Azerbaijan Tax Treaty

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United-States-Azerbaijan Tax Treaty

Azerbaijan International Tax Compliance Rules

Quick Summary.  Effective in 2020, Azerbaijan adopted Amendments to the Tax Code of the Republic of Azerbaijan.  The new provisions introduce a tax concept of multinational corporations, as well as economic substance provisions, thin capitalization rules, and so-called risky taxpayer provisions.  The tax code also provides for certain tax incentives for micro, small, and medium businesses.  

Azerbaijan is a member of the United Nations (UN), the Organization for Security and Co-operation in Europe (OSCE), and the North Atlantic Treaty Organization’s (NATO) Partnership for Peace.

Azerbaijan is a signatory to the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS MCAA), confirming its agreement to provide for automatic exchange of account information under the Common Reporting Standards (CRS).  

U.S.-Azerbaijan Tax Treaty

Treaty.  Convention between the United States of America and the Union of Soviet Socialist Republics on Matters of Taxation

Currency.  Azerbaijani Manat (AZN).

Common Legal Entities.  Limited liability company, open/closed joint stock company, general partnership, limited partnership, cooperative, and branch and representative offices.

Tax AuthoritiesState Tax Service under the Ministry of Economics.

Tax Treaties.  Azerbaijan is a party to 54 tax treaties, 47 of which are effective.  It has not signed the OECD MLI.  It is, however a signatory to the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS MCAA).

Corporate Income Tax Rate.  20%.

Individual Tax RateOil and Gas Industry Employment (14% / 25%) / Private Sector Employment (0% / 14%) / Individual Entrepreneurs (20%).

Corporate Capital Gains Tax Rate 20%.

Individual Capital Gains Tax RateSame as above based on ordinary rates and characterizations as oil and gas industry, private sector, and individual entrepreneur.

Residence.  An entity is a resident of Azerbaijan if it is incorporated there; branch and representative offices of foreign legal entities are deemed nonresidents.  An individual is considered a resident if he or she is physically present in Azerbaijan for a period of more than 182 days in a calendar year.

Withholding Tax.

          Dividends.  10% for resident and nonresident companies and individuals. 

Interest. 10% for resident and nonresident companies and individuals, but subject to certain exemptions. 

Royalties.  0% (company residents) / 14% (individual residents and nonresident companies and individuals). 

Transfer Pricing.  Follows arm’s length standard.

CFC Rules. If an Azerbaijan resident holds directly or indirectly more than 20% of the charter capital or voting shares of a foreign legal entity that receives income from a low-tax jurisdiction must include the proportionate share of that foreign entity’s income in its taxable income.  For these purposes, a foreign jurisdiction is considered a low-tax jurisdiction if the tax rate is 50% or less than the rate in Azerbaijan or if the country has laws that permit secrecy of financial information.

Hybrid Treatment. No. 

Inheritance/estate taxNo.

Tax Treaty Network – International Tax Attorneys

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