|Elena Kostovska, Eurofast Global|
Speedy ratifications of the treaty between FYR Macedonia and Azerbaijan have ensued from both parties recently. The Azerbaijani Parliament ratified the treaty on June 21 2013 while the FYR Macedonian Parliament followed suit just a month later. The ratifications both come shortly after the signing of the treaty which was concluded in April this year.
The treaty covers the personal income tax, property tax and profit tax in FYR Macedonia and the tax on income of physical persons, tax on profit of legal persons, tax on property and land tax in Azerbaijan. As usual the treaty is mostly harmonised with the OECD model with the below specifics that can be observed in the treaty's content.
Permanent establishments are deemed to arise when a building/construction site or an installation project (including any related site activity of supervisory or consulting nature) lasts for more than 12 months.
As far as withholding taxes are concerned, the treaty stipulates rates which slightly deviate from what FYR Macedonian treaties usually define; dividends are taxed at 8% (no preferential rate related to a minimum capital participation has been prescribed). The same 8% withholding tax rate on interest has been agreed on, which is also applicable to royalties.
Income from employment, pensions, and artists/sportsmen income articles of the treaty are fully harmonised with the OECD model treaty.
In regards to the provisions about elimination of double taxation, the treaty stipulates that both FYR Macedonia and Azerbaijan will allow deduction from taxes in the amount of tax paid on it on the other state.
The treaty has entered into force on July 30 2013 (Official Gazette No.107) and will be applicable for all types of affected taxes in both countries as of January 1 2014.
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