Court Cases and Dispute Resolution on Tax Matters Civil disputes and criminal cases AmCham Tax & Customs Committee Meeting, 14 March 2014 Altay Mustafayev

Pre-Court Proceedings Criminal Cases Agenda

Pre-Court Proceedings

Law on Administrative Proceedings Applicable Law Law on Administrative Proceedings Tax Code

Stages for Tax Complaints Higher tax authority Tax Appeal Council Court

Complaints to A Higher Tax Authority Should be filed within 3 months after a tax payer learnt about violation of such tax payer’s rights; A tax payer has the right to provide evidence and participate in a formal administrative hearing; The tax authorities bear the burden of proof; Appeals are considered within 30 days; During consideration of the appeal, a tax payer may refuse to pay financial sanctions.

Complaints to Tax Appeal Council Chaired by Deputy Minister and composed of the senior officials of the Ministry of Taxes; Only repeated appeals are considered – a tax payer shall first appeal to a higher tax authority; Can be appealed online; Appeals from the decisions of the Minister of Taxes are not considered; If appealed to a court, the case is terminated by the Council.

Court Proceedings

Litigation Steps Supreme Court Court of Appeals Administrative-Economic Court Court of Appeals Supreme Court

General Features The tax authorities shall provide that a tax payer was in breach not vice versa A tax payer may ask for provisional measures A tax payer may submit additional evidence and request documents from third parties Failure to appeal to a court will enable the tax authorities to force banks to assess the amount

Defenses to Exclude Tax Liability Lack of violation Lack of fault Lapse of time – 3 years from the date of violation

Lack of Fault Force mojeure; Reliance on explanations and advice of the tax authorities if they are given withing the respective scope of competence; Set-off of tax credit against tax debts; Curing tax violations before tax audit proactively.

Law on Audits in Business Sector and Protection of Rights of Entrepreneurs Generallly, not applicable to tax audits, but applies to audits conduction by the SSPF Audits performed with violation of law cannot trigger any penalties or liability against a business Businesses cannot be liable for breaches occurred as a result of reliance on verbal and written responses of the tax/SSPF authorities

Useful Tips Ask for suspension of arrest of the account and other measures Make sure to observe time limitations Provide as much as evidence possible during the first instance hearings Make sure that your evidence is properly recorded into the minutes of the hearings

Criminal Cases

Article 213 of the Criminal Code – Tax Evasion Evasion from taxes and social security contributions Exceeding AZN 2,000 Committed with direct intent By an individual

Penalties Evasion between AZN 2,000 and AZN 50,000 with or without prohibition to engage in certain business up to 3 years AND fine (between AZN 1,000 and 2,000) OR probation works up to 2 years OR imprisonment up to 3 years Evasion by an organized group or exceeding AZN 50,000 imprisonment between 3 and 7 years

Time Limitation for Criminal Liability 7 years! As opposed to 3 years for tax liability

Process Investigation is conducted by the Investigation Department of the Ministry of Taxes Usually the director and chief accountant/outsourced accountant are targeted After completion of investigation, the case is heard by a respective district court.

Thank you! Altay.Mustafayev@bakermckenzie.com