Tax Residency in Azerbaijan
1. Criteria for Determining Tax Residency under Local Tax Laws
According to Article 11 of the Tax Code of the Republic of Azerbaijan, an individual is considered a tax resident if they meet any of the following criteria:
- Physical presence in Azerbaijan for more than 183 days in a calendar year.
- Permanent residence in Azerbaijan, as evidenced by a residence permit or other official document.
- Having a center of vital interests in Azerbaijan, such as a permanent home, family, or business.
For legal entities, tax residency is determined based on their place of registration or incorporation in Azerbaijan.
2. Impact of International Tax Treaties on Tax Residency Criteria
Azerbaijan has entered into several double taxation treaties (DTTs) with other countries. These treaties may modify or provide exceptions to the standard criteria for tax residency as defined in domestic law.
Key Provisions in Tax Treaties Relating to Tax Residency
- Article 4 of the Azerbaijan-Russia DTT: Defines a resident as an individual who has a permanent home in Azerbaijan or is present in Azerbaijan for more than 183 days in a calendar year.
- Article 4 of the Azerbaijan-Turkey DTT: Considers an individual a resident if they have a permanent home in Azerbaijan or are present in Azerbaijan for more than 183 days in a calendar year. However, if the individual is also a resident of Turkey, the tie-breaker rule is based on the individual's center of vital interests.
- Article 4 of the Azerbaijan-United Kingdom DTT: Defines a resident as an individual who has a permanent home in Azerbaijan or is present in Azerbaijan for more than 183 days in a calendar year. However, if the individual is also a resident of the United Kingdom, the tie-breaker rule is based on the individual's habitual abode.
Rationale and Objectives of Treaty-Specific Modifications
These treaty-specific modifications aim to prevent double taxation and provide clarity in determining tax residency in cross-border situations. They reflect the mutual agreement between Azerbaijan and the treaty partner country to facilitate tax compliance and enhance economic cooperation.
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