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trThe Procedure for Tax Orders on Bank Accounts Is Changing – A NEW UPDATE FOR ENTREPRENEURS
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The Procedure for Tax Orders on Bank Accounts Is Changing – A NEW UPDATE FOR ENTREPRENEURS
Azerbaijan to Change the Procedure for Tax Orders on Bank Accounts – A New Reform for Entrepreneurs
Azerbaijan is set to change the procedure for imposing tax orders on bank accounts, a system that has been in place for nearly 20 years and has been one of the main sources of dissatisfaction among taxpayers.
The issue concerns cases where a taxpayer or entrepreneur has an outstanding tax debt. Under the current system, the tax authority issues collection orders to all of the taxpayer’s bank accounts, resulting in the automatic withdrawal of funds. While the collection of tax debts is a legitimate and necessary measure, the main problem is that these orders are typically applied to all bank accounts simultaneously. As a result, amounts significantly exceeding the actual tax liability may be frozen, or the same tax debt may be collected from several bank accounts at the same time. Recovering the excess funds later becomes a separate and often lengthy process.
The **State Tax Service (STS)** is now preparing to address this issue. **Nijat Imanov**, Head of the Tax Policy Department of the State Tax Service, stated that the agency has launched a pilot project regarding the application of tax orders to bank accounts. Depending on the outcome of the pilot, a new procedure is expected to be introduced.
According to him, under the current legislation, whenever an entrepreneur, company, or taxpayer has an outstanding debt to the state budget, the tax authority sends collection or freezing orders to the taxpayer’s bank accounts.
"A business or company may have several bank accounts, each containing funds. Since the tax authority has no prior information about how much money is held in each account, it automatically sends collection orders to all of them. As a result, the same amount may be withdrawn from two or even three different bank accounts, meaning the same tax debt is collected multiple times," he explained.
Commenting on the pilot project for a financial news portal, tax expert **Anar Bayramov** noted that the current legislation already includes certain mechanisms intended to protect entrepreneurs and companies.
"For example, if an entrepreneur notices that the debt has already been collected from one bank account, they can immediately provide the payment order confirming the transaction to the other banks. This document proves that the tax debt has already been paid, for instance, through their account at *Kapital Bank*, and therefore should not be collected again from their account at *Paşa Bank*.
Upon receiving this confirmation, the second bank does not withdraw the funds again. However, it still freezes the amount until the payment is officially reflected in the tax system, meaning the entrepreneur cannot use those funds. Once the first payment reaches the state budget and the taxpayer’s personal tax account shows that the debt has been settled, the State Tax Service automatically withdraws the collection orders sent to the other banks."
Although this procedure may seem straightforward, in practice it usually takes one or two days. Despite the existence of legal safeguards, entrepreneurs are not always able to act quickly, and in some cases their accountants may lack sufficient experience. As a result, the second bank may withdraw the funds before receiving confirmation that the debt has already been paid. By the time the entrepreneur delivers the payment confirmation to the other bank, duplicate payments may already have been processed, causing significant financial losses.
The expert also noted that similar issues may arise even when an entrepreneur has only one bank account.
"If the entrepreneur pays the tax debt independently, for example after 3:00 or 4:00 p.m. on the last working day, the payment will be reflected in the taxpayer's account no earlier than the following day. In practice, however, the debt is often cleared only after at least two days. During this period, late payment interest (penalties) continues to accrue, and certain banking transactions may remain restricted."
According to Anar Bayramov, this issue has been under discussion with the tax authorities for a long time.
"Based on the information currently available, the State Tax Service is developing a pilot project to eliminate these problems. Under the proposed system, once a taxpayer makes a payment, it will be reflected in the taxpayer’s personal account in real time. The tax debt will be cleared immediately, collection orders sent to other banks will be automatically cancelled, and if no other collection orders remain in force, no additional penalties will be charged."
A similar real-time mechanism is already used in the **HÖP payment system**. For example, customs debts are cleared immediately after payment. The same principle applies to payments for telephone services, telecommunications, electricity, and other utility services, where payments are reflected instantly and users can continue using the services without interruption.
However, the tax administration has so far lacked such a real-time settlement mechanism. Consequently, taxpayers have sometimes been required to pay the same tax debt two or even three times. This reduces business liquidity by tying up financial resources that could otherwise remain in circulation. The consequences become even more significant when large amounts are involved. Furthermore, recovering overpaid funds from the state budget is often a lengthy and complicated process.
