BAKU, Azerbaijan, January 12. Azerbaijan has
launched a new tax oversight mechanism aimed at reducing disputes
between businesses and tax authorities, Trend reports.


Official sources indicate that this measure will significantly
limit the number of field audits and, in some cases, allow for the
cancellation of financial penalties


The changes follow amendments to the Tax Code that introduced a
system known as horizontal monitoring, which allows taxpayers to
disclose potential tax risks to authorities in advance. Vugar
Bayramov, a member of the Azerbaijani Parliament on Economic
Policy, Industry and Entrepreneurship, said the reform is designed
to encourage transparency while easing administrative pressure on
businesses.


“Practically speaking, the new rules will further minimize the
number of on-site inspections. Over 800,000 active taxpayers were
registered in 2024, yet only 384 on-site tax inspections were
conducted during the year. Compared with 2023, the number of
inspections declined by 29%, and it was 5 times lower than in
2018,” Bayramov wrote on social media.


The MP said one of the most significant aspects of the new
system is the conditional removal of financial sanctions.







“Under the new amendments, if risks are disclosed to the tax
authority in advance, no financial penalties will be applied. Only
when the tax authority identifies undisclosed risks will a 25%
financial sanction be imposed,” he said.


According to Bayramov, the tax authority will electronically
monitor the submitted data throughout the period covered by
horizontal monitoring. He added that the system prioritizes
advanced consultation, which he said would help reduce tax risks
and improve financial discipline and corporate governance.


The framework also allows participants to calculate depreciation
on fixed assets using either the declining balance method or the
straight-line method. Medium and large businesses with automated
accounting systems and internal control mechanisms will be eligible
to join the program, which Bayramov described as a transparent
cooperation model between tax authorities and major taxpayers.


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