According to Article 13.2.82 of the AR Tax Code, a risky taxpayer a person who meets the criteria prescribed by the body (institution), established by the relevant executive authority, including performing non-commodity and (or) risky transactions. The decision that the taxpayer is a risky taxpayer, as well as the decision to exclude him from the list of risky taxpayers, is made by the Ministry of Economy of the Republic of Azerbaijan.

 

According to "The Criteria for Risky Taxpayers and Risky Transactions" approved by the decision of the Cabinet of Ministers, a taxpayer who meets at least one of those criteria will be considered a risky taxpayer. Ramin Ramazanov, financial expert explained the criteria with examples to create a concrete idea about the criteria.

 

Under what circumstances does a taxpayer become classified as a high-risk taxpayer?

 

 

1. When carrying out risky operations mentioned below:

 

-  If a taxpayer's electronic invoices indicate the sale of different types of goods compared to what they have purchased or imported, such as importing office furniture but selling construction materials as per the e-invoice, they may be classified as a high-risk taxpayer.

 

-  If it is detected that taxpayers declare a greater quantity of goods than what they have actually purchased or imported, they may be classified as risky taxpayers. For instance, if their purchases or imports are documented as 1,000 manats, but their sales based on receipts amount to 10,000 manats within the same timeframe, and there is insufficient inventory at the beginning of the period, they will be deemed as risky taxpayers.

 

2. If a taxpayer is discovered to be engaging in transactions without actual goods as part of tax control measures, they may be categorized as a high-risk taxpayer. For instance, if an operational tax control measure, accompanied by a justified decision from the tax authority, reveals that the taxpayer's company has conducted non-commodity transactions without providing evidence of the goods involved, they will be deemed a risky taxpayer.

 

3. If the importer, producer, or non-importer does not have a registered warehouse or any other registered business entity with the tax authority, or if the importation does not align with the volume of goods acquired, they may be classified as a high-risk taxpayer.

 

-  If "AA" LLC is involved in the sale of imported goods without possessing its own or leased warehouse, or if the rented warehouse space is significantly smaller than the minimum requirement of 100 square meters for storing imported goods, the company would be classified as a risky taxpayer. However, if the goods are directly delivered to customers and information regarding the order quantities for each customer is reported to the tax authority, the company would not be deemed a risky taxpayer.

 

4. If it is uncovered during tax control that the taxpayer possesses goods that do not align with their declared business activities and lacks documentation to support the acquisition of such goods, they may be classified as a high-risk taxpayer.

 

-  If, during a tax audit, it is revealed that a company offering training services has presented documentation-lacking records of acquiring construction materials, the company would be classified as a risky taxpayer. However, it's important to note that office supplies, inventory, and similar assets acquired by the taxpayer for their business operations are exempt from this classification.

 

5. If the quantity of goods imported or acquired by a taxpayer for the purpose of sales within the past six months surpasses at least three times their turnover during the same period, they may be classified as a high-risk taxpayer.

 

-  If we consider the scenario where LLC imported goods valued at 10,000 manats or acquired them through e-invoices during the period of January to June 2020, while their turnover for the same period was 2,000 manats, the company may be categorized as a risky taxpayer. However, it is important to note that exceptions to this classification apply in situations where the goods have a seasonal nature or when the delivery of goods is pre-ordered and stipulated in the contractual agreement. In such cases, the LLC would not be considered a risky taxpayer.

 

6. A legal entity in which an individual who is a risk taxpayer defined by the 5 points mentioned above is the head or founder of the executive body. If a natural person who is a risky taxpayer is the head or founder of any legal entity, the legal entity headed by him is also considered a risky taxpayer.

 

7. A legal entity established by the head or founder of the executive body of a legal entity that is a risky taxpayer defined by the first 5 points of the criteria, or is the head of an executive body. Thus, if the person who is the head or founder of a legal entity that is a risky taxpayer is the head or founder of other legal entities, that legal entity or persons are also considered a risky taxpayer.

 

8. Individuals who are the head of the executive body of more than five legal entities and legal entities of which they are the head of the executive body:

 

-  This means that a person who is the head of 5 legal entities will lead the 6th individual to start a new business, and all the legal entities he is the head of are included in the list of risky taxpayers.

 

The State Tax Service, operating under the Ministry of Economy of the Republic of Azerbaijan, publishes information regarding risky taxpayers. This includes taxpayers who meet the criteria for risky transactions and have been designated as risky taxpayers due to non-commodity and/or risky transactions. Additionally, information about taxpayers who have been removed from the list of risky taxpayers following a decision is also made available on the official website.

 

In addition, information on taxpayers who have been declared risky taxpayers will be reflected in warning notices by taxpayers during transactions conducted through the electronic invoice system on the Internet Tax Administration portal of the State Tax Service under the Ministry of Economy.

 

It should be noted that the Tax Code stipulates a number of restrictions on taxpayers who have the status of risky taxpayers, as well as taxpayers who avoid taxes by conducting risky and risky transactions.

 

Belə məhdudlaşmalara aşağıdakılar aiddir:

 

 

- Tax obligations arising from non-commodity transactions are imposed on the beneficiary;

 

- Documents obtained within the framework of non-commodity transactions are not considered documents confirming expenses deducted from income;

 

- Reimbursement of VAT paid on transactions carried out within the framework of non-commodity and risky transactions is not allowed;

 

- Information about risky taxpayers is considered non-commercial and (or) tax confidential information;

 

- If the taxpayer meets the criterion of a risky taxpayer, this case is the basis for conducting an extraordinary mobile tax audit and an operative tax control measure;

 

- If the taxpayer is a risky taxpayer, the tax authority has the right to calculate the tax until the date of its payment;

 

- In relation to a risky taxpayer, the tax liability fulfillment period is not extended;

 

- Amounts already paid in relation to risky taxpayers are returned after the full completion of tax control measures on the taxpayer's activities.