"It is precisely to solve these issues that the pilot project is currently being implemented. Although the detailed framework has not yet been made public, its overall direction is already clear," the expert concluded.
Azerbaijan to Change the Procedure for Tax Orders on Bank Accounts – A New Reform for Entrepreneurs
Azerbaijan is set to change the procedure for imposing tax orders on bank accounts, a system that has been in place for nearly 20 years and has been one of the main sources of dissatisfaction among taxpayers.
The issue concerns cases where a taxpayer or entrepreneur has an outstanding tax debt. Under the current system, the tax authority issues collection orders to all of the taxpayer’s bank accounts, resulting in the automatic withdrawal of funds. While the collection of tax debts is a legitimate and necessary measure, the main problem is that these orders are typically applied to all bank accounts simultaneously. As a result, amounts significantly exceeding the actual tax liability may be frozen, or the same tax debt may be collected from several bank accounts at the same time. Recovering the excess funds later becomes a separate and often lengthy process.
The **State Tax Service (STS)** is now preparing to address this issue. **Nijat Imanov**, Head of the Tax Policy Department of the State Tax Service, stated that the agency has launched a pilot project regarding the application of tax orders to bank accounts. Depending on the outcome of the pilot, a new procedure is expected to be introduced.
According to him, under the current legislation, whenever an entrepreneur, company, or taxpayer has an outstanding debt to the state budget, the tax authority sends collection or freezing orders to the taxpayer’s bank accounts.
"A business or company may have several bank accounts, each containing funds. Since the tax authority has no prior information about how much money is held in each account, it automatically sends collection orders to all of them. As a result, the same amount may be withdrawn from two or even three different bank accounts, meaning the same tax debt is collected multiple times," he explained.
Commenting on the pilot project for a financial news portal, tax expert **Anar Bayramov** noted that the current legislation already includes certain mechanisms intended to protect entrepreneurs and companies.
"For example, if an entrepreneur notices that the debt has already been collected from one bank account, they can immediately provide the payment order confirming the transaction to the other banks. This document proves that the tax debt has already been paid, for instance, through their account at *Kapital Bank*, and therefore should not be collected again from their account at *Paşa Bank*.
Upon receiving this confirmation, the second bank does not withdraw the funds again. However, it still freezes the amount until the payment is officially reflected in the tax system, meaning the entrepreneur cannot use those funds. Once the first payment reaches the state budget and the taxpayer’s personal tax account shows that the debt has been settled, the State Tax Service automatically withdraws the collection orders sent to the other banks."
Although this procedure may seem straightforward, in practice it usually takes one or two days. Despite the existence of legal safeguards, entrepreneurs are not always able to act quickly, and in some cases their accountants may lack sufficient experience. As a result, the second bank may withdraw the funds before receiving confirmation that the debt has already been paid. By the time the entrepreneur delivers the payment confirmation to the other bank, duplicate payments may already have been processed, causing significant financial losses.
The expert also noted that similar issues may arise even when an entrepreneur has only one bank account.
"If the entrepreneur pays the tax debt independently, for example after 3:00 or 4:00 p.m. on the last working day, the payment will be reflected in the taxpayer's account no earlier than the following day. In practice, however, the debt is often cleared only after at least two days. During this period, late payment interest (penalties) continues to accrue, and certain banking transactions may remain restricted."
According to Anar Bayramov, this issue has been under discussion with the tax authorities for a long time.
"Based on the information currently available, the State Tax Service is developing a pilot project to eliminate these problems. Under the proposed system, once a taxpayer makes a payment, it will be reflected in the taxpayer’s personal account in real time. The tax debt will be cleared immediately, collection orders sent to other banks will be automatically cancelled, and if no other collection orders remain in force, no additional penalties will be charged."
A similar real-time mechanism is already used in the **HÖP payment system**. For example, customs debts are cleared immediately after payment. The same principle applies to payments for telephone services, telecommunications, electricity, and other utility services, where payments are reflected instantly and users can continue using the services without interruption.
However, the tax administration has so far lacked such a real-time settlement mechanism. Consequently, taxpayers have sometimes been required to pay the same tax debt two or even three times. This reduces business liquidity by tying up financial resources that could otherwise remain in circulation. The consequences become even more significant when large amounts are involved. Furthermore, recovering overpaid funds from the state budget is often a lengthy and complicated process.
"It is precisely to solve these issues that the pilot project is currently being implemented. Although the detailed framework has not yet been made public, its overall direction is already clear," the expert concluded.