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TAX CODE OF THE REPUBLIC OF TAJIKISTAN SECTION VI. GENERAL PROVISIONS CONCERNING THE PROFIT TAX
AND INCOME TAX CHAPTER 22. SPECIAL PROVISIONS REGARDING INTERNATIONAL TREATIES Article 169. Conditions for the Application of an International Treaty 1. The provisions of an international treaty on avoidance of dual taxation and prevention of evasion of taxes on income and property (capital), to which the Republic of Tajikistan is a party (referred to hereinafter as an "international treaty" for the purposes of Articles 169-180 of this Code) shall apply to persons who are residents of one or both of the states that have concluded such a treaty. 2. The provision of item 1 of this article shall not apply to a resident of a state with which an international treaty has been concluded if this resident is using the provisions of the international treaty in the interests of another person who is not a resident of the state with which the international treaty has been concluded. 3. For the purposes of this chapter the taxation of income depending on the context (content) of an international treaty shall mean the taxation of profit or income in accordance with this Code. Article 170. Procedure for the Implementation of International Treaties The implementation of international treaties shall be effected following the procedure established by the Republic of Tajikistan Ministry of Finance in consultation with the authorized government body in accordance with the provisions of Articles 169-180 of this Code. Article 171. Methods for Deducting Management and General Administrative Expenses of a Nonresident Legal Entity for the Purposes of the Taxation of Income from Sources in the Republic of Tajikistan 1. If the provisions of an international treaty applicable to the definition of taxable income of a nonresident legal entity from doing business in the Republic of Tajikistan through a permanent establishment allow for the deduction of management and general administrative expenses incurred for the purpose of earning such taxable income both in the Republic of Tajikistan and abroad, the amount of such expenses shall be determined using one of the following methods: 1) the proportional distribution of expenses
method; 2. A nonresident legal entity shall independently choose one of these methods for the deduction of management and general administrative expenses. 3. The chosen method for treating management and general administrative expenses as a deduction for a permanent establishment (including the procedure for calculation of the reference indicator used in the proportional distribution of expenses method) shall be applied on an annual basis and may be changed only with the approval of the respective tax authority. Article 172. Proportional Distribution of Expenses Method 1. When using the proportional distribution method, the amount of management and general administrative expenses referred to in Article 171 of this Code that are treated as deductions for a permanent establishment shall be defined as the product of these expenses and the reference indicator. 2. The reference indicator shall be calculated using one of the following methods: 1) the ratio of gross annual income earned by a nonresident legal entity from doing business in the Republic of Tajikistan through a permanent establishment in the tax year, to the nonresident legal entity's total gross annual income from all business both within the Republic of Tajikistan and outside the country for said tax period; 2) determination of the average of three indicators: - the ratio of gross annual income earned by a nonresident legal entity from doing business in the Republic of Tajikistan through a permanent establishment in the tax year, to the nonresident legal entity's total gross annual income from all business both within the Republic of Tajikistan and outside the country for said tax period; - the ratio of the value of fixed assets reported in the financial statements of a permanent establishment in the Republic of Tajikistan as of the end of the tax period to the total value of fixed assets of the nonresident legal entity as a whole both within the Republic of Tajikistan and outside the country for the same tax period; - the ratio of the payroll for personnel employed at a permanent establishment in the Republic of Tajikistan as of the end of the tax period to the total payroll for personnel employed by the nonresident legal entity as a whole both within the Republic of Tajikistan and outside the country for the same tax period. A nonresident legal entity shall identify independently one of the aforementioned methods for calculation of the reference indicator. 3. The amount of management and general administrative expenses that has been estimated shall be treated as a deduction for a permanent establishment only if supporting documents are available. 4. Supporting documents shall include: 1) a copy of the financial statements of the nonresident legal entity which indicate, depending on the reference indicator identified by the nonresident legal entity: - the total amount of gross annual income as a whole; - the total payroll as a whole; - the original and residual value of fixed assets as a whole; - the total amount of expenses, with an itemized breakdown, including an itemized breakdown of management and general administrative expenses; 2) a copy of an auditor's report based on an audit of the financial statements of the nonresident legal entity (when the financial statements of the given legal entity are audited). 