Tax authorities to deal with transfer prices

The Azerbaijani Tax Ministry will likely control the transactions of head companies and "subsidiaries" from 2013, the government told Trend on Friday.

Transfer pricing (the prices set during trade turnover between affiliated companies or within a single holding between the head company and its "subsidiaries") may fall under the Tax Code from 2013, however, it is still expected to do by introducing the terminology.

"Initially, it is planned to introduce terms in the code envisaging the taxation of transfer prices," a source in the government said.

"After studying foreign experience in 1-2 years, one can proceed to practically use this mechanism in Azerbaijan."

The finance ministry and taxes ministry already have agreement on this issue.

Using transfer pricing by the companies has been of concern among many countries for a long time. This leads to an artificial increase in costs. It turned into a negative trend for tax evasion. The problems appear when companies resell products at low prices to their
affiliated companies, which then resell them at market price, as well as with different mode of taxation in the countries.

Azerbaijan studies the experience of different countries in this area to improve the legislation, in particular, this is Russia's experience. It has begun using transfer pricing since 2012. In this regard, a special department consisting of researchers and professors has been created in the central office.

"The real situation may be assessed in a year after tax returns are submitted," a source in the government said.

The best variant is Kazakhstan's experience in this field. Azerbaijani specialists familiarized with the experience of European countries.

Draft amendments to the Tax Code will be submitted to the parliament for discussion in autumn.


/Trend/