Azerbaijan Personal Income Tax

Residents are taxed on worldwide income. Non­residents are taxed on Azerbaijani-source income only.

For tax purposes, individuals are considered resident if they are present in the country for 183 days or more in a calendar year.

Income subject to tax

Employment income. Taxable income from employment consists of all compensation, whether received in cash or in kind, subject to certain minor exceptions as discussed below.

Income received in foreign currency is translated into Azerbaijani manats (AZN) at the official exchange rate of the Central Bank of Azerbaijan on the date the income is received.

Education allowances provided by employers to their employees’ children aged 18 years and younger are taxable for income tax and social security purposes.

Self-employment income. Tax is levied on an individual’s annual self-employment income, which consists of gross income less expenses incurred in earning the income.

Non-employment income. Interest on securities and deposits, copyrights, royalties and rental income are taxable.

Capital gains. Capital gains derived from the sale of most mov­able tangible property that is held for business purposes or from the sale of real property that has been the taxpayer’s primary residence for at least three years are exempt from tax in Azerbaijan.

Deductions

Income exclusions. The following specific tax exemptions apply for resident and nonresident individuals:

  • The cost of renting accommodations in Azerbaijan if paid or re imbursed by the employer
  • Food expenses paid or reimbursed by the employer
  • Expenses paid or reimbursed by the employer for business trips

Personal allowances. Individuals with three or more dependents, including students under the age of 23, may reduce their monthly taxable income by AZN50.

Business deductions. Deductible business expenses include expenditure for materials, amortization deductions, lease pay­ments, wages, state social security payments, payments for thera­peutic nourishment, milk and similar products provided to employees (deductible within the established limits), payments of interest and expenses for repairs to capital production assets.

Rates. The following tax rates apply to an individual’s taxable income earned from non-entrepreneurial activities.

Taxable income Tax rate Tax due Cumulative tax due
AZN % AZN AZN
Up to 2,500 14 350 350
Above 2,500 25 ­

 

The taxable income of an individual who conducts entrepreneur­ial activities without creating a legal entity is subject to tax at a flat rate of 20%.

Relief for losses. Losses may be carried forward for up to five years. No limitations are imposed on the deductible amount of losses that can be claimed for each year.

Other taxes

Estate and gift tax. Azerbaijan does not levy estate or gift tax.

The value of gifts and/or material assistance for education and medical treatment up to a limit of AZN1,000 is exempt from income tax. The value of an inheritance up to a limit of AZN20,000 is exempt from income tax. Gifts, material assis­tance and inheritances received from family members are exempt from income tax without limit.

Property tax. Azerbaijan levies an annual property tax on each square meter of building area. The following table provides the property tax rates for residential and nonresidential premises that are privately owned by individuals.

 

Areas Amount of tax per square meter (AZN)
Baku  0.4*
Gyanja, Sumgait cities and Absheron region 0.3
Other cities (except for regional subordination towns) and regional centers 0.2
Cities, towns and villages of regional subordination (except for settlements and villages of Baku, Sumgait cities and Absheron region) 0.1

* For buildings located in Baku, a coefficient of at least 0.7 and not more than 1.5 must be applied to the rate.

 

Social security

Employers must make social security contributions at a rate of 22% of employees’ gross salary to the Social Protection Fund. In addition, 3% is withheld from the employee’s salary and is pay­able to the Social Protection Fund.

Tax filing and payment procedures The tax year is the calendar year.

Employers in Azerbaijan (Azerbaijani entities, joint ventures and foreign representative offices) must withhold tax from the salaries of resident and nonresident employees paid in Azerbaijan. With­holding is required regardless of whether payments are made in manats or in foreign currency.

Resident and nonresident individuals are not required to file tax returns if they receive income from employment and do not have income from other sources.

Resident and nonresident individuals engaged in self-employment in Azerbaijan must comply with the following filing and payment requirements:

  • They must pay estimated taxes of one-fourth of the tax paid for the prior tax year or tax on actual income for the quarter, as measured at the effective tax rate for the prior year, due in four equal installments by 15 April, 15 July, 15 October and 15 January.
  • They must submit an annual tax return no later than 31 March of the year following the reporting year.
  • They must submit a final tax return within 30 days following the end of activities in Azerbaijan.