5. A statement of the amount of these expenses that are to be treated as a deduction for a permanent establishment in the Republic of Tajikistan shall be attached to the corporate income tax (profit tax) return submitted to the appropriate tax authority of the Republic of Tajikistan. 6. In the event that the financial statements do not indicate the amount of management and general administrative expenses that are subject to proportional distribution, these expenses shall not be allowed as deductions for the permanent establishment. Article 173. Direct Application of Expenses Method 1. When using the direct application method for the management and/or general administrative expenses of a nonresident, these expenses shall be treated as deductions for a permanent establishment in the Republic of Tajikistan if they are determined directly and were incurred directly for the purposes of earning income from doing business in the Republic of Tajikistan through the permanent establishment. Said expenses shall be treated as deductions for a permanent establishment only if supporting documents are available. 2. Supporting documents shall include: 1) accounting records that confirm the expenses incurred by the nonresident legal entity on the territory of the Republic of Tajikistan for the purposes of earning income from doing business in the Republic of Tajikistan through the permanent establishment; 2) copies of accounting records that confirm the expenses incurred by the nonresident legal entity outside the Republic of Tajikistan for the purposes of earning income from doing business in the Republic of Tajikistan through the permanent establishment. Article 174. Procedure for Payment of the Tax on Income of Nonresidents from Activity in the Republic of Tajikistan Not Leading to the Creation of a Permanent Establishment 1. The procedure for the payment of tax specified under this article shall apply to income earned by a nonresident from activity in the Republic of Tajikistan that does not lead to the creation of a permanent establishment in accordance with the provisions of an international treaty, with the exception of income referred to under Articles 175-178 of this Code, except as otherwise provided by said articles. 2. A nonresident referred to in item 1 of this article who earns income from sources in the Republic of Tajikistan shall have the right to apply the tax payment procedure provided for under this article. In the event that the provisions of this article do not apply, a tax agent shall be required to withhold the tax at the source of payment and transfer it to the state budget following the generally established procedure. 3. A nonresident earning income, a tax agent, and a resident bank (referred to hereinafter as a "bank") identified by a tax agent, shall conclude an agreement regarding a provisional bank deposit following the form agreed upon by the parties to the agreement, taking into account the provisions of this article. 4. A tax agent shall be required to register an agreement on a provisional bank deposit with the appropriate tax authority within 10 calendar days of the date the agreement is signed, and a copy of the agreement, as well as a copy of a payment document confirming the transfer of the tax to the provisional bank deposit, shall be submitted to the appropriate tax authority. 5. The provisions of this article shall extend only to agreements on a provisional bank deposit that have been registered with the appropriate tax authority. Agreements on a provisional bank deposit the terms of which do not contradict the provisions of this article shall be subject to registration. 6. At the time that income is paid to a nonresident, a tax agent shall be required to withhold tax at the source of payment at the rate specified under Article 164 of this Code, and to transfer the amount withheld to the bank for posting to the provisional bank deposit on behalf of the nonresident. 7. In the case of compliance with the terms of an international treaty, in order to obtain a refund of taxes previously withheld, a nonresident shall submit a request to the appropriate tax authority following the procedure and form established by the authorized government body. 8. Within 15 days of the receipt of a request, a tax authority shall review said request and the necessary documents and shall make a decision regarding the request, and the nonresident and the bank shall be informed of this decision. 9. Upon receipt of a request for the refund of taxes that have been withheld, which has been certified by a tax authority, a bank shall grant the nonresident who submitted the request the right to dispose of the funds held on a provisional bank deposit, up to the amount indicated in the request, plus bank interest that has accrued. 10. In the event that a nonresident does not agree with a negative decision by a tax authority, the nonresident shall have the right within 10 calendar days of the receipt of said decision to file an appeal with the authorized government body (with the involvement of a competent authority of the nonresident's country of residence, if necessary) by submitting a request for a reconsideration of the legality of the application of the provisions of an international treaty, accompanied by the simultaneous notification of the tax authority that its decision is being appealed. 