Since 1 January 2020, the newly introduced notion of High-risk taxpayer to of the Tax Code of the Republic of Azerbaijan is defined as a person who meets the criteria approved by the relevant executive authority (Cabinet of Ministers of AR), including a person conducting non-commodity and/or high-risk transactions (Article 13.2.82).
By Decision No. 265 of the Cabinet of Ministers of the Republic of Azerbaijan dated July 28, 2020, the “Criteria of the high-risk taxpayer and high-risk transactions” were approved.
According to the decision, high-risk transactions are the transactions that meet any one of the following criteria:
- when it is detected that the electronic invoices submitted by taxpayers specify different types of goods rather than the types of goods actually purchased or imported;
- when it is detected that the taxpayers have supplied goods to clients in excess of the goods purchased or imported by the same taxpayers (in respect of goods already supplied in excess).
According to the decision, taxpayers are considered high-risk taxpayers if they meet any one of the following criteria:
2.when it is detected within the framework of tax control measures that a taxpayer is conducting non-commodity transactions;
3. in the absence of a warehouse (including a leased warehouse) or other economic entity (object) registered with the tax authority by an importer, producer (manufacturer) or a person carrying out non-import trade activities, or if the volume of imported or purchased goods does not correspond to the area of the registered warehouse or other economic entity (object) (except for the cases when goods are brought to other persons on the basis of order and are delivered directly to customers (TIN if the customer is a taxpayer, name, surname, father’s name and FIN if the customer is an individual) and information on the amount of the order for each customer is submitted to the tax authority);
4. when undocumented submission of goods obtained by a taxpayer that is not corresponding to the type of activity (types of activity) of the taxpayer is detected during tax control (excluding office supplies, inventory and other similar assets acquired by the taxpayer for use in his/her economic activities);
5. if the volume of goods imported or purchased by the taxpayer for sale purposes for the last 6 months is at least 3 times higher than its turnover for the relevant period (except for the cases when the goods are ordered in advance and are to be delivered by the taxpayer within the period specified in the contract, as well as depending on the seasonal nature of the goods);
6. A legal entity where a shareholder or the head of the executive body is a high-risk taxpayer as specified in paragraphs 1-5;
7. A legal entity incorporated or headed by the head of the executive body or shareholder of a legal entity that is a risky taxpayer as specified in paragraphs 1-5;
8. Individuals who are the head of the executive body of more than five legal entities and the legal entities in which they are the head of the executive body.