Azerbaijan To Introduce Horizontal Tax Monitoring To Boost Business Transparency

Azerbaijan plans to implement a horizontal monitoring mechanism in tax control from 2026, a move aimed at creating a more favourable business environment for entrepreneurs, Azernews reports, citing the State Tax Service under the Ministry of Economy.

Simplifying tax administration remains a key priority of the country's tax policy. As part of ongoing reforms, the new approach will replace the existing electronic audit system and is expected to foster transparent and trust-based cooperation between medium and large taxpayers and tax authorities.

The horizontal monitoring model will apply to medium and large businesses that use automated accounting systems and have established internal control mechanisms. Participating taxpayers will be required to disclose potential tax risks in advance and maintain internal accountability systems.

Under this system, on-site tax inspections will be conducted only in exceptional cases. If a taxpayer proactively reports risks, no financial penalties will be imposed. However, undisclosed risks may incur a financial sanction of 25 per cent.

Authorities said the new mechanism will reduce the administrative burden, minimise tax risks, and strengthen mutual trust with tax authorities. It is also expected to increase transparency, improve corporate governance, and enhance financial discipline among entrepreneurs.

Additionally, horizontal monitoring participants will have the option to calculate depreciation on fixed assets using either the declining balance or straight-line method.

Officials noted that these measures will enhance tax discipline, improve the efficiency of tax administration, stabilise budget revenues, and support the development of a modern, trust-based tax management system.

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