What Is a Tax Residency Certificate and How Can You Obtain It?

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Hiring foreign employees or having foreigners actively engaged in business in Azerbaijan is now quite common. Everyone also understands that taxes must be paid. But where should a foreign person pay those taxes — to the Azerbaijani budget, to the budget of their home country, or to both countries? To avoid double taxation, countries sign international agreements. By presenting a special document called a tax residency certificate, it may be possible to take into account tax already paid in another country or apply a reduced tax rate. The concept of tax residency of individuals and legal entities plays an important role in avoiding double taxation. So, what is tax residency and how can you obtain a tax residency certificate in Azerbaijan? This article explains these questions.

What is a tax residency certificate?

The concept of a resident person for tax purposes is explained in Article 13.2.5 of the Tax Code of the Republic of Azerbaijan. Under Azerbaijani tax legislation, a legal entity is considered a tax resident if at least one of the following conditions applies:

• the legal entity is established in accordance with Azerbaijani law and carries out business activities;
• regardless of where its main place of control is located, its main place of business, where key management decisions are made and day-to-day management is carried out, is located in Azerbaijan.

A tax residency certificate helps a legal entity earning income in another country apply the relevant double taxation agreement.

A tax residency certificate is a document confirming a person’s residency for tax purposes

The concept of residency also applies to individuals. For individuals, the main criterion is their actual presence in Azerbaijan. In general, a person who stays in Azerbaijan for more than 182 days during a calendar year may be considered a tax resident. If this condition is not met, other criteria may also be taken into account. For more information, see “Tax Residency of Individuals and Legal Entities in the Republic of Azerbaijan.” Individuals may also receive a tax residency certificate in order to benefit from tax relief available under international agreements on the avoidance of double taxation.

How can you obtain a tax residency certificate in Azerbaijan?

The procedure for obtaining a tax residency certificate is regulated by the Rules for the Administration of International Agreements on the Avoidance of Double Taxation. The certificate is issued by the tax authorities to a resident of the Republic of Azerbaijan for the current year or previous years, including the year in which a company was established. A certificate issued for the application of an international agreement is not issued for a future year.

To obtain a tax residency certificate in Azerbaijan, an individual or legal entity must complete the “Application for a Tax Residency Certificate” form, known as Form DTA-01, and submit it to the tax authority either electronically or in paper form.

The other contracting country may require the applicant’s tax residency to be confirmed using its own official form. In that case, the tax residency certificate is issued using the form of that country. The applicant must then:

• obtain a notarised Azerbaijani translation of the foreign country’s form;
• state in the application that confirmation is required on the foreign country’s form;
• attach the foreign form and its translation to Form DTA-01;
• submit the required documents to the relevant tax authority.

The tax authority confirms the person’s residency both on the foreign country’s form and on its Azerbaijani translation.

If you have questions about tax legislation, you can use our tax consulting service!

Where should the documents be submitted?

As mentioned above, the tax residency certificate is issued by the tax authorities. The documents are submitted as follows:

• persons registered with the tax authorities submit the documents to the tax office where they are registered;
• individuals who are not registered for tax purposes submit Form DTA-01 to the tax authority at their place of residence or temporary stay.

If a person must first be registered for tax purposes, the tax residency certificate is issued only after the registration process is completed.

In what form is the certificate issued?

If the applicant’s tax residency in Azerbaijan is confirmed, a coded tax residency certificate is prepared in the electronic information system of the State Tax Service. The certificate is signed electronically and sent to the resident’s email address. The applicant may also request a paper version of the certificate. In this case, the signed and stamped copy is:

• sent to the applicant’s postal address; or
• collected personally from the tax authority.

Accounting.Az can assist you with obtaining a tax residency certificate in Azerbaijan and with applying tax benefits available under double taxation agreements