- Updated
- May 2025
- Sections
- 15
- Questions
- 36
Key Facts
Core Framework
The Tax Code Article 13.2.65
The substance of the arm’s length principle is reflected in Azerbaijan’s domestic legislation.
Rules for Determining and Applying Transfer Pricing, Para. 2.0. (Decision of the Board of The Ministry of Taxes of The Republic of Azerbaijan, 27 January 2017)
The concepts used in the Rules for transfer pricing purposes, shall be applied in the meaning adopted in the OECD Transfer Pricing Guidelines, unless otherwise specified in the Rules.
Rules for Determining and Applying Transfer Pricing, Section 4
The guidance for performing a comparability analysis in Azerbaijan is aligned with the guidance outlined in Chapter III of the TPG.
There is no preference for domestic comparables over foreign comparablesspecified in Azerbaijan’s transfer pricing framework.
Rules for Determining and Applying Transfer Pricing, article 2.0.9, 6.2, 6.3
Domestic TP framework require the use of ALP range if there are comparable transactions, if there is only one comparable transaction TP is calculated based on the indicators of that transaction. 2.0.9.Interquartile range - the interval between the median of the lower quartile and the median of the upper quartile of the relevant indicators (price, margin or specific weight) selected from all comparable transactions. If the transfer price is outside the interquartile range, then the tax is calculated using the median of that range. 6.2. If the comparative analysis identifies only one comparable transaction, the transfer price is calculated based on the relevant indicators of that transaction. 6.3. When there are multiple comparable transactions, the transfer price is calculated by determining the interquartile acceptable range of the selected relevant indicators (price, margin, or specific weight) of all comparable transactions.
Documentation
The Tax Code, Article 16.1.4; 16.1.4-1; 16.9
The Tax Code, Article 16.1.4; 16.1.4-1; 16.9
The Tax Code, Article 16.1.4; 16.1.4-1; 16.9
The Tax Code, 57.4, 57.1-2.
Specific transfer pricing penalties : (financial sanctions) 57.4. A taxpayer who fails to submit the reports specified in Articles 16.1.4 and 16.1.4-3 of this Code within the established deadlines, provides incorrect information in these reports, or does not submit the documents and information specified in Article 16.1.4-1 of this Code within 60 days upon the request of the tax authority shall be subject to a financial sanction of 6,000 manats based on the decision of the head of the tax authority (or their deputy). 57.1-2. A financial sanction of 10,000 manats shall be imposed on the taxpayer for failure to submit the CBC report and/or notification within the specified period, in the prescribed form and manner.
TP Methods
- CUP
- Resale Price
- Cost Plus
- TNMM
- Profit Split
- Other
Selection: Most appropriate method
Dispute Resolution
Rules for Determining and Applying Transfer Pricing, Section 9 (APA rules) "Guide on Submitting Requests in Accordance with the 'Mutual Agreement Procedure' Provision of International Treaties on the Elimination of Double Taxation between the Republic of Azerbaijan and Other States” (MAP Guidance) Azerbaijan OECD MAP Profile
APAs are allowed in Azerbaijan (unilateral, bilateral and multilateral) Duration is 30 days and can be extended twice each of 30 days Rollback is allowed There is MAP Guidance in Azerbaijan, and it is reflected in MAP profile of Azerbaijan Specific Provisions on APA: 9.1. Before carrying out any controlled transaction, the taxpayer may apply to the tax authority with an application determined by the State Tax Service under the Ministry of Economy of the Republic of Azerbaijan, along with the relevant agreement and details of the transaction, to agree in advance on the transfer pricing method. 9.2. The application mentioned in clause 9.1 of these Rules must be submitted at least three (3) months before the start of the controlled transaction. 9.3. The tax authority reviews the application regarding the advance agreement on transfer pricing methods within 30 days. If additional time is required for the review, the tax authority has the right to extend the review period twice, each time for 30 days, by providing justification for the extension. In such cases, the applicant must be informed no later than the date on which the extension begins. Unless there are grounds for rejection specified in clauses 9.3-4 of these Rules, a letter is sent to the taxpayer regarding the advance agreement on transfer pricing methods. The validity period of the tax authority's letter regarding the advance agreement on transfer pricing methods is 3 years.
