Thanks to its geographical location, Azerbaijan is one of the most important bridges between Europe and the Middle East and Asia. Over time, the country has attracted many foreign citizens and companies interested in working, respectively doing business here. One important aspect to consider no matter the types of activities completed is related to the Azerbaijan tax.
Below, our company formation agents in Azerbaijan explain how the taxation system of this country works. You can rely on us for various services related to taxation and starting a business here.
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Types of taxpayers in Azerbaijan
There are two categories of taxpayers in Azerbaijan. These are individuals and companies which are further dividend into Azeri and foreign ones. It is important to make the difference between taxpayers from a residency point of view as this will affect the way the Azerbaijan tax is imposed.
It is also important to note that there are several types of taxes those who complete various activities are subject to. With respect to the Azerbaijan tax rate, these depend on the levy imposed.
Our local agents can offer more information on the types of levies the taxation system in Azerbaijan is made of.
Taxation of individuals in Azerbaijan
The following aspects need to be considered when it comes to the Azerbaijan taxes applied to individuals:
- natural persons are taxed based on their residency in this country,
- Azerbaijan citizens and residents are taxed on their worldwide income,
- non-residents are taxed only on the income they earn in Azerbaijan,
- the personal income tax is applied at progressive rates.
In order to be considered a resident in Azerbaijan and pay the personal income tax on one’s worldwide income, an individual must live here at least 182 days in a calendar year.
With respect to types of incomes a natural person can be taxed, these refer to employment, investments, real estate ownership and so on.
In 2019, a few changes in the Azerbaijan tax applied to natural persons have occurred. These can be explained by our consultants.
Taxation of companies in Azerbaijan
The Azerbaijan tax imposed on companies is also known as the corporate levy and it is also based on the residence of the business paying it. Just like in the case of individuals, the Azerbaijan tax rate applicable to corporate income of domestic companies is based on their worldwide profits.
In the case of foreign companies with operations in Azerbaijan, these can be taxed on the worldwide income or the profits generated in this country, depending on the business form overseas entities work under. From this point of view, the branch office and the subsidiary are the two legal forms available for foreign entities.
With respect to the Azerbaijan tax rate levied it is a flat one.
In order to be taxed in Azerbaijan, both companies and natural persons need to be registered with the tax authorities here.
If you want to open a company in Azerbaijan and need guidance our specialists are at your service, no matter the selected business form.
Azerbaijan tax rates
The following tax rates need to be considered when it comes to taxation in Azerbaijan:
- the personal income tax is levied at a rate of 0% for the first 8,000 AZN per month,
- the second rate of the personal income tax is 14% and it is applied for monthly incomes above 8,000 AZN,
- individual enterprisers are imposed with a flat tax rate of 20%,
- the corporate tax rate is also levied at 20% on domestic and foreign companies.
To these, special rules apply to natural persons who work in the oil and gas sector and who must pay the personal income levy at an Azerbaijan tax rate of 14% for a monthly income of 2,500 AZN and 25% for incomes exceeding 2,500 AZN, plus 350 AZN for the first 2,500 AZN.
If you need more information on the Azerbaijan tax system, our local consultants can provide it.
Other taxes levied under the taxation system in Azerbaijan
The income tax is not the only levy imposed in Azerbaijan, as there are also others to consider. Among these, the value added tax which is the most important indirect tax, and it is imposed at a standard rate of 18%, but also a few reduced rates applicable to the sale of various goods and services.
Other Azerbaijan taxes that need to be taken into account are the withholding taxes on dividend payments, interests, and royalties which are levied at a 10% rate in the case of the first two types of incomes, and 14% in the case of royalties. Telecom and international transport services are also imposed with a tax of 6%.
If you need information on the Azerbaijan tax and its rates, do not hesitate to contact our company registration representatives.