ON
BEHALF OF THE REPUBLIC OF AZERBAIJAN
DECISION
OF THE PLENUM OF CONSTITUTIONAL COURT
OF
THE REPUBLIC OF AZERBAIJAN
On interpretation of Article 213.1 of the Criminal Code of the Republic of Azerbaijan and
Articles 78.3 and 78.4 of the Tax Code of the Republic of Azerbaijan
9 September 2013
Baku city
The Plenum of the Constitutional Court of the
Republic of Azerbaijan composed of Farhad Abdullayev (Chairman), Sona Salmanova,
Sudaba Hasanova, Mahir Muradov, Jeyhun Garajayev, Rafael Gvaladze, Isa Najafov
and Kamran Shafiyev (Reporter-Judge);
attended by the Court Clerk Faraid Aliyev,
representatives
of interested parties – Teyub Muhtarov, Judge of Goranboy District Court; Fuad
Mamedov, Senior Advisor of the Department for Administrative and Military
Legislation of Milli Majlis of the Republic of Azerbaijan;
expert – Simran Hasanov, lecturer of the Board
of Civil Procedure and Commercial Law of the Law Faculty of the Baku State
University,
specialists – Adil Beylarov, Deputy Head of
Department of Prosecutor's Office of the Republic of Azerbaijan on supervision
of implementation of laws by Ministry of Justice and Ministry of Taxes, by
State Customs Committee in investigative and operational search activities and
Tural Guliyev, Head of Department of Legal Coverage of Legal Board of the
Ministry of Taxes of the Republic of Azerbaijan;
in accordance with the Article 130.6 of the
Constitution of the Republic of Azerbaijan examined in open
judicial session via special constitutional proceedings the case
on inquiry of Goranboy District Court on interpretation of Article 213.1 of the Criminal Code of the
Republic of Azerbaijan and Articles 78.3 and 78.4 of the Tax Code of the
Republic of Azerbaijan.
having considered the report of
Judge Kamran Shafiyev, the reports of legal representatives of the
interested parties in special constitutional proceedings, expert and
specialist, and examined the materials of the case the Plenum of Constitutional
Court of the Republic of Azerbaijan
DETERMINED AS FOLLOWS:
Goranboy
District Court having applied to the Constitutional Court of the Republic of
Azerbaijan (hereinafter referred to as the
Constitutional Court) in connection with consideration, being in its procedure
of criminal case on a charge of Mushvig Sariyev under the Article 213.2.2 of
the Criminal Code asked to give an interpretation of Article 213.1 of the Criminal Code of the
Republic of Azerbaijan (hereinafter
referred to as the Criminal Code) and Articles 78.3 and 78.4 of the Tax Code of
the Republic of Azerbaijan (hereinafter
referred to as the Tax Code) from the point of view of Articles 25, 57, 60
and 71 of the Constitution of the Republic of Azerbaijan (hereinafter referred to as the Constitution), and also Article 6
of the Convention for the Protection of Human Rights and Fundamental Freedoms.
In the inquiry it is specified that M. Saryev actually
fulfilling the management of Limited Liability Company “Fərid İnşaat Kot”
(hereinafter referred to as the LLC), having assigned to himself an obligation
on accounting of financial and economic activities of property of LLC as the
person who bears responsibility for activities of the taxpayer and it is responsible
for ensuring payment of the corresponding taxes, having violated requirements
of a number of articles of the Tax Code, having provided the false information
in tax authority where registered LLC, evaded from payment to the government
budget in a large size of the income tax of the legal entity.
At the same time in the inquiry it is noted that M.
Sariyev did not hold an official position while the head of the legal entity
was other person, he was made responsible for the actual management of LLC.
In this connection, the Goranboy District Court asked
to interpret bringing to responsibility under the Article 213.1 of the Criminal
Code of the person fulfilling the actual management of the legal entity in the
relation of Articles 78.3 and 78.4 of the Tax Code.
In connection with the inquiry the Plenum of the
Constitutional Court considers necessary to note the following.
Obligation to pay taxes, enshrined in Article 73 of
the Constitution as the unconditional requirement of the state concerns to all taxpayers.
