Azerbaijan

Corporate - Corporate residence

Last reviewed - 14 July 2022

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 (e.g. exclusively storing or exhibiting goods or products belonging to a non-resident, purchasing goods) do not create a PE, such as:

  • storing and demonstration of goods and products belonging to 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 non-resident enterprise itself;
  • purchase of goods or gathering the information for non-resident enterprise’s own needs;
  • joint implementation of any above stated activities

Notwithstanding the foregoing, the above listed activities (auxiliary and preparatory) shall be considered as creating a permanent establishment, 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, if
  • 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 authorized to compile a customer base and organize work with clients for non-residents are also deemed to constitute a PE considering time threshold prescribed above.