Rules for Including and Removing a Taxpayer from the List of Risky Taxpayers Have Been Updated

The Cabinet of Ministers has adopted a decision to amend the “Criteria for Risky Taxpayers and Risky Transactions,” approved on July 28, 2020. The new version, titled “Criteria for Taxpayer Risk, Rules, and Conditions for Including and Removing a Taxpayer from the List of Risky Taxpayers”, has been prepared in accordance with Article 13.2.82 of the Tax Code. This regulation defines the criteria for taxpayer risk, the procedures, and the conditions for inclusion in and removal from the list of risky taxpayers.

Definition of a Risky Taxpayer (Article 13.2.82):
A risky taxpayer is a person who meets the risk criteria approved by the relevant executive authority. The procedures and conditions for including or removing a taxpayer from the list of risky taxpayers are determined by the relevant executive authority. Decisions regarding inclusion or removal are also made by this authority.

Key Updates in the Rules:
The number of criteria for a taxpayer to be considered risky has been reduced. Additionally, clear procedures and conditions for removal from the list of risky taxpayers have been defined.

Cases in Which a Taxpayer is Considered Risky:
A taxpayer will now be deemed risky only in the following three cases:

1. Provision of services or goods without sufficient economic resources:
   When services or goods requiring specific resources (business premises, workforce, fixed assets, raw materials, etc.) are provided without these resources being available or sufficient, or without involving subcontractors.
2. Sale of goods not obtained through proper documentation:
   Goods not obtained based on legally issued e-invoices, purchase acts, or customs declarations (except for goods documented as undelivered during prior tax inspections, or goods and assets officially registered, produced, or derived from dismantling, extraction, or contributed to charter capital).
3. Non-goods transactions (Article 13.2.81):
   Transactions identified during tax inspections that are carried out to disguise other operations or to generate profit without the actual provision of goods, services, or works.

Removal from the List of Risky Taxpayers:
A taxpayer may be removed from the risky taxpayers list in the following cases:

1. Provision of supporting documentation:
   If the taxpayer submits additional explanations, documents confirming the authenticity of the transaction, or information from chronometric observations, proving there are no grounds to consider the transaction risky.
   Supporting documents may include verifications from relevant state bodies.
2. Payment of financial sanctions for non-goods transactions:
   Taxpayers conducting non-goods transactions are subject to financial sanctions under Article 58.15-1 of the Tax Code. Once the full amount of the financial sanction is paid, the taxpayer will be removed from the list.

Article 58.15-1 Financial Sanctions:

• First offense within a calendar year: 10% of the non-goods transaction amount.
• Second offense within the same year: 20% of the transaction amount.
• Third and subsequent offenses within the same year: 40% of the transaction amount.

Application Process for Removal from the Risky Taxpayers List:

• A taxpayer who meets the required conditions may apply to the tax authority.
• The application will be reviewed within 20 business days from the date of submission.
• The decision to remove the taxpayer from the list or reject the application will be communicated to the taxpayer via their e-cabinet in the tax system within 1 business day.
• If the financial sanction has been paid, the decision will be made within 3 business days and sent to their e-cabinet in the tax system within 1 business day.

Grounds for Rejection of Application:
Failure to fully or partially meet the specified conditions will result in the rejection of the taxpayer’s application for removal from the list.

References
https://www.taxes.gov.az/az/post/3722