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Tax rates in Azerbaijan

Tax Rates

Consumption Taxes

Nature of the Tax
Əlavə Dəyər Vergisi (ƏDV) - VAT (Value Added Tax).
Tax Rate
18%
Reduced Tax Rate
Exports of goods and services, as well as international and transit cargo and passenger transportation, are zero-rated.
Certain items are exempt, including: provision of financial services; sale or purchase of all types of mass media products and the publishing of mass media products (not including advertising activities); transportation of passengers by subway; contribution of property to an enterprise’s charter fund in the form of participation share, except for imported property (if the contribution of property in the form of a participation share is not directly connected to the acquisition of other property in exchange); production of textbooks for schools, literature for children and state publications funded by the state budget; provision of paid educational services (except for the provision of services in connection with other activities).
Other Consumption Taxes
Excise duties on alcohol, tobacco products, oil products, energy drinks, electronic cigarettes, light vehicles, leisure and sport yachts and certain floating transports, imported platinum, gold, jewellery, diamonds, leather goods.
A road tax is also levied.
 
Find out more about Taxes and Accounting in Azerbaijan on GlobalTrade.net, the Directory for International Trade Service Providers.
 

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Corporate Taxes

Company Tax
20%
Tax Rate For Foreign Companies
Azerbaijan resident companies are subject to a profit tax on their worldwide income. Foreign companies are taxed uniquely on their Azerbaijan-source income.
In addition to profit tax paid by a permanent establishment of a non-resident company, the amount repatriated from the net profit of such PE to the non-resident entity is taxed at the source of payment at a rate of 10%.
Capital Gains Taxation
Capital gains are included in taxable income and taxed at the standard corporate tax rate of 20%.
Main Allowable Deductions and Tax Credits
In general, expenses incurred to generate income are tax-deductible.
Depreciation of tangible and intangible assets are tax-deductible at rates varying between 7% (building and premises) and 25% (technological material, expenses incurred for geological works and exploitation of natural resources, means of transportation). The Azerbaijani tax legislation does not define nor provide for any tax deduction for goodwill.
Interest expenses may be deducted, but up to the limit of the interest rate on loans with similar currency and maturity at the interbank credit auction. If there is no such auction, the deduction is limited to 125% of the interbank auction credit rates published by the Central Bank of Azerbaijan.
Bad debts are considered tax-deductible (double debt deduction is possible if the debt is written off as worthless in the taxpayer's books).
Charitable contributions, fines and penalties are not deductible.
Property, land and mining taxes can be deducted. Repair and business trip expenses are also deductible (within certain limits).
Net operating losses can be carried forward up to five years. Carryback of losses is not permitted.
In light of the COVID-19 pandemic, expenditures incurred for necessary preventive measures that are documented in accordance with the Tax Code are fully deductible.
Other Corporate Taxes
Real property tax is levied at a 1% rate on the average annual book value of the property (imposed on legal entities, natural persons are liable for property tax that is calculated by square metre). Land tax is levied on Azerbaijan’s land resources that are in the possession of or used by individuals or companies. The tax is calculated per square metre at varying rates depending on the type of land (agricultural, commercial, industrial). Azerbaijan does not levy transfer tax, but transferring property may incur notary fees. Similarly, there are no stamp duties except for certain notary fees.
Social security contributions payable by the employer amount to 3% of the employee's gross salary up to first AZN 200 and 10% on the excess. Employers are also liable for unemployment insurance contributions amounting to 0.5% of the gross salary of the employee. From 1 April 2020, employers (and employees) are required to make monthly medical insurance contributions calculated at 2% of monthly income up to AZN 8,000, and 0.5% on the excess.
Mining activity is subject to a separate tax at varying rates ranging from 3% to 26% of the final product's wholesale price.
50% of income derived from the disposal of shares held for at least three years is exempt from income tax.
Other Domestic Resources
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Country Comparison For Corporate Taxation

  Azerbaijan Eastern Europe & Central Asia United States Germany
Number of Payments of Taxes per Year 9.0 13.9 10.6 9.0
Time Taken For Administrative Formalities (Hours) 159.0 226.2 175.0 218.0
Total Share of Taxes (% of Profit) 40.7 36.5 36.6 48.8

Source: Doing Business, Latest available data.

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Individual Taxes

Tax Rate

Private employment (for private sector employees except for those in the gas and oil industry)
From AZN 0 to 8,000 per month 0%
Above AZN 8,000 per month AZN 350 + 14%
Oil and gas industry employment
From AZN 0 to 2,500 per month 14%
Above AZN 2,500 per month AZN 350 + 25%
Individual entrepreneurs 20%
Individuals who hold an investment promotion certificate 50% exemption from personal income tax for seven years from the date of obtaining the certificate
Entrepreneurs participating in micro enterprises, and income from innovative activities of entrepreneurs participating in micro or small enterprises 75% exemption for three years from the date a start-up certificate is obtained
Allowable Deductions and Tax Credits
In case of entrepreneurial activity, the portion of deductible expenses exceeding income may be carried forward for three years without limitations to offset future taxable income.
Some expenses are not included in the taxable income, such as: the reimbursement of business expenses, dividends and interest received by physical persons and previously taxed at the source of payment in the Azerbaijan Republic, entertainment and meals, employee’s accommodation and other expenses of social nature incurred by the employer for employees.
Special Expatriate Tax Regime
Residents are taxed on their worldwide income, whereas non-residents are taxed on their Azerbaijani income (at the same rate as nationals).
An individual is considered to be tax resident if he/she is physically present in Azerbaijan for a period of more than 182 cumulative days in a calendar year.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
List of the fiscal conventions signed by the Republic of Azerbaijan
Withholding Taxes
Dividends: 10%, Interest: 10%, Royalties: 0 (paid to resident companies)/14%

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Find out more about Taxes and Accounting in Azerbaijan on GlobalTrade.net, the Directory for International Trade Service Providers.

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Latest Update: April 2022