The tax legislation of Azerbaijan is comprised by the Constitution of Azerbaijan Republic, the

Tax Code A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...

and legal standards which are adopted herewith. The taxes levied in Azerbaijan can be generally broken down into 3 main types: state taxes, taxes of autonomy republic and local (municipal) taxes. State taxes include the following: personal income tax, corporate tax, value added tax, excise tax,

property tax A property tax or millage rate is an ad valorem tax on the value of a property.In the OECD classification scheme, tax on property includes "taxes on immovable property or net wealth, taxes on the change of ownership of property through inhe ...

, land tax,

road tax Road tax, known by various names around the world, is a tax which has to be paid on, or included with, a motorised vehicle to use it on a public road. National implementations Australia All states and territories require an annual vehicle registra ...

, mineral royalty tax and simplified tax. Taxes of autonomy republic are the same as state taxes but levied in Nakhichevan Autonomous Republic. The Tax Code of Azerbaijan Republic was approved on 11 July 2000 and consists of two parts. The ''General Part'' indicates the rights and responsibilities of

taxpayers A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or ...

, tax agents and tax authorities, procedures of tax registration, tax control and audit. The second part, also referred to as ''Special Section,'' defines specific taxes and their bases, rates, payment schedules and procedures. There exist separate taxation procedures for Production Sharing Agreements (PSAs). From 2010, the government revenues from taxes started to rise. Thus, in 2014,

tax revenue Tax revenue is the income that is collected by governments through taxation. Taxation is the primary source of government revenue. Revenue may be extracted from sources such as individuals, public enterprises, trade, royalties on natural resour ...

s as percentage from

GDP Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...

totaled 14.213%. Highest shares of tax revenues came from value added tax and corporate profit taxes in 2014. In 2015, tax revenues as percentage of GDP were equal to 15.6%. The central

executive body The Executive, also referred as the Executive branch or Executive power, is the term commonly used to describe that part of government which enforces the law, and has overall responsibility for the governance of a state. In political systems ba ...

which provides the implementation and control of tax policies in the country, collection and transfer of tax payments into the government budget is Ministry of Taxes of Azerbaijan Republic.

Tax Regime

Currently, Azerbaijan has 3 distinct tax regimes. These are the following: statutory tax regime, tax regime that relates to companies operating under Production Sharing Agreements and tax regime that relates to companies operating under Host Government Agreements. The statutory tax regime is applicable to all companies operating in Azerbaijan, except for those, who are involved into oil and gas industry. The regime related to Production Sharing Agreements covers the rules for more than twenty existing PSAs. Milli Majlis has ratified these PSAs. The rules related to Baku-Tbilisi-Ceyhan oil export and South Caucasus pipelines are covered by Host Government Agreements tax regime.

Tax Procedures

The

tax year A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...

in Azerbaijan starts in January, 1st and ends in December, 31st. The tax declaration has to be filled in and submitted by enterprises no later than 31 March following the calendar year and users of simplified tax should submit the declaration no later than 20 April.

Natural person In jurisprudence, a natural person (also physical person in some Commonwealth countries, or natural entity) is a person (in legal meaning, i.e., one who has its own legal personality) that is an individual human being, distinguished from the br ...

s who have stayed in Azerbaijan 182 days in a calendar year are accounted as residents and are responsible for paying the taxes. Residents of Azerbaijan are taxable on their international income, whereas non-residents are taxable on the Azerbaijani source income only. Taxes can be withhold from people who are related to employment activities, as well as non- entrepreneurial activities such as

interest income Passive income is unearned income that is acquired automatically with minimal labor to earn or maintain. It is often combined with another source of income, such as a side job. In the United States, the IRS divides income into three categories ...

dividend A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-i ...

s, capital gains and royalties. Agricultural income, gifts and

inheritance Inheritance is the practice of receiving private property, titles, debts, entitlements, privileges, rights, and obligations upon the death of an individual. The rules of inheritance differ among societies and have changed over time. Officia ...

from family members, capital gains, income from crafts production, lottery prizes, alimonies and compensation receipts are exempt from taxation. Standard deductions are applicable for war heroes, their families and military officials.

