Doing Business in Azerbaijan 2009 - Azerbaijan Export ...

whatsoever in respect of their oil and/or gas production. The
taxable profit (or loss) of Contractors under PSAs is computed in
the generally accepted manner, i.e. sales income less taxdeductible
expenses. The list of tax-deductible expenses is
specified in each relevant PSA and is usually quite extensive.
The revenues of foreign companies providing services to oil
companies under the scope of a PSA (Foreign Sub-contractors)
are subject to a withholding tax at different rates varying from 5%
to 8% depending on the particular PSA. Only goods and services
supplied by Foreign Sub-contractors on the territory of Azerbaijan
are subject to this tax. No other taxes are payable by Foreign
Sub-contractors operating under any PSA.
Value Added Tax is not applicable to any supplies and sales
within the ambit of any PSA. Under the PSAs, Double Tax Treaties
entered into between Azerbaijan and a relevant country may
apply as long as they provide better treatment for persons operating
under the PSA. Contractor Parties as well as Sub-contractors
(including the Foreign Subcontractors) may import and re-export
free of duties and taxes any machinery, equipment, fixed assets,
goods, works, and services for use under the PSAs.
Although the system of regulation of the industry through PSAs is
in place and working effectively, the Government of Azerbaijan
continues improving the legislative base of this sector of the
economy. A number of laws regulating the oil and gas industry
have been approved by the Azerbaijani Parliament (Milli Majlis)
over the past few years, including the “Subsoil” and “Use of
Energy Resources” laws. As part of restructuring programme
taking place in the energy sector of Azerbaijan, a new Ministry
of Industry and Energy was established by Presidential Decree on
6 December, 2004.
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