Rules for Determining and Applying Transfer Pricing, Section 9 (APA rules) "Guide on Submitting Requests in Accordance with the 'Mutual Agreement Procedure' Provision of International Treaties on the Elimination of Double Taxation between the Republic of Azerbaijan and Other States” (MAP Guidance) Azerbaijan OECD MAP Profile
APAs are allowed in Azerbaijan (unilateral, bilateral and multilateral) Duration is 30 days and can be extended twice each of 30 days Rollback is allowed There is MAP Guidance in Azerbaijan, and it is reflected in MAP profile of Azerbaijan Specific Provisions on APA: 9.1. Before carrying out any controlled transaction, the taxpayer may apply to the tax authority with an application determined by the State Tax Service under the Ministry of Economy of the Republic of Azerbaijan, along with the relevant agreement and details of the transaction, to agree in advance on the transfer pricing method. 9.2. The application mentioned in clause 9.1 of these Rules must be submitted at least three (3) months before the start of the controlled transaction. 9.3. The tax authority reviews the application regarding the advance agreement on transfer pricing methods within 30 days. If additional time is required for the review, the tax authority has the right to extend the review period twice, each time for 30 days, by providing justification for the extension. In such cases, the applicant must be informed no later than the date on which the extension begins. Unless there are grounds for rejection specified in clauses 9.3-4 of these Rules, a letter is sent to the taxpayer regarding the advance agreement on transfer pricing methods. The validity period of the tax authority's letter regarding the advance agreement on transfer pricing methods is 3 years.
Simplifications
As of March 2025, regulations have not yet been established for the simplified and streamlined approach.
Special Topics
Rules for Determining and Applying Transfer Pricing, article 4.4.1.-4.4.4.
Articles 4.4.1-4.4.4. of the Rules for Determining and Applying Transfer Pricing states that: “4.4. If the controlled transaction relates to the transfer or concession of rights to intangible assets, a comparative analysis will be conducted to select a comparable transaction. In addition to the factors outlined in paragraph 4.3 of these Rules, the following indicators will be compared: 4.4.1. The advantage that the person acquiring the intangible asset (such as a patent, trademark, license, or other intangible asset) will gain in the market from acquiring that asset; 4.4.2. Any geographical restrictions or prohibitions related to the use or re presentation of the rights to the intangible asset being transferred or conceded; 4.4.3. Whether the right to use the intangible asset is exclusive or non-exclusive; 4.4.4. Whether the person acquiring the right to use the intangible asset has the authority to improve or modify it.”
The guidance in Chapter VII of the TPG is followed.
Rules for Determining and Applying Transfer Pricing, para. 4.5
Full OECD Questionnaire
Legal ReferenceThe Tax Code Article 13.2.65
The substance of the arm’s length principle is reflected in Azerbaijan’s domestic legislation.
Legal ReferenceRules for Determining and Applying Transfer Pricing, Para. 2.0. (Decision of the Board of The Ministry of Taxes of The Republic of Azerbaijan, 27 January 2017)
The concepts used in the Rules for transfer pricing purposes, shall be applied in the meaning adopted in the OECD Transfer Pricing Guidelines, unless otherwise specified in the Rules.
Legal ReferenceThe Tax Code Article 18, Article 14-1.2.