To pay taxes (including in appropriate time and in the amount established by
the legislation) is one of the constitutional obligations of everyone. The
taxpayer cannot dispose at discretion of a certain part of the property that in
the order provided by the law shall be listed in the state treasury in the form
of a certain sum of money and is regularly obliged to transfer this amount of
advantage of the state. Otherwise, the rights and interests of the state
protected by the law and other persons can be violated.
Public concerns of all members of society are
reflected in this obligation of the taxpayer. Therefore, the state with the
purpose of protection of the rights and legitimate interests not only
taxpayers, but also other members of society has rights and an obligation to
take legal measures in the field of regulation of tax legal relations.
The
Tax Code based on the specified constitutional provisions establish
the tax system of the Republic of Azerbaijan, general principles of taxation,
rules for determining, payment and collection of taxes, the rights and
responsibilities of taxpayers and State tax authorities, as well as other
parties to taxation procedures, tax control forms and methods, liability for
tax law violations and the procedures for lodging complaints against unlawful
actions (inactions) committed by tax agencies and officials thereof (Article 1.1 of the Tax Code).
The
Tax Code also regulates the issues of tax control and accountability in
connection with violation of the tax legislation.
It
should be noted that taxes being from the moment of creation of each state, the
integral component of the economic relations in society are at the present
stage the one of the main forms of the income of the state. With respect
thereto evasion of taxes and other mandatory fees is considered rather
dangerous act doing harm to financial interests of the state and can become the
basis for attraction to the corresponding type of responsibility. Public danger
of this act is expressed in non-execution of the constitutional obligations of
everyone to pay the taxes and other state charges established by the law.
According
to Article 53.1 of the Tax Code taxpayers, tax agents and their
representatives as well as tax authority officials shall be responsible for
violation of tax legislation in accordance with the procedures set by this
Code, Code of the Republic of Azerbaijan for Administrative Offences, Criminal
Code of the Republic of Azerbaijan and other legislation of the Republic of
Azerbaijan.
Any
person for commitment of a tax offense depending on feature of act bears only
one type of legal responsibility. In the cases provided in the legislation,
violation of the tax legislation can become the reason of bringing of the
person to criminal liability. Such responsibility is established in Article 213
of the Criminal Code and according to a disposition of this article, evasion of
taxes is considered as a crime.
In
this regard, the Plenum of the Constitutional Court according to the legal
positions created in the previous decisions considers that the act of
commission revealed by tax authority and made by the taxpayer within
established by Articles 57, 58 and 60 of the Tax Code, and its qualification as
the tax offense connected with violation of the tax law has to be decided
according to provisions of the Tax Code, and at commission of crime connected
with violation of the tax law provided by Article 213 of the Criminal Code has
to be decided according to provisions of this Code (decisions of the Plenum of
the Constitutional Court of April 8, 2002, August 6, 2002 and January 12,
2011).
In
spite of the fact that the subject of a crime provided in Article 213 of the
Criminal Code is an individual, in this article the specific subject
(individual or legal entity, other persons) of criminal act is not specified.
Therefore it is inevitable the addressing other regulations for establishment
of persons on which the obligation on tax payment or fees on compulsory
national social insurance is assigned.
First
of all, it is necessary to consider that one of the main conditions of
emergence of the tax liabilities along with establishment of the taxpayer is
establishment of the taxation object and other elements of the taxation
(Articles 12.1.1 and 12.3 of the Tax Code). According to the legislation on
taxes the taxpayer is any person who is obliged to pay taxes from the taxation
objects determined according to the Tax Code (Article 13.2.4 of the Tax Code).
According
to the Article 78.3 of the Tax Code the fulfillment of
tax obligations realized directly by the taxpayer, unless otherwise provided
for in this Code. According to Article 78.4 fulfillment of tax obligations
shall not be assigned to other persons.
According to
Article 53 of the Tax Code, the responsibility for tax offenses is born by the
taxpayer who can be as legal entity and individual. Drawing of the taxpayer or
tax agent to liability for violation of tax legislation does not release them
from execution of responsibilities on taxes and legal requirements of executives
of tax authorities (Article 53.7 of the Tax Code). At the same time in case of
deliberate evasion of taxes the taxpayer can be brought to tax responsibility,
and the corresponding authorized person – to the criminal liability provided by
the Article 213 of the Criminal Code.
