The tax legislation of Azerbaijan is comprised by the Constitution of Azerbaijan Republic, the Tax Code 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 A corporate tax, also called corporation tax or company tax or corporate income tax, is a type of direct tax levied on the income or capital of corporations and other similar legal entities. The tax is usually imposed at the national level, but ...

value added tax A value-added tax (VAT or goods and services tax (GST), general consumption tax (GCT)) is a consumption tax that is levied on the value added at each stage of a product's production and distribution. VAT is similar to, and is often compared wi ...

excise tax file:Lincoln Beer Stamp 1871.JPG, upright=1.2, 1871 U.S. Revenue stamp for 1/6 barrel of beer. Brewers would receive the stamp sheets, cut them into individual stamps, cancel them, and paste them over the Bunghole, bung of the beer barrel so when ...

property tax A property tax (whose rate is expressed as a percentage or per mille, also called ''millage'') 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 Wealth t ...

, 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 regist ...

, 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, tax agents and tax authorities, procedures of tax registration, tax control and

audit An audit is an "independent examination of financial information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon." Auditing al ...

. 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 revenue Government revenue or national revenue is money received by a government from Tax revenue, taxes and Non-tax revenue, non-tax sources to enable it, assuming full resource employment, to undertake non-inflationary public expenditure. Government re ...

s 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 reso ...

s as percentage from GDP totaled 14.213%. Highest shares of tax revenues came from

and corporate profit taxes in 2014. In 2015, tax revenues as percentage of GDP were equal to 15.6%. The central executive body which provides the implementation and control of tax policies in the country, collection and transfer of tax payments into the

government budget A government budget is a projection of the government's revenues and expenditure for a particular period, often referred to as a financial or fiscal year, which may or may not correspond with the calendar year. Government revenues mostly incl ...

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 fiscal year (also known as a financial year, or sometimes budget year) is used in government accounting, which varies between countries, and for budget purposes. It is also used for financial reporting by businesses and other organizations. La ...

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 A calendar year begins on the New Year's Day of the given calendar system and ends on the day before the following New Year's Day, and thus consists of a whole number of days. The Gregorian calendar year, which is in use as civil calendar in ...

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 Entrepreneurship is the creation or extraction of economic value in ways that generally entail beyond the minimal amount of risk (assumed by a traditional business), and potentially involving values besides simply economic ones. An entrepreneu ...

activities such as interest income,

dividend A dividend is a distribution of profits by a corporation to its shareholders, after which the stock exchange decreases the price of the stock by the dividend to remove volatility. The market has no control over the stock price on open on the ex ...

capital gain Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset may include tangible property, a car, a business, or intangible property such as shares. ...

s 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. Offi ...

from family members, capital gains, income from crafts production,

lottery A lottery (or lotto) is a form of gambling that involves the drawing of numbers at random for a prize. Some governments outlaw lotteries, while others endorse it to the extent of organizing a national or state lottery. It is common to find som ...

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 is the communication by representatives of State (polity), state, International organization, intergovernmental, or Non-governmental organization, non-governmental institutions intended to influence events in the international syste ...

cargo In transportation, cargo refers to goods transported by land, water or air, while freight refers to its conveyance. In economics, freight refers to goods transported at a freight rate for commercial gain. The term cargo is also used in cas ...

and valuable goods.

Excise Tax

Excise taxes are

indirect tax An indirect tax (such as a sales tax, per unit tax, value-added tax (VAT), excise tax, consumption tax, or tariff) is a tax that is levied upon goods and services before they reach the customer who ultimately pays the indirect tax as a part of ...

es which are included in the sales price of goods. All excise goods that are produced or imported to Azerbaijan are subject to taxation.

Alcohol Alcohol may refer to: Common uses * Alcohol (chemistry), a class of compounds * Ethanol, one of several alcohols, commonly known as alcohol in everyday life ** Alcohol (drug), intoxicant found in alcoholic beverages ** Alcoholic beverage, an alco ...

and all types of

alcoholic beverages Drinks containing alcohol are typically divided into three classes—beers, wines, and spirits—with alcohol content typically between 3% and 50%. Drinks with less than 0.5% are sometimes considered non-alcoholic. Many societies have a di ...