Definition of related parties is defined in Article 18 (Interdependent persons) of the Tax Code: “18.1. Interdependent persons for tax purposes are individuals and (or) legal entities whose relations may directly affect the economic results of their activities or the activities of the persons they represent. 18.2. For the purposes of this Article, the following persons shall be considered to be mutually dependent: 18.2.1. a person directly or indirectly participates in the property (authorized capital) of another person and his/her share or voting rights are at least 20 percent; 18.2.2. a person is subordinate to another person due to his/her service position or a person is directly or indirectly under the control of another person; 18.2.3. the persons are directly or indirectly under the control of a third party; 18.2.4. the persons directly or indirectly jointly control a third party; 18.2.5. family members specified in Article 13.2.7 of this Code. 18.3. For the purposes of this Article, a person is deemed to have control over another person if that person has the ability to restrict or direct the activities of the other person. Between a resident of the Republic of Azerbaijan and (or) a permanent establishment of a non-resident in the Republic of Azerbaijan and entities established (registered) in countries with preferential taxation;” Transactions covered by transfer pricing is stated in Article 14-1.2 of the Tax Code: “14-1.2. Taxes may be calculated on the basis of transfer pricing from transactions carried out between the following persons: 14-1.2.1. Between a resident of the Republic of Azerbaijan and non-resident persons who are mutually dependent on him, as well as any representative office, branch and other division of that resident located in other states (territories); 14-1.2.2. between a permanent establishment of a non-resident in the Republic of Azerbaijan and that non-resident itself or any of its representative offices, branches and other divisions located in other states, or any other person mutually dependent on that non-resident and located in another state; 14-1.2.3. Between a resident of the Republic of Azerbaijan and (or) a non-resident with a permanent representative office in the Republic of Azerbaijan and entities established (registered) in countries with preferential taxation; 14-1.2.4. except for the cases specified in Articles 14-1.2.1-14-1.2.3 of this Code, between a resident of the Republic of Azerbaijan or a permanent representative office of a non-resident in the Republic of Azerbaijan and non-resident persons, provided that: 14-1.2.4.1. persons have conducted transactions on products traded on international commodity exchanges and (or); 14-1.2.4.2. The total income of a resident of the Republic of Azerbaijan or a permanent representative office of a non-resident in the Republic of Azerbaijan during the tax year exceeds 30 million manats and the specific weight of the volume of transactions with each non-resident in the total income (expenses) exceeds 30 percent.”
Legal ReferenceThe Tax Code, Article 14-1.7. Rules for Determining and Applying Transfer Pricing, para 5.1.1.-5.1.5.
According to Article 14-1.7. of the Tax Code The taxpayer has the right to provide evidence regarding the determination of the transfer price of goods (works, services) in a manner different from what is specified in this Code.
- CUP (provided)
- Resale Price (provided)
- Cost Plus (provided)
- TNMM (provided)
- Profit Split (provided)
- Other (provided)
Legal ReferenceRules for Determining and Applying Transfer Pricing, para 5.2-5.4.
The selection of a transfer pricing method always aims at finding the most appropriate method for a particular case. With regard to the proper method of establishing transfer prices, general recommendations of the OECD TPG are followed. If applicable in a reliable manner, CUP has the priority. Articles 5.2-5.4 of the Rules for Determining and Applying Transfer Pricing state the following: “5.2. In all cases where possible, the price comparison method provided for in subparagraph 5.1.1 (CUP) of these Rules shall be applied to determine the transfer price. 5.3. If it is not possible to determine the transfer price using the CUP method, and if there are no comparable transactions or information of known source about the prices of those transactions for the application of this method, other methods shall be used. 5.4. When selecting other methods, the method shall be used, taking into account the nature of the controlled transaction, the characteristics of the parties to the transaction and other indicators, whichever method is more likely to be applied based on the information on the identified comparable uncontrolled transaction. If the information obtained allows the application of both one of the methods provided for in subparagraphs 5.1.2 (RPM) or 5.1.3 (CPM) of these Rules and one of the methods in subparagraphs 5.1.4 or 5.1.5 of these Rules, one of the methods in subparagraphs 5.1.2 or 5.1.3 of these Rules shall be selected when determining the transfer price.”
- Hierarchy of methods (not selected)
- Most appropriate method (selected)
- Other (if so, please explain) (not selected)
Legal ReferenceThe Tax Code, Article 14-1.2.4.1. Rules for Determining and Applying Transfer Pricing, para 2.0.1.4.
Commodity transactions (traded in international commodity exchanges) are covered by the Rules for Determining and Applying Transfer Pricing (paragraph 2.0.1.4.) and by the Tax Code (Article 14-1.2.4.1.).
Legal ReferenceRules for Determining and Applying Transfer Pricing, Section 4
The guidance for performing a comparability analysis in Azerbaijan is aligned with the guidance outlined in Chapter III of the TPG.
There is no preference for domestic comparables over foreign comparablesspecified in Azerbaijan’s transfer pricing framework.
Legal ReferenceRules for Determining and Applying Transfer Pricing, article 2.0.9, 6.2, 6.3
Domestic TP framework require the use of ALP range if there are comparable transactions, if there is only one comparable transaction TP is calculated based on the indicators of that transaction. 2.0.9.Interquartile range - the interval between the median of the lower quartile and the median of the upper quartile of the relevant indicators (price, margin or specific weight) selected from all comparable transactions. If the transfer price is outside the interquartile range, then the tax is calculated using the median of that range. 6.2. If the comparative analysis identifies only one comparable transaction, the transfer price is calculated based on the relevant indicators of that transaction. 6.3. When there are multiple comparable transactions, the transfer price is calculated by determining the interquartile acceptable range of the selected relevant indicators (price, margin, or specific weight) of all comparable transactions.
