Azerbaijan adopted the Transfer Pricing rules in its legislation first time on January 1, 2001. Although it has been amended several times, such as in 2017, when the Ministry of Finance approved the Transfer Pricing rules and their application which came into force on February 8, 2017, these rules focus on the pricing of goods and services under the Arm’s Length Principle for related party transactions.

Related Parties

They are considered if:

  • A person owns, directly or indirectly, 20% or more of the value or number of shares or voting rights in the other entity or an entity that actually controls both entities.
  • A person is subordinate to the other regarding the official position.
  • The persons are under the direct or indirect control of a third person.
  • The persons have direct or indirect control over a third person.

Transfer Pricing Methods

Previously, the Tax Code listed the methods for determining the market price (Comparable Uncontrolled Price, Resale Price, and Cost Plus methods), prioritizing the CUP method over the others for determining market prices. If the determination of the market price was not possible under any of the above methods, the market price had to be determined by an “expert.”

In 2019, the elimination of the requirement to apply the Comparable Uncontrolled Price method to transactions, where specific Transfer Pricing methods are to be applied, was incorporated. Now, the Transfer Pricing methods will apply to transactions between the following persons: Transactions of residents of the Republic of Azerbaijan with their related parties qualified as non-residents.

  • Transactions of the permanent establishment of a non-resident of the Republic of Azerbaijan with the non-resident itself or its branches, representative offices, or divisions in other countries, and of the multinational enterprise with any other person who is a related party of the multinational enterprise and domiciled in another country;
  • Transactions between a resident of the Republic of Azerbaijan or a non-resident with persons incorporated (registered) in low-tax countries.

Transfer Pricing Documentation 

Following the 2019 amendment, there is no annual threshold (previously controlled transactions exceeding AZN 500,000) for the Transfer Pricing application, i.e., taxpayers may indeed consider the Transfer Pricing implications for each related party transaction.

Taxpayers will be required to file an annual report on controlled transactions no later than March 31 of the following calendar year, not only on transactions whose value exceeds AZN 500 000 per year per taxpayer but on transactions where the transfer has a value based on the price exceeding AZN 500 000 per year per taxpayer. As indicated above, this requirement will require the performance of a Transfer Pricing study for each controlled transaction.


There is a financial penalty of AZN 500 for failure to file accurate information in the aforementioned annual report. Previously, this economic penalty was applied only for failure to file this report on time.

Source: Ministry of Taxes

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