The Tax Code of the Republic of Azerbaijan

Article 126. Taxation of net profit of non-resident’s permanent establishment at the source of payment
In addition to profit tax of non-resident’s permanent establishment from any amount of net income of this permanent establishment at the source of payment, transferred (issued) to the favor of such non-resident tax shall be withheld at the rate of 10 percent.
Article 127. Foreign Tax Credit
127.1. Amounts of income tax or profit tax of resident enterprise paid outside the Republic of Azerbaijan from the incomes of not Azerbaijani source shall be credited upon the payment of tax in the Republic of Azerbaijan.
127.2. The amounts of the credit stipulated in Article 127.1 of this Code shall not exceed the amount of tax charged on that income or profit in the Republic of Azerbaijan at the rates in effect in the Republic of Azerbaijan.
Article 128. Income received in countries with concessive taxation
128.1. If a resident directly or indirectly holds more than 20 percent of the basic charter capital or possesses more than 20 percent of the voting shares of a foreign legal entity that, in turn, received income from a state with concessive taxation, said income of the resident shall be included in its taxable income.
128.2. A foreign state shall be considered a state with concessive taxation, if in that country the tax rate is 2 or more times lower than that determined under this Code, or if there exist laws on confidentiality of information about companies, which allow secrecy to be maintained concerning financial information, as well as the actual owner of property or income (property) receiver.
Article 129. Tax year
A tax year shall be a calendar year.
Article 130. Procedure for recording income and expenditures
130.1. With a view to reflecting clearly taxable income (or profit), the taxpayer shall be obliged to maintain accurate and timely records of income and expenditures on the basis of documented data and shall assign, using methods provided for in this Chapter, said income and expenditures to relevant reporting periods during which they were received or incurred. The method used by taxpayer shall take account of all requirements concerning the moment of expenditures and receipts and procedure for their accounting. Taxpayer can use cash basis or accrual basis method as an accounting method.
Legal and physical entities shall keep the records of profit and losses according to the current legislation of the Republic of Azerbaijan. With taxation purposes the profit and losses are established on the basis of this Code.
130.2. Taxpayer shall be obliged to ensure that all operations connected with its activity are recorded in such a manner that their beginning, course and end can be discerned.
130.3. Subject to the provisions of this Article, taxable income shall be calculated by the method used by the taxpayer for his own book-keeping, provided that adjustments necessary for meeting the requirements of this Code are incorporated.
130.4. Taxpayer may use cash method or accrual method of tax accounting, provided that the same method is applied by taxpayer during a year.
130.5. If the accounting method of taxpayer is changed, adjustments to accounting operations affecting the tax amount shall be effected in the year that the accounting method changed, so that none of the operations is left out or included twice.