In
this connection it should be noted what the person which is evading of paying
taxes can be as well the subject to whom the legislation assigned an obligation
on tax payment, that is individual, determination of which is given in the tax
legislation, or the person who is actually fulfilling the tax liabilities of
the legal entity. It is possible to regard to number of subjects of this crime
the individuals who pay taxes or fees on compulsory national social insurance,
and also executive officials of legal entities, that is the head, the chief
accountant, including other persons to whom the legislation or the employment
contract charged an obligation on creation and official execution of accounting
documents, accounting of property and financial and economic activities of the
entity.
At
that the main criterion is responsibility of authorized workers for accounting
of financial and economic activities, the income (expenses) and the taxation
objects of the legal entity, in the order provided in the legislation, payment
of the taxes established by the law, and also the added percent, the applied
financial sanctions and other mandatory fees, providing of tax reports to tax
authorities in cases and the order established in the legislation, the actual
implementation of business activity on behalf of the taxpayer with assignment
on himself of other obligations, activities of the taxpayer with conducting tax
transactions and ensuring of accomplishment of the tax liabilities.
Due
to specified, the person who got profit from the taxation object actually is
recognized as the taxpayer, and according to a sense of the Article 78.3 of the
Tax Code, accomplishment of the tax liabilities is assigned to the actual head
of the legal entity. A person who gets the actual profit as a result of
business activity fulfilled by legal entity actually disposing of assets, money
and property, shall bear responsibility for calculation and payment of taxes
established by law regarding taxation objects.
In
foreign case-law the possibility of criminal prosecution of actual head of the
legal entity for a crime of evasion of taxes is also provided. Thus, in the
decision of the Plenum of the Supreme Court of the Russian Federation of
December 28, 2006 No. 64 “On Practice of Application by Courts of the Penal
Legislation on Responsibility for Tax Offences” is noted that the person who is
actually fulfill the business activity through the man of straw (for example,
the unemployed who was formally registered as the individual entrepreneur),
evaded at the same time of paying taxes, his actions should be qualified under the
Articles 198 and 199 of the Criminal Code as executor of this crime, and
actions of the other person in force as his helper under a condition if he
understood that participates in evasion of taxes and his intention making of
this crime was covered.
According
to the above, the Plenum of the Constitutional Court considers that also the
person fulfilling the actual management of the legal entity (the actual head)
who is a taxpayer shall be carried to number of subjects of a crime of evasion
of taxes.
Along
with noted, it is necessary to consider that the usage of provision “evasion”
of the criminal act specifying a particular purpose provided in a disposition
of Article 213.1 of the Criminal Code that is on evasion from payment of taxes
established by the law, demonstrates that the structure of this crime provides
availability in actions of the charged intention directly directed to evasion
of taxes in the specified case. “Corpus delicti” provided in this article
arises in case when act is made intentionally and is directed to evasion of
taxes with violation of the orders established by the tax legislation.
It
can be expressed in intentional not reflection in tax reports of gained income
and taxation objects, reduction of the valid size of the income, inflate the
expenses which are considered in case of calculation of taxes (for example, the
expenses subtracted in case of determination of aggregate income of the subject
of taxation). The untrue data on time of the incurred expenses and the gained
income, misstatement in calculations of the physical indicators characterizing
a certain type of activity in case of payment of a unified imputed income tax,
etc. can be also carried to obviously false data.
Thus,
involvement of the actual head of the legal entity to criminal liability under
Article 213 of the Criminal Code is possible if this person did not submit
within the terms established by the law the declaration on the income subject
of taxation, provided or disposed to provide to tax authorities the declaration
with entering into it of obviously distorted data (for the purpose of
concealment, reduction of a tax or release from it) about the income or
expenses which shall be considered in case of calculation of taxes. The
official head of the legal entity cannot be brought to trial in cases when he
deceived by the actual head did not know about tax avoidance and participated a
straight line in activities of the legal entity.
