Harmful Tax Practices – 2023 Peer Review Reports on the Exchange of Information on Tax Rulings

106. Azerbaijan can legally issue the following five types of rulings within the scope of the transparency framework: (i) preferential regimes; (ii) cross-border unilateral APAs and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles; (iii) rulings providing for unilateral downward adjustments; (iv) permanent establishment rulings; and (v) related party conduit rulings.

107. For Azerbaijan, past rulings are any tax rulings issued prior to 1 March 2023. However, there is no obligation for Azerbaijan to conduct spontaneous exchange information on past rulings.

108. For Azerbaijan, future rulings are any tax rulings within scope that are issued on or after 1 March 2023.

109. The Azerbaijan tax authority (State Tax Service) can issue tax rulings. A dedicated Working Group, which is led by the Deputy Head of the State Tax Service and consists of the representatives of relevant departments, is responsible for the issuance of the rulings. When a ruling request comes in, this is discussed within the Working Group. When a ruling is issued, it is registered in the electronic system (AVIS) of the State Tax Service by the Secretariat of the Working Group.

110. Specific “Procedural Rules for the Provision of Mutual Assistance on Tax Matters” set out the types of rulings for which information needs to be exchanged and with which jurisdictions. The Working Group has been instructed of the types of rulings that need to be exchanged under the Action 5 transparency framework, and cooperates with the Exchange of Information (EOI) division within the State Tax Services on the identification and exchanges of in-scope rulings. The EOI division has also an access to AVIS and checks on a regular basis (once per month) whether issued rulings meet the criteria and should be exchanged.

111. As part of the Procedural Rules, the Working Group needs to collect from the taxpayer the information on all relevant exchange jurisdictions for each specific type of ruling in line with the BEPS Action 5 report (OECD, 2015[3]), before the ruling is sent to the EOI division.

112. To date, no rulings within the scope of the transparency framework have been issued.

113. In accordance with the provisions of the “Internal Supervisory Procedures of the State Tax Service under the Ministry of Economy of the Republic of Azerbaijan” approved by the order of the Head of the State Tax Service, there is an internal group within the International Taxation and Tax Monitoring department which consists of Deputy Head of the Department, Head of Transfer Pricing unit and employees of the EOI division. This internal group and the Head of the Department monitor and oversee the activities of the EOI unit, responsible for exchange of tax rulings with the relevant partners.

114. Furthermore, staff members of the Working Group have participated in various trainings on exchange of information, and specifically on the Action 5 transparency framework.

115. Azerbaijan has met all of the ToR for the information gathering process and no recommendations are made.

116. Azerbaijan has the necessary domestic legal basis to exchange information spontaneously. Azerbaijan notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

117. Azerbaijan has international agreements permitting spontaneous exchange of information, including: (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011[2]) (“the Convention”) and (ii) bilateral agreements in force with 55 jurisdictions.1

118. The “Procedural Rules for the Provision of Mutual Assistance on Tax Matters” set out the types of rulings for which information needs to be exchanged and with which jurisdictions. In addition, these Procedural Rules provide instructions on the exchanges of information, including that the information on rulings should be exchanged using the template of Annex C of the BEPS Action 5 Report (OECD, 2015[3]). Furthermore, the summary section of the template has to be completed in line with the internal FHTP suggested guidance.

119. Issued rulings need to be made available within one month to the EOI division, which then needs to perform the exchange within 60 days. An additional 30 days may be added to that period, in the case of exceptional circumstances. This is still within the timelines as provided for by the Action 5 transparency framework.

120. During the year in review, no exchanges were required to take place and no data on the timeliness of exchanges is reported.

121. Azerbaijan has the necessary legal basis for spontaneous exchange of information and has a process for completing the templates in a timely way. Azerbaijan has met all of the ToR for the exchange of information process and no recommendations are made.

122. As no rulings were issued, no statistics can be reported.

123. Azerbaijan does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015[3]) were imposed.

[1] OECD (2021), BEPS Action 5 on Harmful Tax Practices - Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD Publishing, Paris, http://www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparency-framework.pdf.

[3] OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris, https://doi.org/10.1787/9789264241190-en.

[2] OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris, https://doi.org/10.1787/9789264115606-en.