11. In the event that a tax authority makes a negative decision regarding a request and does not receive notification from a nonresident of an appeal of the tax authority's decision within the 10-day period established under item 10 of this article, this tax authority shall forward to the bank a collection order calling for the transfer of the amount indicated in the request and held in a provisional bank deposit, plus bank interest that has accrued, to the budget, accompanied by a document confirming the refusal to exempt the nonresident from taxation of its income. 12. A bank shall be required, within one business day of the receipt of documents referred to in item 11 of this article from a tax authority, to transfer to the budget the amount of tax held on the provisional bank deposit, plus bank interest that has accrued. The amount of tax collected in this manner shall be applied against the nonresident's obligations to the budget. 13. Provisional bank deposits shall be opened in the domestic currency or in foreign currency. In the event that provisional bank deposits are opened in foreign currency, the taxes and bank interest shall be transferred to the budget in the domestic currency, converted at the official exchange rate of the National Bank of Tajikistan at the time the tax is paid. 14. A nonresident and a tax agent shall not have the right to dispose of tax funds held on a provisional bank account until a tax authority makes some sort of decision. 15. In the event of a violation of the terms of an agreement on a provisional bank deposit and failure to transfer withheld taxes to the budget in a timely manner, for which the bank is at fault, the bank shall bear liability in accordance with the legislation of the Republic of Tajikistan. 16. In the event that it is not possible for a bank to meets its obligations to transfer to the budget taxes held on a provisional bank deposit, the obligation to transfer taxes at the source of payment, bank interest, and penalties for failure to transfer taxes to the budget in a timely manner shall be assigned to a tax agent. 17. Tax authorities shall be required to maintain records of taxes: 1) held on provisional bank deposits; 2) paid to [sic] nonresidents who have the right to apply the provisions of international treaties; 3) transferred to the budget. Article 175. Procedure for the Application of an International Treaty Regarding Taxation of Income from Providing Transportation Services in International Shipping Operations 1. Income from providing transportation services in international shipping operations, one of the parties to which is the Republic of Tajikistan, earned by a nonresident legal entity that has the right to apply the provisions of an international treaty, shall be exempt from taxation without the submission of a request for the application of the provisions of an international treaty on the basis of a document confirming the nonresident's residency, if the given legal entity has a permanent establishment in the Republic of Tajikistan associated with this activity. A nonresident legal entity shall be required to maintain separate accounting records of income earned from providing transportation services in international shipping operations (not subject to taxation in accordance with an international treaty) and from providing transportation services on the territory of the Republic of Tajikistan (subject to taxation), and also to report said income in the profit tax return. The total amount of taxable profit (taxable income) in the aforementioned return shall be reduced by the amount of taxable profit (taxable income) that is exempt from taxation in accordance with an international treaty, as calculated on the basis of separate accounting records. In the event of the unlawful application of the provisions of an international treaty that results in nonpayment or underpayment of taxes to the budget, the taxpayer shall bear liability in accordance with legislative acts of the Republic of Tajikistan. 2. The income of a nonresident legal entity that operates means of transport in international shipping operations, one of the parties to which is the Republic of Tajikistan, without the creation of a permanent establishment in the Republic of Tajikistan, and that has the right to apply the provisions of an international treaty, shall be exempt from taxation following the procedure established under Article 174 of this Code. Article 176. Procedure for the Application of an International Treaty Regarding Taxation of Dividends, Interest, and Royalties 1. A tax agent shall have the right at the moment income is paid to a nonresident in the form of dividends, interest, and royalties, to apply the provisions of the relevant international treaty without requiring the nonresident to submit a request for the application of the provisions of an international treaty, on the basis of a document confirming residency, if the nonresident is the final recipient of the income and has the right to apply the provisions of an international treaty. 