BAKU, Azerbaijan, January 12. Azerbaijan has launched a new tax oversight mechanism aimed at reducing disputes between businesses and tax authorities, Trend reports.
Official sources indicate that this measure will significantly limit the number of field audits and, in some cases, allow for the cancellation of financial penalties
The changes follow amendments to the Tax Code that introduced a system known as horizontal monitoring, which allows taxpayers to disclose potential tax risks to authorities in advance. Vugar Bayramov, a member of the Azerbaijani Parliament on Economic Policy, Industry and Entrepreneurship, said the reform is designed to encourage transparency while easing administrative pressure on businesses.
“Practically speaking, the new rules will further minimize the number of on-site inspections. Over 800,000 active taxpayers were registered in 2024, yet only 384 on-site tax inspections were conducted during the year. Compared with 2023, the number of inspections declined by 29%, and it was 5 times lower than in 2018,” Bayramov wrote on social media.
The MP said one of the most significant aspects of the new system is the conditional removal of financial sanctions.
“Under the new amendments, if risks are disclosed to the tax authority in advance, no financial penalties will be applied. Only when the tax authority identifies undisclosed risks will a 25% financial sanction be imposed,” he said.
According to Bayramov, the tax authority will electronically monitor the submitted data throughout the period covered by horizontal monitoring. He added that the system prioritizes advanced consultation, which he said would help reduce tax risks and improve financial discipline and corporate governance.
The framework also allows participants to calculate depreciation on fixed assets using either the declining balance method or the straight-line method. Medium and large businesses with automated accounting systems and internal control mechanisms will be eligible to join the program, which Bayramov described as a transparent cooperation model between tax authorities and major taxpayers.
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