The Tax Code of the Republic of Azerbaijan (Approved by Law No. 905-IG of the Republic of Azerbaijan of 11 July, 2000) General Part Chapter 1. General Provisions Article 1. Relations Regulated by the Tax Code of the Republic of Azerbaijan 1.1. This Code shall establish the tax system of the Republic of Azerbaijan, general principles of taxation in the Republic of Azerbaijan, rules of determination, payment and collection of taxes, the rights and responsibilities of taxpayers and State tax authorities, as well as other parties to taxation procedures, tax control forms and methods, liability for tax law violations and the procedures for lodging complaints against unlawful actions (inactions) committed by tax agencies and officials thereof. 1.2. This Code establishes the general principles of taxation and taxes for Nakhchivan Autonomous Republic and municipalities. 1.3. Definitions and rules determined in this Code shall be established for the purposes of tax payment and used only within the scope of taxation and tax control regulated by this Code and other legislative acts established on its basis. 1.4. Provisions of this Code on general taxation principles, tax payment rules (excluding sources of payment), rights and obligations of taxpayers and state tax authorities, as well as other participants of tax relations on taxation issues, forms and methods of tax control, liability for violation of tax legislation, rules of appeal of action (inaction) of state tax authorities and their officials are also applied to compulsory state social insurance contributions and unemployment insurance. Article 2. Tax Legislation of the Republic of Azerbaijan 2.1. The Constitution of the Republic of Azerbaijan, this Code, and those legal acts adopted in compliance herewith, shall comprise the tax legislation of the Republic of Azerbaijan. 2.2. Any article of law adopted on the basis of this Code or for the purposes of its execution shall not contradict with the provisions of this Code. 2.3. Whenever there is conflicts on matters of taxation and tax control between legal acts on taxes and legislative acts in other areas, except for cases stipulated by Article 2.7. of this Code, the provisions of tax legislation shall apply. 2.4. Taxation and tax control issues can not be included into the legislative acts, other than tax legislation, with the following exceptions: 2.4.1. provisions concerning administrative offences in relation to tax issues, stipulated by the Code of the Republic of Azerbaijan for Administrative Offences; 2.4.2. provisions concerning tax crimes envisaged by the Criminal Code of the Republic of Azerbaijan; 2.4.3. provisions concerning the priority of tax obligations envisaged in the legislation on bankruptcy and insolvency; 2.4.4. the budget law provisions on taxes; 2.4.5. provisions governing state guarantees and term benefits on taxes; 2.4.6. provisions stipulated by agreements or laws on production sharing, main pipeline and other similar agreements and laws; 2.4.7. provisions stipulated by the legislation on oil and gas operations of export direction and special economic zones. 2.4.8. provisions stipulated by the Law of the Republic of Azerbaijan "On regulation of inspections in the field of entrepreneurship and protection of interests of entrepreneurs" in respect of tax audits (except on-site tax audit); 2.4.9. provisions stipulated by the Law of the Republic of Azerbaijan "On the Alat Free Economic Zone". 2.4-1. Provisions in connection with the granting of tax exemptions and privileges are set only by this Code. Other legal acts, besides this Code, including legal acts specified in Article 2.4 of this Code (except for Article 2.4.9 of this Code), can not stipulate provisions in relation to the tax exemptions and privileges. 2.5. Should any international treaty to which the Republic of Azerbaijan is a party provide for regulations that differ from those contained in this Code and legislative acts established on taxes, the provisions of these international treaties shall apply. 2.6. If international treaty with the intention of avoiding double taxation to which the Republic of Azerbaijan is the party applied by any person, who is not the resident of the state that entered into such treaty for the purpose of obtaining tax privileges, provisions of article 2.5. of this Code shall not be applied for the purposes of tax privileges to the resident of the state that is the party to such treaty. 2.7. If production sharing agreements and laws, main pipeline agreements and etc., approved before this Code is entered into force or after its enforcement, including the laws on oil and gas operations of export direction and special economic areas, oil and gas, contain provisions that differ from those stipulated by this Code and other legislative acts on taxes, then provisions of such agreements and laws shall be applied. 