Information from Financial Chain Corporation - FChain

New Reporting Requirement

Starting immediately, individual entrepreneurs (natural persons conducting business without forming a legal entity) and legal entities undergoing bankruptcy proceedings in Azerbaijan must notify the tax authorities within 15 days of either the initiation or the conclusion of the relevant process.

Current Situation

• Individual Entrepreneurs: Previously, there was no obligation to inform the tax authorities upon being declared bankrupt or upon completion of bankruptcy proceedings.
• Legal Entities: Under the Law on “State Registration and State Registry of Legal Entities,” registration data was updated within 40 days. Likewise, the Tax Code requires taxpayers to update their registration information within 40 days of any change.

Proposed Amendments

1. Shortened Reporting Period
   • Both individual entrepreneurs and legal entities will now be required to submit notice of bankruptcy commencement or conclusion to the tax authority within 15 days, instead of the current 40-day window.
2. Registry Notification
   • Legal entities undergoing bankruptcy must also apply to the relevant registration authority within the same 15-day
3. Increased Transparency
   • Faster data updates will enable accounting systems to align more quickly with actual statuses, thereby better protecting the interests of creditors and debtors.

Key Objectives of the Improvement

• Accuracy of Records:
  Timely updates to taxpayers’ address, operational status, and other registration data will keep registry information current.
• Risk Management:
  Rapid access to information about entities in bankruptcy will allow government agencies and business partners to more accurately assess associated risks.
• Legal Transparency:
  This draft law has been prepared within the framework of the World Bank Group’s “Business Ready” initiative, in accordance with the 2024 Roadmap for improving bankruptcy indicators.

Conclusion

These legislative changes will ensure more prompt updating of tax and registration data, enhancing transparency in the business environment and safeguarding the rights of individual entrepreneurs and legal entities undergoing bankruptcy.