Azerbaijan, U.S. to sign double taxation avoidance agreement
Baku, Azerbaijan, May 26
By Emin Aliyev - Trend:
Azerbaijan and the U.S. intend to sign a double taxation evasion agreement in the near future, Azerbaijan's Deputy Minister of Taxes, Sahib Alakbarov told journalists on May 26.
The minister said that among other things, this document will allow the Ministry of Taxes to actively fight against the Azerbaijani residents receiving income in the U.S. and evading taxes.
In other words this agreement will enable to put into practice the agreement previously signed with the U.S. Internal Revenue Service, according to Alakbarov.
Azerbaijan and IRS reached an agreement on FATCA (Foreign Account Tax Compliance Act) - the sensational law on taxation of U.S. residents' foreign accounts. The document, adopted by the U.S. Congress in 2010, binds the banks all over the world to report to the IRS about such accounts from July 1.
FATCA imposes a 30 percent withholding tax on payments of U.S. source income made to non-U.S. financial institutions unless they enter into an agreement with the U.S. Internal Revenue Service and disclose information about their U.S. account holders.
A similar collection is planned to be deducted from revenues of the sale of securities and even transit payments starting from 2017.
"The Azerbaijani government has created a special commission on this issue headed by the country's Deputy Minister of Taxes Natig Amirov. The government's adequate response to the issue raised by the U.S. side, allowed us to reach all necessary agreements in a short time," Alakbarov said.
A draft agreement on the exchange of information agreed through diplomatic channels reflects the most profitable of the proposed models, the ministry said. The competent bodies of the two countries will mutually exchange data about the accounts of their residents, according to the draft agreement.
"Until recently, the country's legislation has prohibited the transfer of such data," Alakbarov said. "But the Tax Code and some other legislative acts have been amended to eliminate the ban since January 1, 2013. Regarding data transfer to Azerbaijan, an agreement on the avoidance of double taxation, which we have not had with the U.S yet, must be concluded."
Alakbarov added that after signing the amendments to the Strasbourg Convention, the country had the opportunity to conclude such agreements with all the world's countries and intends to do this.
The sanctions to be faced by the countries, refusing to transfer the data about the accounts of Americans in their banks, will take effect from July 1. Azerbaijan was included by the IRS in a list of cooperating countries. Therefore, a registration deadline of local financial institutions in the system of the U.S. tax body was extended until December 31, 2014. A final text of the intergovernmental agreement on FATCA, completion of all necessary internal procedures and the signing will be held by late 2014.
Edited by C.N.