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RESOLUTION OF THE CABINET OF MINISTERS OF THE AZERBAIJAN REPUBLIC

of September 20, 2024 No. 435

About approval of "Regulations on creation of special reserves for the purposes of the taxation of bankrupt banks"

For the purpose of ensuring execution of subitem 2.2.6 of the Presidential decree of the Azerbaijan Republic of December 28, 2023 No. 2439 "About implementation of the Law of the Azerbaijan Republic of December 5, 2023 No. 1033-VIQD about introduction of amendments to the Tax Code of the Azerbaijan Republic". The Azerbaijan Republic and settlement of number of the questions following from this", the Cabinet of Ministers of the Azerbaijan Republic decides:

Approve "Regulations on creation of special reserves for the purposes of the taxation of bankrupt banks" it (is applied).

Approved by the Resolution of the Cabinet of Ministers of the Azerbaijan Republic of September 20, 2024 No. 435

Regulations on creation of special reserves for the purposes of the taxation of bankrupt banks

1. General provisions

1.1. This Provision determines rules of classification of assets of bankrupt banks (further - banks) and creations of special provisions by recognition of possible losses on assets and deductions from the income for the purposes of the taxation.

1.2. Provisions of this provision do not extend to the measures for restructuring realized according to the Presidential decree of the Azerbaijan Republic of February 28, 2019 No. 551 "About the additional measures connected with the solution of the problem credits of physical persons in the Azerbaijan Republic".

1.3. The concepts used in this Provision express the values determined normative and regulatory legal acts of the Azerbaijan Republic.

2. Classification of assets

2.1. After appointment in bank of the liquidator classification of assets of bank and calculation of reserves are performed according to this Provision.

2.2. Bad assets are removed from balance according to the decision of the liquidator.

2.3. Assets share on standard and non-standard. The satisfactory, being under control assets belong to standard assets, and unsatisfactory, unsafe and bad assets belong to non-standard assets.

2.4. Classification of assets is performed on delay terms taking into account the level of their security. Satisfactory assets belong to the highest category, and dormant assets - to the lowest classification category.

2.5. If other is not established by this Provision, the classification category of assets on terms of delay is determined by the following table:

2.6. The term of delay of asset (on principal debt or debt on the percent and (or) other payments specified in the agreement) from the date specified in the relevant agreement or the payment schedule for repayment of principal debt and (or) debt on percent and (or) other payments specified in the agreement are charged.

3. Creation of reserves

3.1. Reserves are created for covering of possible losses on assets. Reserves are divided into two categories:

3.1.1. The normal reserves created for compensation of possible losses on standard assets of bank;

3.1.2. Special reserves are created for indemnification, determined by non-standard assets of bank.

3.2. If other is not established by this Provision, regulations of inventories on classification categories are determined by the following table:

3.3. Reserves are created at the expense of means of Bank on each asset in national currency corresponding to the total amount of asset.

3.4. In case of delay of payment of principal debt or interest-bearing debt for asset more than for 90 (ninety) days the reserve in the amount of 100 percent for the added payments is created.

3.5. The created reserves are used for covering of possible losses on asset.

3.6. Correspondent accounts and the deposits "overnight" (the deposit placed for one day) in the Central Bank of the Azerbaijan Republic (further – the Central Bank) and the credit rating issued by the international rating agencies with the minimum investment rating, and also the Central bank and the minimum credit rating "And -" (or other equivalent rating) do not provide reserves for other requirements which are not overdue.

3.7. The created reserves are estimated by the liquidator at least once a month no later than the last working day of month.

4. Classification of consumer loans

Classification of consumer loans by terms of delay is determined by the following table:

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