Page 122 - Azerbaijan State University of Economics

THE PUBLIC INVESTMENTS IN AZERBAIJAN: THEORETICAL AND PRACTICAL ASPECTS

other types of assets and 0% for zero year-end net book value assets is

tax deductable from the income. In case when the factual amount of
repair expenses is below the indicated limits, the total amount of repair

expanse is deducted from the income as operating expenditure during the
year in which it is actually incurred; otherwise the total amount of repair

expenditure is capitalized and added to year-end net book value for tax

deductibility purposes. The repair expenses for the assets with zero net
book value any repair expenses are not directly deducted, instead total

expenditure is included into the net book value of such assets for
depreciation purposes [Tax Code of Azerbaijan Republic]. As we can

see the tax practice in Azerbaijan does not separate the operating and

capital repair. At the same time System of National Accounts treats the
capital repair expenses as expenditures increasing the book value of the

assets [System of National Accounts, 2009: 8-9]. Note that all capital
expenditures included into the budget are treated as investment both on

micro and macro-economic level.
According to budgetary classification the category of “Acquisition

of non-financial assets” includes the costs incurred due to purchase of

non-financial assets. This category includes also following articles: “Fixed
assets”, “Material production reserves”, “Precious materials” and “Non-

productive assets” [Law on Unique budgetary classification of Azerbaijan
Republic, 2004]. According to System of National Accounts costs

incurred due to acquisition of non-financial assets can be treated as
investment. Thus such assets are considered for acquisition or formation

land, buildings or equipment. The “Fixed assets” article includes

following sub-articles: buildings and constructions, machinery and
equipment, agricultural equipment, acquisition of herd and other working

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