The tax legislation in the country consists of the constitution of the Azerbaijan Republic, the tax code, and legal standards. Taxes collected by the government are used to provide quality amenities for the citizens. In Azerbaijan, every resident pays taxes on all income earned while residing within the territory during a tax year. However, certain incomes such as agricultural income, capital gains, lottery prizes, alimonies, gifts, and inheritance from family members, etc. are tax-exempted. Generally, there are three main types of taxes levied on income: state taxes, local taxes, and taxes of the autonomy republic.
Who is liable to pay the tax
Persons living within the state are considered taxpayers as long as they earn income while residing in the republic for 182 days or more in a tax year. While residents are charged on their global income earned (locally and abroad), non-residents pay taxes on income sourced here. The tax year in begins in January and ends in December. Tax returns have to be filled in and submitted by enterprises before the 31st of March following the calendar year, while users of simplified tax submit theirs no later than 20 April.
Types of Taxes
There are various types of state taxes such as personal income tax, corporate tax, value-added tax, excise tax, property tax, land tax, road tax, etc. Taxes of an autonomous republic are akin to state taxes but charged in Nakhichevan autonomous republic.
Income tax
Also known as personal income tax, this is charged at a progressive rate on income earned in or outside of Azerbaijan by residents. Taxable income for non-residents includes income connected and not connected with employment and other types of income not tax-exempt.
| Income band | Tax rate |
| 0 to 2499 AZN | 14% |
| 2500 AZN and more | 25% (levied on the income exceeding 2500 AZN) |
Profit tax for entities
Profit is the amount left after subtracting expenses from income. The profits made by companies legally established in the nation are taxed at a 20% rate.
Value Added Tax (VAT)
VAT has a tax rate of 18 percent imposed on works, goods, services provided, and taxable imports that are not tax exempted. Financial aids, diplomacy, cargo, valuable goods, etc., attract a 0% VAT rate.
Excise Tax
Excise taxes are indirect taxes added to the sale prices of goods. It is imposed on all excise goods produced locally or imported. There is no fixed tax rate for all goods. Alcohol, alcoholic beverages, tobacco products, imported platinum, gems, etc. are liable to excise tax.
Property Tax
This is imposed on the value of buildings and their parts, and water and air transportation or facility. For legal entities, it is the average annual value of fixed assets. The rates depend on the area where buildings are located.
Tax on land
Residents, non-residents, and companies are obligated to pay taxes after proving ownership, irrespective of the outcome of the economic activities carried out on the land. The usage of the land and the area it is located determines the tax rates.
Royalty (Mining Tax)
This tax is paid by corporations and establishments involved in the extraction of mineral resources within the territory, including areas around the Caspian Sea. The tax rates imposed include 26 percent for crude oil, 20 percent for natural gas, and 3 percent for all kinds of metals.
Simplified Tax
This type of tax applies to firms, with a volume of transactions not exceeding 200.000 AZN in twelve consecutive months. It is deducted from the total volume of cash flows realized as regards the purchase of goods and services provided. The simplified tax rate differs by region; Baku has a 4% rate, 2% for others, 6% for trading activities, and 8% for open catering activities.
