Azerbaijani Customs Authorities Are Always in Legal Trade
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Issue 32 A Word From Executive Director of AmCham Credits Dear members, Welcome to AmCham Azerbaijan’s quarterly business AmCham Executive Director: magazine – IMPACT, devoted to the recent achievements in Natavan Mammadova Taxation & Customs systems of Azerbaijan. This edition is quite remarkable – we are wrapping up our calendar year with lots of fruitful achievements and you will be able to read Editor: opinion on these changes from higher level officials – Minister Aykhan Nasibli of Taxes Mr. Mikayil Jabbarov and Chairman of the State Customs Committee customs service lieutenant-general Mr. Articles contributed by: Safar Mehdiyev. Nuran Kerimov As you know, tax legislation in Azerbaijan is expected Zaur Gurbanov to undergo substantial changes. As a “voice” of the business community in the country, AmCham is pleased with these encouraging reforms aimed at reducing tax Gumru Eyvazova burden, simplifying tax administration, creating positive behaviors and preventing Ruslan Mirzayev tax evasion. In parallel, the customs system is also introducing lots of positive Yunis Salayev, Sabit Abdullayev changes. These will improve effectiveness of foreign economic activity, strengthen Walid Madhoun state support for domestic production and diversification of oil economy. All these changes will contribute for sustainable development of the business climate in the Advertisers: country. Another successful benchmark of AmCham was preparation of White Paper – BP representing collective thinking of the members about changes that will strengthen Azerfon Azerbaijan’s business environment, and by extension, the country as a whole. The Turkish Airlines document contains recommendations on banking, finance, insurance, tax, customs, Dow Turkey legal, compliance, antimonopoly, labor, migration, tourism, etc. which also contribute The Coca Cola Company to successful implementation of “Strategic Road Maps for the National Economy P&G and Main Economic Sectors”, endorsed by the President H.E. Ilham Aliyev. Iteca Caspian Let me recapitulate that AmCham welcomes such reform initiatives of the Government and always ready to mobilize expertise and best practices among the member companies to make a substantial contribution for enhancing standards in Publisher: the country. American Chamber of Commerce Taking this opportunity, let me thank each of you for being engaged with AmCham in Azerbaijan in 2018 and wish all the very best in 2019. Happy upcoming New Year, Happy Solidarity Day of Azerbaijanis! Tel: (+994 12) 497 13 33 Best regards, Fax: (+994 12) 497 10 91 Natavan Mammadova www.amcham.az www.impact.az Editor’s Comment Advertising opportunities: Dear friends, dear members. Welcome to 32nd edition of IMPACT Azerbaijan magazine, Please contact the Editor at devoted to recent changes and achievements in taxation [email protected] and customs system of Azerbaijan. Within this edition, we are happy to provide interviews from relevant higher level The articles in IMPACT Azerbaijan government representatives. Herein, the focus has been express the opinions of the authors and on different aspects of the recent changes, which will do not necessarily reflect the position of bring positive impact for development of business climate in Azerbaijan; thus, further contribute for sustainable the American Chamber of Commerce in development of the country. At the same time, member Azerbaijan companies have shared their expertise on important issues touching to the needs and expectations of the private sector. Please, enjoy reading it! Sincerely, Aykhan Nasibli contents IN FOCUS 4 20 Reflection of Recent Changes on Introduction of Mediation for Taxation for the Business Community Commercial Disputes in Azerbaijan of Azerbaijan Special Interview with Minister of Taxes, Ruslan Mirzayev Third-Rank State Tax Councilor Adrem Attorneys Law Firm, Managing Partner Mr. Mikayil Jabbarov 23 7 Beneficial Ownership Disclosure Azerbaijani Customs Authorities are Always in Legal Trade Yunis Salayev, Sabit Abdullayev Special Interview with the Chairman of State Customs BDO Azerbaijan Committee of the Republic of Azerbaijan, Lieutenant- General of Customs Service Mr. Safar Mehdiyev DEVELOPMENT & EDUCATION 11 25 Azerbaijan’s 2019 Tax Reform: Capacity Building: a Vital Factor of Clampdown on Informal Economy Economic Development Nuran Kerimov Walid Madhoun Partner, Deloitte Baku Partner, Mast Canada 14 AMCHAM AZERBAIJAN Changing Wave of Reforms 29 in Taxation About Us Zaur Gurbanov Tax Director, EY 30 16 Business Events Azerbaijan and the European Union: Great Potential in Relations 33 Gumru Eyvazova Amcham Members’ Luncheon Legal and External Affairs Executive,BAT MEMBER CONTRIBUTION 18 36 Direct and Indirect Impact of