State Taxes

Income tax from individuals

Income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...

es in Azerbaijan are set at progressive rate. The taxable base for residents is income which has been earned in or outside of Azerbaijan. For non-residents income which is taxed are the following – income which is both connected and not connected with employment and also all other kinds of income which are not tax-exempt or arose from

revaluation Revaluation is a change in a price of a good or product, or especially of a currency, in which case it is specifically an official rise of the value of the currency in relation to a foreign currency in a fixed exchange rate system. In contrast, ...

of assets. Tax rate on income of

natural person In jurisprudence, a natural person (also physical person in some Commonwealth countries, or natural entity) is a person (in legal meaning, i.e., one who has its own legal personality) that is an individual human being, distinguished from the br ...

s receiving less than 2500 AZN is 14%, if income is more than 2500 AZN, then 25% tax is levied on the proportion which is exceeding 2500 AZN.

Profit tax from legal persons

Profit is defined as the difference between income and expenses. The profits of all resident-enterprises should be taxed. If legal person is permanently established in Azerbaijan – then its profits should be taxed. Otherwise, it should be taxed at the source of payment without subtracting its expenses. Gains, which arise from revaluation of assets are not subject to taxation. The profits are taxed at 20% rate.

Value Added Tax

Value Added Tax (VAT) rate is 18%. All works, goods, services provided and taxable imports constitute the base for taxation. There also exists zero (0) rate VAT in the country for the issues related with financial aids,

diplomacy Diplomacy comprises spoken or written communication by representatives of states (such as leaders and diplomats) intended to influence events in the international system.Ronald Peter Barston, ''Modern diplomacy'', Pearson Education, 2006, p. ...

cargo Cargo consists of bulk goods conveyed by water, air, or land. In economics, freight is cargo that is transported at a freight rate for commercial gain. ''Cargo'' was originally a shipload but now covers all types of freight, including trans ...

and valuable goods.

Excise Tax

Excise taxes are indirect taxes which are included in the sales price of goods. All excise goods that are produced or imported to Azerbaijan are subject to taxation. Alcohol and all types of

alcoholic beverages An alcoholic beverage (also called an alcoholic drink, adult beverage, or a drink) is a drink that contains ethanol, a type of alcohol that acts as a drug and is produced by fermentation of grains, fruits, or other sources of sugar. The cons ...

tobacco Tobacco is the common name of several plants in the genus '' Nicotiana'' of the family Solanaceae, and the general term for any product prepared from the cured leaves of these plants. More than 70 species of tobacco are known, but the ...

products, light

vehicle A vehicle (from la, vehiculum) is a machine that transports people or cargo. Vehicles include wagons, bicycles, motor vehicles (motorcycles, cars, trucks, buses, mobility scooters for disabled people), railed vehicles (trains, trams), ...

s, leisure and sports floating transports, imported

platinum Platinum is a chemical element with the symbol Pt and atomic number 78. It is a dense, malleable, ductile, highly unreactive, precious, silverish-white transition metal. Its name originates from Spanish , a diminutive of "silver". Pla ...

gold Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile me ...

and

jewelry Jewellery ( UK) or jewelry ( U.S.) consists of decorative items worn for personal adornment, such as brooches, rings, necklaces, earrings, pendants, bracelets, and cufflinks. Jewellery may be attached to the body or the clothes. From a w ...

are subject to excise tax. There is no fixed tax rate for all types of goods, instead, there are different rates for each of the product and its amounts. For example,

wine Wine is an alcoholic drink typically made from fermented grapes. Yeast consumes the sugar in the grapes and converts it to ethanol and carbon dioxide, releasing heat in the process. Different varieties of grapes and strains of yeasts are m ...

and

vineyard A vineyard (; also ) is a plantation of grape-bearing vines, grown mainly for winemaking, but also raisins, table grapes and non-alcoholic grape juice. The science, practice and study of vineyard production is known as viticulture. Vineya ...

materials are taxed at 0.1 AZN per liter.