The final tax due for the year is determined from the final tax return after it is filed with the tax authorities. However, the final tax must be paid by the deadline for filing the final tax return.

Double tax relief and tax treaties

Foreign taxes paid by residents on foreign-source income may be credited against Azeri tax, but the credit may not exceed the amount of the Azeri tax payable on the same income. To obtain relief, the taxpayer must present the appropriate form from the tax authorities of the foreign state verifying that tax has been paid in that country.

According to information provided on the official site of the Ministry of Taxes, double tax treaties with the following coun­tries are effective in Azerbaijan.

Austria                            Iran                              Qatar

Belarus                            Italy                              Romania

Belgium                           Japan                            Russian

Bosnia and                      Kazakhstan                   Federation

Herzegovina                    Korea (South)              Saudi Arabia

Bulgaria                           Kuwait                         Serbia

Canada                            Latvia                           Slovenia

China                               Lithuania                      Switzerland

Croatia                             Luxembourg                Tajikistan

Czech Republic               Macedonia                   Turkey

Estonia                            Moldova                      Ukraine

Finland                            Montenegro                 United Arab

France                             Netherlands                  Emirates

Georgia                           Norway                        United Kingdom

Germany                         Pakistan                       Uzbekistan

Greece                             Poland                          Vietnam

Hungary

Visas

Foreigners who want to visit Azerbaijan and who are from coun­tries with which Azerbaijan has a visa regime should obtain entry visas from the respective embassy or consulate of Azerbaijan. In general, entry visas are granted to foreign individuals for entry into the country. Under recent changes to the migration legisla­tion, several types of entry visas are available. These visas are based on the purpose of the visit and include, but are not limited to, the following:

  • Visa for business trip purposes
  • Visa for labor activity conduction purposes
  • Touristic visa
  • Visa for official visit

Visas are divided into single and multiple entries with the valid­ity period of stay ranging from one month for single-entry visas to 180 days for multiple-entry visas.

To obtain a visa from the diplomatic representations, embassies and consulates of Azerbaijan abroad or from the Consular Department of the Ministry of Foreign Affairs of Azerbaijan, applicants must present the following items:

  • Letter of invitation
  • A completed application
  • Passport-size photographs
  • A passport
  • Applicable fee

The following are two exceptions:

  • Citizens of certain countries under several international agree­ments to which Azerbaijan is a party can obtain the visa on arrival at international airports by submitting a set of documents to state officials through the use of an invitation letter approved by the State Migration Service.
  • Citizens of countries that have direct airline relations with Azerbaijan but do not have embassies and accredited consulates of Azerbaijan can apply for visas on arrival at international airports by submitting a set of documents to state officials.

Electronic application forms for obtaining Azerbaijani visas, which are available on the websites of the embassies of Azerbaijan, may be used.

In addition, permits for staying in Azerbaijan temporarily or per­manently are obtained through the “one window” principle, which is designed to ease the application process. Under the “one window” principle, all documents necessary for the registration of expatriates in Azerbaijan or for the obtaining of work permits for them are submitted to one state body (State Migration Service), which, in turn, coordinates the work with other state authorities and issues identification cards and work permits for expatriates.

The “one window” principle is likewise used to register expatri­ates who have already been granted permits for staying in Azerbaijan temporarily or permanently and to obtain special iden­tifications for them.

Citizens of countries that have a non-visa regime with Azerbaijan, such as the Russian Federation, do not need a visa to enter Azerbaijan.

Work permits

Expatriates must obtain a work permit to work in Azerbaijan. Work permits are obtained through the “one window” principle (see Section F).

Family and personal considerations

Vaccinations. Although no vaccinations are required, a vaccina­tion for malaria is recommended. Malaria is not a threat in Baku, but it exists in other regions of the country.

Driver’s permits. A foreign national may drive legally using his or her home country driver’s license if the license is legally trans­lated into Azeri. Azerbaijan has driver’s license reciprocity with other CIS countries.