Any type of activity completed in Azerbaijan implies the imposition of a tax. The main categories of taxpayers in this country are natural persons who must pay the personal income tax and companies that, in Azerbaijan, are subject to the corporate tax that is levied at a specific rate based on the type of operations completed, but also on the residency status.
The corporate tax in Azerbaijan is levied based on the filing of tax returns in accordance with the financial year. Here, the fiscal year is the same as the calendar year, provided that a business chooses otherwise.
Below, our company formation specialists in Azerbaijan explain how the corporate tax is levied here and the rates it is applied at.
Corporate residence in Azerbaijan
In order to determine how the Azerbaijan corporate tax is levied and the rate it is imposed at, the tax residence of a business must be established, as the country hosts both locally registered and foreign-registered enterprises. The latter can operate under branch and representative offices. These can also set up subsidiaries in Azerbaijan, however, these are deemed as local businesses.
In order to be considered a corporate tax resident in Azerbaijan, the following criteria apply:
- the company is set up in accordance with the Company Law in Azerbaijan;
- the business has a management place in this country;
- the company undertakes an entrepreneurial activity in Azerbaijan.
Then, there are permanent establishments that benefit from special tax regulations in Azerbaijan, including when it comes to the corporate tax rate which is levied only on the profits these earn here.
Permanent establishments usually fall under the provisions of double tax treaties signed by Azerbaijan and imply:
- completing various activities in Azerbaijan on a permanent basis;
- undertaking commercial operations in Azerbaijan on a temporary basis, however, the minimum period is 90 days within a calendar year;
- the foreign company can have a management place or an office for the aforementioned minimum period of time;
- construction sites, mines, and quarries are also deemed as permanent establishments in Azerbaijan.
If you want to open a company in Azerbaijan and need guidance, our local representatives are at your service.
Corporate income tax rates in Azerbaijan
In Azerbaijan, the corporate tax is levied at a standard rate of 20%, however, there can also be exceptions from this rule for specific companies. A simplified tax system is available for certain categories of traders, including for those who are not registered for the value added tax (VAT).
Here are the main aspects to consider about the corporate tax rates in Azerbaijan:
- the standard 20% rate applies to both national and foreign companies operating through permanent establishments;
- a rate of 2% applies on the gross revenue of traders who are not registered for VAT;
- an 8% corporate tax rate is levied on companies offering catering services and which exceed 200,000 AZN taxable incomes.
The following categories of taxpayers can be considered candidates for Azerbaijan simplified corporate tax system and the reduced rates mentioned above:
- those who complete wholesale trading activities;
- those engaged in retail trade and who exceed a 200,000 AZN turnover within a calendar year;
- companies with more than 10 employees;
- sole traders who need specific licenses to complete their activities.
Azerbaijan companies must also consider the real estate tax which is levied at a rate of 1% on the average value of a property that is established annually.
Our company formation advisors in Azerbaijan can offer detailed information on the corporate and other taxes that need to be paid by local and foreign companies with operations in this country.
Filing corporate tax returns in Azerbaijan
In order to compute and levy the Azerbaijan corporate tax at the established rate, a company must file annual tax returns with the State Tax Office after having its accounts audited.
As mentioned above, the tax year corresponds to the calendar year in Azerbaijan, and companies are required to file their annual tax returns by March 31st of the current year for the past one. Enterprises are also subject to advanced tax payments that must be made on a quarterly basis. These must be made by the 15th of the month following the conclusion of the calendar quarter. The final payment must coincide with the filing of the annual tax declaration.
Special tax return regulations apply when a company is liquidated when the filing must be completed within 30 days after the decision is made.
For assistance in corporate tax matters, please contact our specialists in company registration in Azerbaijan.