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 () is a machine designed for self-propulsion, usually to transport people, cargo, or both. The term "vehicle" typically refers to land vehicles such as human-powered land vehicle, human-powered vehicles (e.g. bicycles, tricycles, velo ...

s, leisure and sports floating transports, imported

platinum Platinum is a chemical element; it has Symbol (chemistry), symbol Pt and atomic number 78. It is a density, dense, malleable, ductility, ductile, highly unreactive, precious metal, precious, silverish-white transition metal. Its name origina ...

gold Gold is a chemical element; it has chemical symbol Au (from Latin ) and atomic number 79. In its pure form, it is a brightness, bright, slightly orange-yellow, dense, soft, malleable, and ductile metal. Chemically, gold is a transition metal ...

and

jewelry Jewellery (or jewelry in American English) consists of decorative items worn for personal adornment such as brooches, ring (jewellery), rings, necklaces, earrings, pendants, bracelets, and cufflinks. Jewellery may be attached to the body or the ...

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 made from Fermentation in winemaking, fermented fruit. Yeast in winemaking, Yeast consumes the sugar in the fruit and converts it to ethanol and carbon dioxide, releasing heat in the process. Wine is most often made f ...

and

vineyard A vineyard ( , ) is a plantation of grape-bearing vines. Many vineyards exist for winemaking; others for the production of raisins, table grapes, and non-alcoholic grape juice. The science, practice and study of vineyard production is kno ...

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, 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 Economics () is a behavioral science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyse ...

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 vehicle A motor vehicle, also known as a motorized vehicle, automotive vehicle, automobile, or road vehicle, is a self-propelled land vehicle, commonly wheeled, that does not operate on railway track, rails (such as trains or trams), does not fly (such ...

s 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 Motion, movement of humans, animals, and cargo, goods from one location to another. Mode of transport, Modes of transport include aviation, air, land tr ...

ation, as well as all

motor fuel A motor fuel is a fuel that is used to provide power to the engine of motor vehicles — typically a heat engine that produces thermal energy via oxidative combustion of liquid or gaseous fuel and then converts the heat into mechanical energy ...

s, diesel that has been either produced or imported to Azerbaijan Republic for domestic use. Taxes for

motor cars 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 gene ...

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 ge ...

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 there is specific procedure of calculation.

Royalty (Mining Tax)

These taxes are paid by physical entities and enterprises which extract

mineral resources Natural resources are resources that are drawn from nature and used with few modifications. This includes the sources of valued characteristics such as commercial and industrial use, aesthetic value, scientific interest, and cultural value. ...

from the territory of Azerbaijan Republic, including area of

Caspian Sea The Caspian Sea is the world's largest inland body of water, described as the List of lakes by area, world's largest lake and usually referred to as a full-fledged sea. An endorheic basin, it lies between Europe and Asia: east of the Caucasus, ...

which belongs to the country. Tax rates for

crude oil Petroleum, also known as crude oil or simply oil, is a naturally occurring, yellowish-black liquid chemical mixture found in geological formations, consisting mainly of hydrocarbons. The term ''petroleum'' refers both to naturally occurring u ...

is 26%,

natural gas Natural gas (also fossil gas, methane gas, and gas) is a naturally occurring compound of gaseous hydrocarbons, primarily methane (95%), small amounts of higher alkanes, and traces of carbon dioxide and nitrogen, hydrogen sulfide and helium ...

– 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 revenue received in respect of goods and services provided is subject to taxation. Simplified tax rate is – 2% (applicable when the annual revenue is below 200 000 azn); for public catering activity where the annual revenue is above 200 000 az – 8%. When taxpayers are engaged in sales to commercial entities and private entrepreneurs (buyers for commercial use) along with individual customers (buyers for personal use), where income from buyers for commercial use is less than 30 percent of total sales, they would also be entitled to pay simplified tax with the rate of 2%. https://www.caspianlegalcenter.az/insights/more/corporate-tax-azerbaijan

References

External links

Official website of Ministry of Taxes of Azerbaijan

Official website of Azerbaijan Republic Statistic Committee

Official website of LTA Azerbaijan LLC
{{Asia in topic, Taxation in

Azerbaijan Azerbaijan, officially the Republic of Azerbaijan, is a Boundaries between the continents, transcontinental and landlocked country at the boundary of West Asia and Eastern Europe. It is a part of the South Caucasus region and is bounded by ...