On
the other hand, the official head of the legal entity can be brought to trial
if realizes that he evades from taxes, or having entered criminal communication
with the actual head, together with him participates in tax avoidance. In such
cases the official head is considered as abettor of a crime.
Purpose
the criminal procedure law of the Republic of Azerbaijan is to define the legal
procedures for criminal prosecution and defend of a suspect or accused person.
Criminal Procedure Code of the Republic of Azerbaijan (hereinafter referred to
as the Criminal Procedure Code), defining these procedures ensures that a
person who has committed a crime shall possess equal (balanced) opportunities
in the process of bringing to criminal responsibility (decision of the Plenum
of the Constitutional Court of July 15, 2011 “On interpretation of Articles 26
and 96 of the Criminal Procedure Code of the Republic of Azerbaijan”).
Due
to the above, the Plenum of the Constitutional Court notes that the correct
establishment and the correct classification of structure of each criminal
action in case of its investigation are directed to establishment of that
whether are a crime the act reflecting criminal elements, whether accused of
crime execution is guilty, and also on imposing of fair punishment to accused
of this crime. The opposite case can become the reason of accountability of the
innocent person, or evasion from responsibility of the person guilty in
commitment of crime, the wrong application of punishment.
At
the same time, it is necessary to consider that in the Article 139 of the
Criminal Procedure Code the circumstances that are subject to proof during
procedure of criminal prosecution are specified. In a row of these
circumstances the fact and circumstances of criminal incident, connection of
the suspect or defendant with criminal incident, essential elements of offense
in the act provided by the penal statute, guilt of the person in commitment of act,
etc. are included.
The
proofs collected on criminal prosecution for full, comprehensive and objective
verification are analyzed and at comparing with each other, their reliability
is established (Articles 138.1 and 144 of the Criminal Procedure Code). From
the point of view of requirements of criminal procedure legislation, only set
of admissible proofs allowing to draw reliable total conclusion on criminal
prosecution is understood as sufficiency of proofs (Article 146 of the Criminal
Procedure Code).
Thus,
the question of criminal prosecution of the actual head, and also official head
and other ranking officers of the legal entity shall be solved in cumulative
proofs collected during pretrial investigation on each case separately.
Considering the above, the Plenum of the Constitutional Court comes to such
conclusion:
-
According to a sense of Article 78.3 of the Tax Code the person that gained the
actual income in result of the business activity fulfilled by the legal entity,
which is actually disposing of his money property is recognized as the person
fulfilling the tax liabilities as the taxpayer. This person according to
Article 78.4 of the Tax Code cannot assign execution of the tax liabilities to
other person and in case of crime execution of tax avoidance can be brought to
trial under Article 213 of the Criminal Code.
-
The person that officially directs of activities of the legal entity with
participation in a crime of tax avoidance can be brought to trial under Article
213 of the Criminal Code.
Being guided by the Article
130.6 of the Constitution of the Republic of Azerbaijan and Articles 60, 62,
63, 65-67 and 69 of the Law of the Republic of Azerbaijan “On Constitutional
Court”, Plenum of the Constitutional Court of the Republic of Azerbaijan
DECIDED:
1. According to a sense of the Article
78.3 of the Tax Code of the Republic of Azerbaijan the person who gained actual
income from business activity fulfilled by a legal entity actually disposing of
his/her money and property is recognized as the person fulfilling tax
liabilities as a taxpayer. This person according to the Article 78.4 of the Tax
Code of the Republic of Azerbaijan cannot assign execution of tax liabilities
to other person and in case of crime execution of tax avoidance can be brought
to trial under the Article 213 of the Criminal Code of the Republic of
Azerbaijan.
2. The person that officially directs of
activities of the legal entity with participation in crime of tax avoidance can
be brought to trial under the Article 213 of the Criminal Code of the Republic
of Azerbaijan.
3. The decision shall come into force from the date of its publication.
4. The decision shall be published in “Azerbaijan”, “Respublika”, “Xalq Qazeti” and “Bakinskiy Rabochiy” newspapers, and “Bulletin of the Constitutional Court of the Republic of Azerbaijan”.
5. The decision is final, and
may not be cancelled, changed or officially interpreted by any institution or
official.