OECD TPG Guidance is followed: Where there are differences between the situations being compared that could materially affect the comparison, comparability adjustments must be made, where possible, to improve the reliability of the comparison
Legal ReferenceRules for Determining and Applying Transfer Pricing, article 4.4.1.-4.4.4.
Articles 4.4.1-4.4.4. of the Rules for Determining and Applying Transfer Pricing states that: “4.4. If the controlled transaction relates to the transfer or concession of rights to intangible assets, a comparative analysis will be conducted to select a comparable transaction. In addition to the factors outlined in paragraph 4.3 of these Rules, the following indicators will be compared: 4.4.1. The advantage that the person acquiring the intangible asset (such as a patent, trademark, license, or other intangible asset) will gain in the market from acquiring that asset; 4.4.2. Any geographical restrictions or prohibitions related to the use or re presentation of the rights to the intangible asset being transferred or conceded; 4.4.3. Whether the right to use the intangible asset is exclusive or non-exclusive; 4.4.4. Whether the person acquiring the right to use the intangible asset has the authority to improve or modify it.”
The guidance in Chapter VII of the TPG is followed.
Legal ReferenceRules for Determining and Applying Transfer Pricing, para. 4.5
Legal ReferenceThe Tax Code, Article 110.1, 110.3
Articles 110.1 and 110.3 of the Tax Code provide restrictions on deductibility of interest payments, as follows: 110.1.not to exceed 125% of average interest rate of interbank loans, either from a bank auction held for a similar period or, if no such auction is held, from the average interest rate of interbank loans published by the Central Bank of the Republic of Azerbaijan 110.3. Notwithstanding the other provisions of this article, if the foreign debts (excluding debts issued by foreign banks and credit institutions, as well as bonds traded on foreign exchanges) exceed twice the taxpayer’s net assets (capital), the interest calculated on the portion of the debt exceeding twice the net assets (capital) shall not be deductible from income.”
There are no specific rules on cost contribution arrangements in Azerbaijan. However, these arrangements are allowed under Azerbaijan transfer pricing framework.
Legal ReferenceThe Tax Code, Article 16.1.4; 16.1.4-1; 16.9
- Master file consistent with Annex I to Chapter V of the TPG (selected)
- Local file consistent with Annex II to Chapter V of the TPG (selected)
- Country-by-country report consistent with Annex III to Chapter V of the TPG (selected)
- Specific transfer pricing returns (separate or annexed to the tax return) (not selected)
- Other (specify): (not selected)
Legal ReferenceThe Tax Code, Article 16.1.4; 16.1.4-1; 16.9 “Rules on The deadline, form, and procedure for submitting the report of an enterprise that is a resident of the Republic of Azerbaijan and part of a multinational group of companies to the tax authority” Section 4 and 5 Rules for Determining and Applying Transfer Pricing, para. 7.4
Azerbaijan’s transfer pricing framework provides for master file, local file and country-by-country reporting (CbCR), as follows: • Master file should be submitted within 60 days upon request of the tax administration • Local file should be submitted: o for transactions that exceed Azerbaijan Manats (AZN) 500 000 – according to the “Report on controlled transactions”, a local file for transactions exceeding this threshold should be submitted no later than 31 March of the year following the reporting year (the same due date for corporate income tax returns) o for transactions below AZN 500 000, the local file should be submitted within 60 days upon request of the tax administration • If the total revenue of a multinational enterprise (MNE) group exceeds the manat equivalent of 750 million euros in a financial year, the taxpayer that is part of the MNE group and registered for tax purposes in the Republic of Azerbaijan must submit a report and notification to the tax authority. This submission must be made within the timeframe, format, and procedure determined by the relevant executive authority.CbCR should be submitted by the end of the reporting year. The Main Enterprise, Authorized Enterprise or Intra-Group Enterprise, which is a resident of the Republic of Azerbaijan and is part of a Transnational Group of Companies, shall submit the notification to the tax authorities of the Republic of Azerbaijan by electronic application by 30 June of the reporting year.
