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The Exchange of Tax Information Portal is an initiative of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The Global Forum conducts peer reviews of its member jurisdictions' ability to co-operate with other tax administrations in accordance with the internationally agreed standard. The standard provides for exchange of information on request where it is foreseeably relevant to the administration and enforcement of the domestic tax laws of the requesting jurisdiction. Effective exchange of information requires that jurisdictions ensure information is available, that it can be obtained by the tax authorities and that there are mechanisms in place allowing for the exchange of that information. The Global Forum's peer review process examines both the legal and regulatory aspects of exchange (Phase 1 reviews) and the exchange of information in practice (Phase 2). The EOI Portal will track the development of these peer reviews, including changes that jurisdictions make in response to the Global Forum's recommendations.

Peer Review: Azerbaijan Phase 2 report

This report for Azerbaijan has been published on 4 Nov 2016. You can buy this report, or browse it online below.

Skip directly to the Executive Summary. You may also want to view the tables of determinations and ratings.


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Determinations and Recommendations

Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities. (ToR A.1)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   Prior to 15 July 2015, JSCs potentially could have issued bearer shares, but there is no sufficient mechanism in place to ensure that the ownership information of holders of bearer shares is maintained and available.  Azerbaijan should take necessary measures to ensure that ownership information on potentially existing bearer shares, issued before 15 July 2015, is maintained and available. 
Phase 2 Rating Factors Recommendations
Largely Compliant.  The new securities market law of July 2015 has established a central depositary and required all JSCs to deposit their share registers with this custodian before September 2015 but the compliance has not been monitored. Similarly, the new law has obligated shareholders of all JSCs to dematerialize their shares before 15 July 2015. But the effective implementation of these obligations has not been tested in practice.  It is recommended that the Central Depositary of Azerbaijan monitors the implementation of the new securities market law to ensure that updated ownership information on all JSCs is available in Azerbaijan. 
The requirement on nominees to disclose the identity information of the actual owner of the shares to the Central Depositary has come into force after the review period and the compliance has not been tested in practice.  It is recommended that Azerbaijan monitors the implementation of this new obligation to ensure that nominees held ownership information is actually available in Azerbaijan. 
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements. (ToR A.2)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   While Azerbaijan’s accounting and tax laws indirectly require the keeping of underlying documentation, lack of explicit obligations in Azerbaijan’s legislation may provide the opportunity for some entities not to maintain underlying documentation.  Azerbaijan should introduce express obligations in its relevant laws that require all relevant entities to maintain underlying documentation.  
The Tax Code has inconsistent provisions that do not impose sufficient obligations on taxpayers to maintain accounting records for a period of more than 3 years.  Azerbaijan should ensure clarity and consistency in the provisions in the Tax Code to maintain accounting records for a period of at least 5 years. 
Phase 2 Rating Factors Recommendations
Largely Compliant.     
   
Banking information should be available for all account-holders. (ToR A.3)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information). (ToR B.1)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   There is ambiguity in the scope of different laws in defining the term “Commercial Secret”. This may affect the access powers of the competent authority in obtaining information in line with the international standard on EOI.  Azerbaijan should clarify its laws to ensure that the scope of the term “commercial secret” is in line with the international standard on EOI. 
Uncertainties in accessing certain types of client information from banks and in accessing information using compulsory powers for period beyond 3 calendar years may restrict the access to information in certain cases.  Azerbaijan should ensure that the competent authority has adequate access powers including compulsory powers unhindered by the 3 years limitation and is able to access client information from banks in all situations for EOI purposes, to bring them in line with the standard. 
Azerbaijan’s EOI Agreements do not define the term "professional secret" and the scope of this term under the domestic law restricts the tax authorities’ access to any information held by auditors.  Azerbaijan should ensure that the scope of professional secrecy that applies to auditors is consistent with the international standard. 
Phase 2 Rating Factors Recommendations
Largely Compliant.     
   
   
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information. (ToR B.2)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   There are no exceptions to prior notification of the person concerned for accessing bank account information.  Notification rules in Azerbaijan should permit exceptions from prior notification, an e.g. in case in which the information request is of a very urgent nature or the notification is likely to undermine the chance of success of the investigation. 
Phase 2 Rating Factors Recommendations
Largely Compliant.     
Exchange of information mechanisms should provide for effective exchange of information. (ToR C.1)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   The issues identified under element B.1 may affect Azerbaijan’s ability to give effect to its EOI mechanism.  Azerbaijan should address the recommendations made under element B.1. 
Phase 2 Rating Factors Recommendations
Largely Compliant.     
The jurisdictions' network of information exchange mechanisms should cover all relevant partners. (ToR C.2)
Determination Factors Recommendations
The element is in place.     Azerbaijan should continue to develop its exchange of information network with all relevant partners. 
Phase 2 Rating Factors Recommendations
Compliant.     
The jurisdictions' mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received. (ToR C.3)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties. (ToR C.4)
Determination Factors Recommendations
The element is in place.   Ambiguity in the scope of different domestic laws in defining the term “commercial secret” may result, in some cases, in interpreting this term wider than that permitted by the international standard.  Azerbaijan should remove any ambiguities in its domestic laws to bring the scope of the term “commercial secret” in line with the international standard. 
Azerbaijan’s EOI Agreements do not define the term "professional secret" and the scope of this term under the domestic law restricts the tax authorities’ access to any information held by auditors.  Azerbaijan should ensure that the scope of professional secrecy that applies to auditors is consistent with the international standard. 
Phase 2 Rating Factors Recommendations
Compliant.     
   
The jurisdiction should provide information under its network of agreements in a timely manner. (ToR C.5)
Determination Factors Recommendations
The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review.      
Phase 2 Rating Factors Recommendations
Compliant.