Double taxation, the simultaneous imposition of identical taxes on the incomes of legal and natural persons in different countries, can create significant challenges for non-residents—individuals and entities that do not permanently reside in their home country. Such non-residents often find themselves obligated to pay taxes both on the profits they earn in the country where they are physically located and on the basis of their citizenship. To alleviate this issue, countries enter into agreements to prevent double taxation, a move aimed at fostering economic collaboration and attracting investments. The Republic of Azerbaijan has signed such agreements with approximately 60 countries.
These international intergovernmental pacts, known as Double Taxation Avoidance (DTA) agreements, have a clear objective: to avoid the taxation of the same income in multiple nations. By implementing these agreements, countries aim to create a more conducive environment for cross-border economic activities and to promote investment. Azerbaijan has embraced this approach and has established five distinct forms of DTA:
DTA-01 (Residency Certificate Application): This form allows non-residents to apply for a certificate of residency in Azerbaijan.
DTA-02 (Foreign Tax Credit Application): Non-residents who have already paid taxes in a foreign country can use this form to apply for a deduction from the tax imposed in Azerbaijan.
DTA-03 (Beneficial Tax Rate Application): This form is used to apply for the preferential or lower tax rates provided by international agreements for income payments to non-residents in Azerbaijan.
DTA-04 (Confirmation of Taxes Paid by Non-Residents): This form is used to confirm the taxes paid by non-residents in Azerbaijan.
DTA-05 (Tax Refund Application for Non-Residents): Non-residents can use this form to apply for a refund of taxes withheld from their income in Azerbaijan.
To obtain these forms, applicants must fill out the appropriate application and submit the necessary documents to the State Tax Service under the Ministry of Economy of the Republic of Azerbaijan.
By providing a clear framework for managing tax obligations for non-residents, these DTA agreements help facilitate international business transactions, encourage cross-border investment, and promote economic cooperation between Azerbaijan and its partner countries. The existence of these agreements demonstrates Azerbaijan’s commitment to fostering a favorable business environment and encouraging foreign investment in its economy.