Legal ReferenceThe Tax Code, 57.4, 57.1-2.
Specific transfer pricing penalties : (financial sanctions) 57.4. A taxpayer who fails to submit the reports specified in Articles 16.1.4 and 16.1.4-3 of this Code within the established deadlines, provides incorrect information in these reports, or does not submit the documents and information specified in Article 16.1.4-1 of this Code within 60 days upon the request of the tax authority shall be subject to a financial sanction of 6,000 manats based on the decision of the head of the tax authority (or their deputy). 57.1-2. A financial sanction of 10,000 manats shall be imposed on the taxpayer for failure to submit the CBC report and/or notification within the specified period, in the prescribed form and manner.
Legal ReferenceThe Tax Code, 16.1.4
There is no documentation requirement for transactions below AZN 500 000, unless required by the tax authority.
Legal ReferenceRules for Determining and Applying Transfer Pricing, Section 9 (APA rules) "Guide on Submitting Requests in Accordance with the 'Mutual Agreement Procedure' Provision of International Treaties on the Elimination of Double Taxation between the Republic of Azerbaijan and Other States” (MAP Guidance) Azerbaijan OECD MAP Profile
APAs are allowed in Azerbaijan (unilateral, bilateral and multilateral) Duration is 30 days and can be extended twice each of 30 days Rollback is allowed There is MAP Guidance in Azerbaijan, and it is reflected in MAP profile of Azerbaijan Specific Provisions on APA: 9.1. Before carrying out any controlled transaction, the taxpayer may apply to the tax authority with an application determined by the State Tax Service under the Ministry of Economy of the Republic of Azerbaijan, along with the relevant agreement and details of the transaction, to agree in advance on the transfer pricing method. 9.2. The application mentioned in clause 9.1 of these Rules must be submitted at least three (3) months before the start of the controlled transaction. 9.3. The tax authority reviews the application regarding the advance agreement on transfer pricing methods within 30 days. If additional time is required for the review, the tax authority has the right to extend the review period twice, each time for 30 days, by providing justification for the extension. In such cases, the applicant must be informed no later than the date on which the extension begins. Unless there are grounds for rejection specified in clauses 9.3-4 of these Rules, a letter is sent to the taxpayer regarding the advance agreement on transfer pricing methods. The validity period of the tax authority's letter regarding the advance agreement on transfer pricing methods is 3 years.
- Rulings (not selected)
- Enhanced engagement or cooperative compliance programmes (not selected)
- Advance Pricing Agreements (APA) (selected)
- Unilateral APAs (selected)
- Bilateral APAs (selected)
- Multilateral APAs (selected)
- International Compliance Assurance Programme (ICAP) (not selected)
- Mutual Agreement Procedures (selected)
- Other (please specify): (not selected)
As of March 2025, regulations have not yet been established for the simplified and streamlined approach.
N/A: As of March 2025, regulations have not yet been established for the simplified and streamlined approach.
Legal ReferenceThe Tax Code, 14-1.3
Article 14-1.3 of the Tax Code states that: “In transactions between persons specified in Article 14-1.2 of this Code, if the prices applied by the taxpayer to the goods (works, services) provided are less than the lower limit of prices established under the same conditions between other persons, except for persons specified in Article 14-1.2 of this Code, for the same transaction, taxes shall be calculated at the transfer price, and if they exceed the upper limit, taxes shall be calculated at the actual selling price.” For a definition of related parties and transactions covered by transfer pricing, please see response to question 3 of this questionnaire.
Legal ReferenceThe Tax Code of AR Article 72.5
- Article 7 as it read before 2010. (selected)
- Article 7 as it reads after 2010. (selected)
- Other (please provide additional details) (not selected)
The provisions of tax treaties take precedence over domestic legislation. In cases of conflict, the tax treaty provisions prevail
Legal ReferenceThe Tax Code, 14-1.10.
The attribution of profits to permanent establishments of non-resident entities is defined based on the transfer pricing rules. There is no specific regulation on the attribution, but the primary legislation provides fundamental principle based on the transfer pricing regulations. Article 14-1.10 of the Tax Code states that: “The determination of profit (income) derived by non-resident persons from sources in Azerbaijan and the calculation of taxes concerning the permanent establishment of that non-resident in the Republic of Azerbaijan are defined based on this article.”
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