Economy has stated that, pursuant to Article 13.2.33 of the Tax Code, international transportation means the transportation of goods, passengers, baggage and mail, based on transportation documents, by various modes of transport between a point of departure (destination) located in the Republic of Azerbaijan and a destination (departure) point in another state. At the same time, pursuant to Article 125.1.4 of the Tax Code, payments made by a resident enterprise or entrepreneur for communication or transportation services in the course of international communications or international transportation between the Republic of Azerbaijan and other states are subject to withholding tax at a rate of 6%.
According to Clause 5.1 of the Rules on the «Administration of International Treaties on the Avoidance of Double Taxation Concluded between the Republic of Azerbaijan and Other States», if an international treaty provides for an exemption from taxation or taxation at a lower rate with respect to any income of a non-resident derived from sources in Azerbaijan, the non-resident may apply for the relevant exemption or reduced tax rate by submitting the DTA-03 application form, «Application for the application of an exemption or reduced rate provided for under an international treaty at the source of payment on income derived by a non-resident from the Republic of Azerbaijan», completed electronically or in paper form, to the tax authority where the person paying the income is registered.
In addition, we would like to note that, in order to accurately determine tax obligations, it is recommended to contact the tax authority where you are registered, providing information on the actual circumstances of the case, including the agreement concluded between the parties, payment documents and other necessary supporting documents.
Our company has entered into an agreement with an enterprise that is a tax resident of the Republic of Georgia for the provision of international road freight transportation services. According to the agreement, the transportation of goods is carried out from Tashkent, Republic of Uzbekistan, to Baku, Republic of Azerbaijan. Payment for the transportation services will be made by our company to the aforementioned non-resident. The carrier has provided a Certificate of Residence issued by the competent tax authority of Georgia for 2026 and certified with an apostille.
In view of the above, we kindly request clarification on the following questions. Should a 6% withholding tax be imposed, pursuant to Article 125.1.4 of the Tax Code of the Republic of Azerbaijan, on payments made to this company for international road freight transportation services? Is it possible to apply the provisions of the Agreement between the Republic of Azerbaijan and Georgia for the Avoidance of Double Taxation with respect to Taxes on Income and on Capital in this case? In the absence of a permanent establishment of the carrier in our country and provided that a valid Certificate of Residence has been submitted, can our company make the payment without withholding tax at source?
The State Tax Service under the Ministry of Economy has stated that, pursuant to Article 13.2.33 of the Tax Code, international transportation means the transportation of goods, passengers, baggage and mail, based on transportation documents, by various modes of transport between a point of departure (destination) located in the Republic of Azerbaijan and a destination (departure) point in another state. At the same time, pursuant to Article 125.1.4 of the Tax Code, payments made by a resident enterprise or entrepreneur for communication or transportation services in the course of international communications or international transportation between the Republic of Azerbaijan and other states are subject to withholding tax at a rate of 6%.
According to Clause 5.1 of the Rules on the «Administration of International Treaties on the Avoidance of Double Taxation Concluded between the Republic of Azerbaijan and Other States», if an international treaty provides for an exemption from taxation or taxation at a lower rate with respect to any income of a non-resident derived from sources in Azerbaijan, the non-resident may apply for the relevant exemption or reduced tax rate by submitting the DTA-03 application form, «Application for the application of an exemption or reduced rate provided for under an international treaty at the source of payment on income derived by a non-resident from the Republic of Azerbaijan», completed electronically or in paper form, to the tax authority where the person paying the income is registered.
In addition, we would like to note that, in order to accurately determine tax obligations, it is recommended to contact the tax authority where you are registered, providing information on the actual circumstances of the case, including the agreement concluded between the parties, payment documents and other necessary supporting documents.