Social Events Coca-Cola System to the National Economy of Azerbaijan Adrian Cernautan 38 Committee Highlights Caucasus Region Manager, The Coca-Cola Company 41 AmCham Legal Update 2 Issue 32 JOURNEY TO THE NEW HOME OF TURKISH AIRLINES THE AIRLINE THAT FLIES TO MORE COUNTRIES THAN ANY OTHER AWAITS YOU IN THE WORLD’S NEW AVIATION CENTER ISTANBUL AIRPORT in focus Reflection of Recent Changes on Taxation for the Business Community of Azerbaijan Special Interview with Minister of Taxes, Third-Rank State Tax Councilor Mr. Mikayil Jabbarov relations between the state and taxpayers in carrying out active tax policy as one of the main challenges to be addressed by tax authorities. The main task here is to direct the efforts of the Ministry of Taxes and tax legislation towards boosting economic growth and development of entrepreneurship, as well as effective promotion of private investments. Scaling down the shadow economy is among the main targets too. The year of 2018 has been defined as the transition year in relations with taxpayers; relevant steps are being taken to ensure transition to a new tax system stipulated by the factor of social development, as well as in conformity with the leading global practices. This process is carried out through introducing relevant changes both to tax administration culture and tax legislation without detriment to economic growth, entrenched business habits and business environment. Tax legislation has been significantly amended. The amendments may be classified according to 5 directions. These are support to entrepreneurship, reducing the scale of shadow economy and tax evasion, expanding tax base, streamlining tax administration and increasing efficiency of the existing and new tax incentives. The most notable change to the tax legislation features Minister Jabbarov, lately the tax system has been introduction of tax incentives in respect of taxes from salary going through serious changes and local entrepreneurs income for the citizens employed in non-oil private sector. have many expectations with regards to the proposed According to the change, monthly income up to 8000 manats amendments to the tax legislation. Allow us to start our is fully exempted from income tax, whereas citizens with conversation on the very same issue. What will be the monthly income over 8000 manats, are subject to income tax impact of the proposed amendments to the development at the rate of 14% for the amount exceeding 8000 manats. It of the business in the country? is worth mentioning that, this is a big concession on behalf of Tax policy as part of the social-economic policy pursued in the state which is estimated at hundreds of millions manats. Azerbaijan, is constantly improving to meet the changing The state loses part of its revenues because of this particular demands and growing pace of the economy. This is sustainable reform. We anticipate that following the implementation of process. Tax policy shall be flexible and adaptable to the this reform the shadow economy will be reduced, informal economic situation, as well as support business development employment removed, economic and business activity, and competition environment. Ministry of Taxes strives to especially in private segment of non-oil sector revived and embrace these demands in its activity. accelerated, and citizens’ rights will be protected more President Ilham Aliyev outlined the issue of building reliable thoroughly. 4 Issue 32 in focus In order to increase confidence to the reform, the introduced. This was triggered by misuse of tax benefits, aforementioned incentive will remain applicable during originally meant for small entrepreneurs, by the persons who 7 years. Taxpayers will have an opportunity to plan their were not eligible for those benefits. In reality, it cut across activities in a long term perspective. Moreover, income tax the principle of equal and fair taxation by violating the rights of natural persons and social security contributions will be of small entrepreneurs. Current amendments, along with tax merged under a single administration that means further administration measures that we plan to carry out next year, simplification of procedure for the employers. are aimed at preventing unfair competition and supporting Here, I would like to underline the fact that granting tax activities of disciplined taxpayers. incentives at such a scale required high level political decision making. In this regard, Mr. President’s support in this matter Support to small and medium entrepreneurship can should be especially noted. I am certain that, entrepreneurs also be found in the roadmaps endorsed by President and citizens of Azerbaijan will duly appreciate this incentive Ilham Aliyev. These documents list the issues related to by taking adequate steps towards ensuring tax compliance,