Azerbaijan

Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS)

In December 2022, Azerbaijan joined the OECD/G20 Inclusive Framework on BEPS. By joining the OECD/G20 Inclusive Framework on BEPS, Azerbaijan, together with over 140 countries and jurisdictions, has taken on the commitment to implement 15 measures to tackle tax avoidance, improve the consistency of international tax rules, and ensure a more transparent tax environment.

Some of the Action Plans have already been fully or partially adopted into Azerbaijan’s tax legislation, such as controlled foreign company (CFC) rules, permanent establishment (PE) provisions, transfer pricing regulations, and country-by-country (CbC) reporting requirements.

Through joining the OECD/G20 Inclusive Framework on BEPS, Azerbaijan has committed to addressing tax challenges arising from the digitalisation and globalisation of the economy by joining a two-pillar plan to reform the international taxation rules to make multinational enterprises pay a fair share of tax wherever they operate.

Further strengthening its commitment to the OECD/G20 BEPS agenda, Azerbaijan signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (BEPS Multilateral Instrument or MLI) on 20 November 2023, becoming the 102nd signatory. The MLI is a key international tax instrument that allows jurisdictions to swiftly modify their existing bilateral tax treaties to address tax treaty abuse and artificial avoidance of PE status and to improve dispute resolution mechanisms.

Following the signing, Azerbaijan ratified the MLI by depositing its instrument of ratification with the OECD on 24 September 2024. As a result, the MLI entered into force for Azerbaijan on 1 January 2025. With this, Azerbaijan has committed to updating its existing network of double tax treaties (DTTs) in accordance with the BEPS measures, further enhancing its tax system's integrity and transparency.

New tax incentives

Beginning from 2023, a new tax incentives regime has been created for the legal entities and sole entrepreneurs operating in the liberated territories.

Exemptions for IT companies

Companies involved in system integration, software preparation, and development activities (so-called ‘IT companies’), beginning from 2023, can benefit from certain profit tax exemptions.