Azerbaijan has implemented Country-by-Country Reporting (CbCR) requirements in accordance with OECD’s BEPS Action 13 and its commitment to international tax transparency. The State Tax Service of Azerbaijan (STS) under the Ministry of Economy oversees CbCR compliance, ensuring that multinational enterprises (MNEs) operating in Azerbaijan adhere to global reporting standards.

This guide provides CFOs and tax professionals with a structured overview of Azerbaijan’s CbCR framework, covering applicability, reporting obligations, submission process, penalties, and key resources.

Applicability of CbCR in Azerbaijan

Criteria for Reporting

CbCR requirements apply to MNE groups that:

• Have consolidated global revenues exceeding AZN 1.5 billion (approximately EUR 750 million) in the preceding financial year.
• Include at least one Azerbaijani entity or permanent establishment (PE).

Local Filing Requirements

An Azerbaijani entity within an MNE group must submit a CbC report if:

• It is the Ultimate Parent Entity (UPE) of the group.
• It has been designated as the Surrogate Parent Entity (SPE) for CbCR purposes.
• The UPE is located in a jurisdiction that does not require CbCR or does not have a qualifying exchange agreement with Azerbaijan.

Relevant Legislation

• Azerbaijan Tax Code – Incorporates BEPS recommendations, including CbCR obligations.
• OECD BEPS Action 13 – Forms the basis for Azerbaijan’s CbCR framework.

Reporting Requirements

Content of the CbC Report

The CbC report must include financial and tax-related data for all jurisdictions in which the MNE operates, including:

• Total revenues (related and unrelated party transactions).
• Profit or loss before income tax.
• Income tax paid and accrued.
• Stated capital and retained earnings.
• Number of employees.
• Tangible assets other than cash or cash equivalents.

Notification Requirement

• All Azerbaijani entities within an MNE group must notify the State Tax Service (STS) regarding which entity will file the CbC report and in which jurisdiction.
• The notification must be submitted electronically before the end of the financial year.

Submission Platform

• Reports must be electronically filed via the Azerbaijan Tax Portal, using the OECD CbCR XML schema.

Resource

Filing instructions and guidelines are available on the State Tax Service (STS) website:
State Tax Service of Azerbaijan

Filing Deadlines

• CbC Reports: Must be submitted within 12 months after the end of the MNE’s financial year.
  • Example: For a financial year ending 31 December 2023, the report must be filed by 31 December 2024.
• Notifications must be provided before the end of the financial year.

Penalties for Non-Compliance

Penalties and Consequences

Failure to comply with Azerbaijan’s CbCR requirements may result in:

• Fines of up to AZN 50,000 for missing or inaccurate reports.
• Additional penalties for persistent non-compliance.
• Increased scrutiny from the Azerbaijani tax authorities.

Mitigation Measures

• Companies can apply for extensions or appeal penalties if they can demonstrate reasonable cause for non-compliance.

Confidentiality and Data Exchange

Data Protection

• The State Tax Service (STS) ensures that CbC reports remain confidential and are only used for tax risk assessment purposes.
• Reports are automatically exchanged with jurisdictions that have a bilateral exchange agreement with Azerbaijan.