The new amendments to the Azerbaijani Tax Code were published on 25 December 2016. The amendments introduced new Transfer Pricing provisions to the Tax Code. These amendments are effective from 1 January 2017.
According to the new rules taxes may be calculated based on the transfer price for transactions concluded between the following persons:
- a resident and its affiliated non-resident
- a non – resident with permanent establishment in Azerbaijan; or the branches of non – residents, representatives and other such units outside Azerbaijan;
- a resident or non-resident with PE in Azerbaijan and persons involved in a favorable tax regime.
In such cases, corporate income tax will be calculated on the basis of the transfer price irrespective of the actual value of the transaction.
For determining the transfer price, the following methods will have to be used:
- Resale price method;
- Cost plus method;
- Comparable profit method;
- Profit split method.
The methods can be used only where no comparable information exists or obtaining information on the price of the goods in transactions between other persons is impossible. The taxpayer must notify the tax authority of the transactions subject to transfer price before 31 March if the total amount is more than AZN 500,000 per year.