Azerbaijan

A resident enterprise is any legal entity established in accordance with the legislation of Azerbaijan and performing entrepreneurial activity or any entity that is effectively managed in Azerbaijan.

Permanent establishment (PE)

A PE of a foreign legal entity is subject to taxation with respect to the income attributable to such PE. A PE is an establishment of a foreign legal entity, through which it fully or partially performs commercial activities (for these purposes, a PE may be considered a management unit, office bureau, agency, construction site, etc.) for 90 cumulative days or more within any 12-month period.

Activities of an auxiliary or preparatory nature, such as the following, do not create a PE:

• Storing and demonstration of goods and products belonging to a non-resident enterprise.
• Storing stocks of goods or products belonging to a non-resident enterprise for eventual processing and subsequent export from the Republic of Azerbaijan by a third party.
• Any other preparatory or auxiliary activity for a non-resident enterprise itself.
• Purchase of goods or gathering information for a non-resident enterprise’s own needs.
• Joint implementation of any of the above-stated activities.

Notwithstanding the foregoing, the above-stated activities (auxiliary and preparatory) shall be considered as creating a PE if:

• the joint implementation of those activities by a non-resident and its interdependent persons in the Republic of Azerbaijan are for entrepreneurial purposes or
• the results of a coherent implementation of any of those activities are not of a preparatory or auxiliary nature, and/or
• the activities of such persons are complementary to other activities as part of a single business process.

Moreover, according to the PE Amendments to the Tax Code, persons authorised to compile a customer base and organise work with clients for non-residents are also deemed to constitute a PE, considering the time threshold prescribed above.