The tax legislation of Azerbaijan is comprised by theConstitution of Azerbaijan Republic, theTax 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,value added tax,excise tax,property tax,land tax,road tax, mineral royalty tax and simplified tax. Taxes of autonomy republic are the same as state taxes but levied in Nakhichevan Autonomous Republic.[1]
The Tax Code of Azerbaijan Republic was approved on 11 July 2000 and consists of two parts. TheGeneral Part indicates the rights and responsibilities oftaxpayers, tax agents and tax authorities, procedures of tax registration, tax control andaudit. The second part, also referred to asSpecial Section, defines specific taxes and their bases, rates, payment schedules and procedures.[1] There exist separate taxation procedures for Production Sharing Agreements (PSAs).[2]
From 2010, thegovernment revenues from taxes started to rise. Thus, in 2014,tax revenues as percentage fromGDP totaled 14.213%. Highest shares of tax revenues came fromvalue added tax andcorporate profit taxes in 2014.[3] In 2015, tax revenues as percentage of GDP were equal to 15.6%.[4]
The centralexecutive body which provides the implementation and control oftax policies in the country, collection and transfer of tax payments into thegovernment budget is Ministry of Taxes of Azerbaijan Republic.[5]
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.[6]
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.[6]
Thetax year 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 thecalendar year and users of simplified tax should submit the declaration no later than 20 April.Natural persons who have stayed in Azerbaijan 182 days in a calendar year are accounted asresidents 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.[1]
Taxes can be withhold from people who are related to employment activities, as well as non-entrepreneurial activities such asinterest income,dividends,capital gains and royalties.[1]
Agricultural income, gifts andinheritance from family members, capital gains, income from crafts production,lottery prizes,alimonies and compensation receipts areexempt from taxation. Standard deductions are applicable for war heroes, their families and military officials.[1]
Income taxes in Azerbaijan are set atprogressive rate. The taxable base forresidents 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 fromrevaluation of assets. Tax rate on income ofnatural persons 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 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 (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 withfinancial aids,diplomacy,cargo and valuable goods.
Excise taxes areindirect 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 ofalcoholic beverages,tobacco products, lightvehicles, leisure and sports floating transports, importedplatinum,gold andjewelry 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 andvineyard materials are taxed at 0.1 AZN per liter.
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, andAbsheron regions – 0.3 AZN, other cities and regions – 0.2 AZN, cities and towns of regional subordination – 0.1 AZN.
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 ofeconomic 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.
The taxable base for this type of tax constitutes themotor vehicles which are imported to the country by non-residents and are used fortransportation, as well as allmotor fuels,diesel that has been either produced or imported to Azerbaijan Republic for domestic use. Taxes formotor cars are calculated depending onengine 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, deliveringdangerous cargo there is specific procedure of calculation.
These taxes are paid by physical entities and enterprises which extractmineral resources from the territory of Azerbaijan Republic, including area ofCaspian Sea which belongs to the country. Tax rates forcrude oil is 26%,natural gas – 20%, all types of metals – 3%.
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%.[7]https://www.caspianlegalcenter.az/insights/more/corporate-tax-azerbaijan
Taxation in Asia | |
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