2. A tax agent shall be required to indicate in a statement of tax withheld at the source of payment, which is submitted to a tax authority, the amount of income paid (accrued) and the taxes withheld in accordance with the provisions of international treaties, as well as the tax rates and the names of the international treaties. 3. In the event of the unlawful application of the provisions of an international treaty, which results in the nonpayment or underpayment of taxes to the budget, the tax agent shall bear liability in accordance with legislative acts of the Republic of Tajikistan. Article 177. Procedure for the Application of an International Treaty Regarding Taxation of Net Profit (Net Income) from Doing Business through a Permanent Establishment 1. A nonresident shall have the right to apply the provisions of an international treaty regarding the taxation of net profit (net income) from doing business in the Republic of Tajikistan through a permanent establishment without submitting a request for the application of the provisions of an international treaty, on the basis of a document confirming residency, if the nonresident is the final recipient of the net profit (net income) and has the right to apply the provisions of the relevant international treaty. 2. A nonresident legal entity shall be required to indicate in a profit tax return the tax rate and amount of tax on net profit (net income) and the name of the international treaty on the basis of which the relevant tax rate has been applied. 3. In the event of the unlawful application of the provisions of an international treaty, which results in the nonpayment or underpayment of taxes to the budget, the taxpayer shall bear liability in accordance with legislative acts of the Republic of Tajikistan. Article 178. Procedure for the Application of an International Treaty Regarding Taxation of Other Income from Sources in the Republic of Tajikistan 1. A nonresident who earns income from sources in the Republic of Tajikistan, with the exception of cases referred to in Articles 174-177 of this Code, shall have the right to file a request with the tax authority where the tax agent is registered for the application of the provisions of an international treaty following the form established by the authorized government body, before the income is paid. 2. A tax authority shall review a request within 10 calendar days, and if the information contained in the request is accurate, shall certify the request. 3. In the event of the unlawful application of the provisions of an international treaty, the tax authority shall issue a denial to the nonresident, indicating the reasons for doing so. 4. In the event that a nonresident does not agree with a negative decision by a tax authority, the nonresident shall have the right to file an appeal with the authorized government body (with the involvement of a competent authority of the nonresident's country of residence, if necessary) by submitting a request for a reconsideration of the legality of the application of the provisions of an international treaty. Article 179. General Requirements for the Submission of a Request for Application of the Provisions of an International Treaty A request for the application of the provisions of an international treaty, following the form established by the authorized government body, shall be accepted by a tax authority provided that the following requirements are met: 1) submission of the following with the request: - copies of contracts (agreements) for the performance of work (provision of services) or for other purposes; - copies of charter documents; - a breakdown of income from providing transportation services in international shipping operations and on the territory of the Republic of Tajikistan; - a certificate of work performed, when a nonresident performs various types of work; a certificate of occupancy when construction work is performed; and an invoice or payment document confirming the receipt of income for services provided; 2) submission by a tax agent of accounting documents confirming the amount of income accrued and/or paid and taxes withheld; 3) confirmation of the applicant's residency by a competent or authorized body of the applicant's home country, with which the Republic of Tajikistan has concluded an international treaty (on the form used for the request, or with a document confirming residency attached). For the purposes of this article and Articles 174-178 of this Code, a nonresident who has the right to apply the provisions of a relevant international treaty, in the event of a change in the nonresident's registration data in its country of residence, shall be required to submit a document confirming residency which takes into account the modified data following the procedure established by said articles; 4) diplomatic or consular authentication, following the procedure established by the legislation of the Republic of Tajikistan or an international treaty to which the Republic of Tajikistan is a party, of the signature and seal of the body that has certified the nonresident's residency (document confirming residency). Article 180. Certificate of Taxes Withheld and Paid in the Republic of Tajikistan At the request of a nonresident, a tax
authority shall issue a certificate of the amount of income
received from sources in the Republic of Tajikistan and the
taxes withheld, following the form and procedure established
by the authorized government body.
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