Property Tax

Taxable base of property tax for physical persons are the value of buildings and their parts, any water and air transportation or facility. For legal enterprises it is only average annual value of fixed assets. The rates are specified based on the area where buildings are located. Thus, for Baku it is 0.4 AZN per each square meter, Gyandja,

Sumgait Sumgait (; az, Sumqayıt, ) is a city in Azerbaijan, located near the Caspian Sea, on the Absheron Peninsula, about away from the capital Baku. The city has a population of around 345,300, making it the second largest city in Azerbaijan after Ba ...

, and Absheron regions – 0.3 AZN, other cities and regions – 0.2 AZN, cities and towns of regional subordination – 0.1 AZN.

Tax on land

Residents, as well as non-residents and businesses are obliged to register for paying taxes after proving their rights to use the land, and regardless of the results of economic activities on the land itself it is mandatory to pay land tax. The tax rates differ by the purpose of use and the area where the land is located. Generally, the tax rates are higher for the big and industrial cities. Land tax rates for agricultural use is 0.06 AZN for each conventional point.

Taxes to the Road

The taxable base for this type of tax constitutes the motor vehicles which are imported to the country by non-residents and are used for

transport Transport (in British English), or transportation (in American English), is the intentional movement of humans, animals, and goods from one location to another. Modes of transport include air, land ( rail and road), water, cable, pipelin ...

ation, as well as all

motor fuel An engine or motor is a machine designed to convert one or more forms of energy into mechanical energy. Available energy sources include potential energy (e.g. energy of the Earth's gravitational field as exploited in hydroelectric power g ...

s, diesel that has been either produced or imported to Azerbaijan Republic for domestic use. Taxes for motor cars are calculated depending on

engine An engine or motor is a machine designed to convert one or more forms of energy into mechanical energy. Available energy sources include potential energy (e.g. energy of the Earth's gravitational field as exploited in hydroelectric power ...

cubic capacity and period of presence, for buses – number of seats and period of presence, for trucks – number of axis and period of presence. Generally, these taxes may vary from US$20 to US$2800 and higher. For transportation, delivering

dangerous cargo ''Dangerous Cargo'' is a 1954 British second feature crime film directed by John Harlow starring Jack Watling, Susan Stephen and Karel Stepanek. The film was produced by Stanley Haynes for ACT Films. '' Daily Express'' crime reporter Percy H ...

there is specific procedure of calculation.

Royalty (Mining Tax)

These taxes are paid by physical entities and enterprises which extract mineral resources from the territory of Azerbaijan Republic, including area of

Caspian Sea The Caspian Sea is the world's largest inland body of water, often described as the world's largest lake or a full-fledged sea. An endorheic basin, it lies between Europe and Asia; east of the Caucasus, west of the broad steppe of Central Asia ...

which belongs to the country. Tax rates for crude oil is 26%,

natural gas Natural gas (also called fossil gas or simply gas) is a naturally occurring mixture of gaseous hydrocarbons consisting primarily of methane in addition to various smaller amounts of other higher alkanes. Low levels of trace gases like carbo ...

– 20%, all types of metals – 3%.

Simplified Tax

Simplified tax is applicable to entities, whose volume of transactions does not exceed 200.000 AZN in 12 consecutive months. Gross volume of cash flows received in respect of goods and services provided is subject to taxation. Simplified tax rate for Baku is 4%, for other regions – 2%, for trading activities – 6%, for public catering activity – 8%.

References

External links

Official website of Ministry of Taxes of Azerbaijan

Official website of Azerbaijan Republic Statistic Committee
{{Asia in topic, Taxation in

Azerbaijan Azerbaijan (, ; az, Azərbaycan ), officially the Republic of Azerbaijan, , also sometimes officially called the Azerbaijan Republic is a transcontinental country located at the boundary of Eastern Europe and Western Asia. It is a part of t ...