2.7-1. Issues related to taxation and tax control, tax exemptions and privileges in the Alyat free economic zone are governed in accordance with the requirements of the Law of the Republic of Azerbaijan "On the Alyat free economic zone". 2.8. In the event of required changes to the Tax Code of the Azerbaijan in connection with definition of tax policy, tax administration and tax rates within the next year state budget draft, the drafts of these laws shall be submitted to the respective executive authority no later than by May 1 of current year, and respective executive authority further submits them to Milli Majlis of the Republic of Azerbaijan. Article 3. Basis for establishment of taxes and their collection 3.1. Legislation on taxes is based on the universality, equality and fairness of taxation 3.2. Taxes shall have an economic base. 3.3. It is not allowed to establish taxes that will limit everybody's constitutional rights and freedom. 3.4. It is not allowed to determine taxes that violate the single economic space of the Republic of Azerbaijan (in particular those that will directly or indirectly limit the free movement on the territory of the Republic of Azerbaijan (of goods and services) and monetary means, or otherwise limiting the legal activities of taxpayers). 3.5. No one can be forced to pay the tax from the profit (income) of one type more than once. 3.6. The taxes shall not be of discriminatory nature and shall not be established based on the political, ideological, ethnic, confessional or other existing differences between taxpayers. It is prohibited to establish different tax rates based on the form of ownership, citizenship of individuals or origin of capital. It is allowed to establish different rates of customs duties for commodities imported into the territory of the Republic of Azerbaijan, dependant on commodity's country of origin in accordance with this Code and customs legislation. 3.7. Taxes in the Republic of Azerbaijan shall be determined only by this Code; their changes or cancellations shall be implemented by making the changes in this Code. 3.8. No person can be obliged to pay taxes, that have indications of taxes established by this Code but not established by it or taxes that were established in the order different to that specified by this Code. 3.9. The tax legislation shall be formulated in the order that will allow everyone to know what taxes, in which order, when and how much he shall pay. 3.10. The tax system shall encourage the entrepreneurship and investment activity. 3.11. All contradictions and obscurities and uncertainties in the tax legislation shall be interpreted in favour of the taxpayer. 3.12. Individuals and legal entities shall have a free access to regulating legislative acts on taxes. Article 4. The tax system of the Republic of Azerbaijan 4.1. The taxes levied in the Republic of Azerbaijan shall be as follows: 4.1.1. state taxes; 4.1.2. autonomous republic taxes; 4.1.3. local (municipal) taxes. 4.2. State taxes are those taxes that are stipulated by this Code and are obligatory for payment on the entire territory of the Republic of Azerbaijan. 4.3. The taxes of Autonomy Republic are those taxes that are stipulated by the laws of Nakhichevan Autonomy Republic in accordance with this Code and obligatory for payment in the Nakhichevan Autonomy Republic. 4.4. Local (municipal) taxes are those taxes stipulated by this Code and applicable legislation, applied by the resolution of municipalities and obligatory for payment on the territory of municipalities. Other obligatory payments applied by municipalities shall be stipulated by the relevant laws. Local (municipal) taxes rates shall be established within limits stipulated by tax legislation. In accordance with tax legislation municipalities shall be entitled to make decisions on complete or partial tax release or decrease of tax levels for certain categories of taxes paid by taxpayer in their areas. 4.5. In accordance with this Code special tax regime can be applied on the territory of the Republic of Azerbaijan. The special tax regime stipulates the special procedure for tax calculation and payment for the specified period of time. 4.6. It is not allowed to levy taxes that are not stipulated by this code. Article 5. Forms of taxation 5.0. Amounts of tax shall be collected in following forms: 5.0.1. directly from the source (tax collection before obtaining income or profit); 5.0.2. by declaration (tax collection after obtaining income or profit); 5.03. by notice (payment of the tax by taxpayer on the basis of payment notice, issued for the sum, calculated by taxation authority or municipality on the basis of cost of the taxation object and area).