Significant changes have been made to the Tax Code of the Republic of Azerbaijan by adopting Law “on Amendments to the Tax Code” dated 30 November 2018, effective as of January 1st, 2019 (“Amendment Law”).
1. PERSONAL INCOME TAX
According to the Amendment Law, starting from January 1, 2019 for the 7 years period, personal income tax rates for non-oil and gas sectors and non-public sector will be as follows:
Taxable monthly income
up to AZN 8,000
over AZN 8,000
14% of the amount exceeding AZN 8,000
Personal income tax rates for oil and gas sectors and public sector was not affected by the Amendment Law and remained the same i.e.:
Up to AZN 2,500
Over AZN 2,500
AZN 350 + 25% of the amount exceeding AZN 2,500
New amendments do not provide any criteria for determining oil and gas activities and non-public sector. According to Presidential decree dated 20 December 2018, the respective criteria shall be determined by the Cabinet of Ministers within 1 months period. In cases where the taxpayer is involved in oil and gas and non-oil and gas activities simultaneously, the company shall keep separate accounting records for those employees working in multiple sectors. In case if the company fails to keep separate accounting records, then all employees will be subject to the income tax rates indicated for the oil and gas and public sector (i.e. higher rate).
2. SOCIAL SECURITY CONTRIBUTIONS
It should be also noted that starting from January 1, 2019 for the 7 years period, social security contribution rates for non-oil and gas activities and non-public sector will be as follows:
Accrued monthly income
From insured (employees)
From insurers (employers)
Over AZN 200
10% of the amount exceeding AZN 200 plus 6 AZN
15% of the amount exceeding AZN 200 plus AZN 44
SSC rates for oil and gas sectors and public sector remains the same, i.e.:
3. SIMPLIFED TAX
For your information, simplified tax regime in Azerbaijan applies if (i) a taxpayer is not registered for VAT purposes and (ii) his taxable turnover does not exceed AZN 200,000 threshold during any month (months) of consecutive 12-months period. Simplified tax regime is also applied to persons who are engaged in public catering business even if an entity’s turnover exceeds AZN 200,000.
The Amendment Law limits the applicability of simplified tax regime in Azerbaijan. Under the Amendment Law, the following persons cannot be eligible to qualify as the simplified taxpayers (Art. 218.5.8-13):
- Persons who are engaged in production activity having employees’ number more than 10;
- Persons who are engaged in wholesale trading activity;
- Persons who provide services to taxpayers (i.e. individual entrepreneurs and legal entities) rather than to individuals (population) who are not registered with tax authority;
- Persons who are engaged in sale of gold, gold jewellery and diamond products;
- Persons who are engaged in sale of leather and fur products;
- Persons who are engaged in licensable activity (except for building construction and services on compulsory insurance contracts).
In addition, simplified tax rate in Baku was reduced from 4% to 2%.
In general, excise rates were increased by adopting the Amendment Law. Energy drinks were also included into the list of excised products.
Alcoholic energy drinks
AZN 2 per litre
Non-alcoholic energy drinks
AZN 3 per litre
AZN 1 per one unit
Liquids for electronic cigarettes
AZN 20 per litre
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This information is provided for your convenience and does not constitute legal advice. It is prepared for the general information of our clients and other interested persons. This information should not be acted upon in any specific situation without appropriate legal advice and it may include links to websites other than the GRATA website.
GRATA Azerbaijan Law Firm
43 Samed Vurgun Street, World Business Center,
17th floor, AZ1014, Baku, Azerbaijan
Tel.: +994 (12) 597-48-33/53
45 Rockefeller Plaza Suite 2000 New York, NY 10111
+1 (212) 332 3299; +1 (646) 387 4757
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