Latest: Major Changes in the Tax Code

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Deloitte Tax News

Latest: New Double Tax Treaty administration rules published


On 12 June 2017, changes to the Rules on “Administration of international agreements for the avoidance of double taxation concluded between the Republic of Azerbaijan and other states’’ (“DTT administration rules”) approved by the Board of Ministry of Taxes of the Republic of Azerbaijan.  

Tax News - July 2017:

The Rules on Accounting for income and expenses for taxation purposes in the field of wholesale trade and manufacturing sector

The Rules on “Accounting for income and expenses for taxation purposes in the field of wholesale trade” and The Rules on “Accounting for income and expenses for taxation purposes in the field of manufacturing” (together “Rules”) have been approved by the Decree of President of the Republic of Azerbaijan on 26th of June 2017. The Rules are effective from 15th of July 2017.

According to the Rules, taxpayers in wholesale trade and manufacturing are imposed the following obligations:

• Accurate bookkeeping of income and expenses in a timely manner 

• To fulfill the requirements of the Tax Code of Azerbaijan Republic and the Law of the Republic of Azerbaijan "On Accounting" and other appropriate legislative acts in respect of the accounting of revenues, expenses, taxation objects and commodity stocks, as well as compilation and maintenance of the accounting documents

• Depending on the applicable accounting method under the Tax Code, recording income and expenses in periods when they obtained and incurred, respectively

• Maintaining bookkeeping in a manner allowing to track commencement, progress and completion of all transactions

 

Additionally, the Rules contain the following requirements relating to wholesale trade and manufacturing:

• Documentation of the receipt of raw materials into warehouse 

• Documentation of the receipt of goods from persons without tax registrations

• Documentation of the release of raw materials into main and auxiliary production

• Documentation of the warehousing and sale of finished products 

• Determination of income and expenses of taxpayers

• Methods of accounting for the closing inventory balance

 

New Double Tax Treaty administration rules published

On 12 June 2017, changes to the Rules on “Administration of international agreements for the avoidance of double taxation concluded between the Republic of Azerbaijan and other states’’ (“DTT administration rules”) approved by the Board of Ministry of Taxes of the Republic of Azerbaijan.  

According to the introduced changes to the Double Tax Treaty (“DTT”) administration rules, non-residents are entitled a right of submission of DTA forms electronically via online tax cabinet for all types of income independently or via tax agent along with traditional submission via physical forms to the Ministry of Taxes.  Previously, obtaining advance tax exemption or reducing tax rates was only possible for 4 types of income (i.e. interest, dividend, royalty and international transportation) and submission of necessary documentation was only in hard copies. The published changes provide a handy application process to use tax exemptions and privileges stipulated under the DTTs.  

Pursuant to the DTT administration rules, the tax authorities are obliged to respond to the taxpayers’ applications not later than 20 days upon receiving respective DTA-forms. An extension of additional 20 days can be applied by the tax authorities with relevant justification for the analysis of applications require additional time.

A guideline for submission of DTA forms, and DTT administration rules can be found via following link: 

http://www.taxes.gov.az/modul.php?name=beynelxalq&cat=12 

 

On 11 July 2017, a Presidential Decree approved a list of 40 countries and territories with low-tax regimes

It is worth mentioning that, the list of low-tax countries and territories is determined in accordance with the Law of the Republic of Azerbaijan “On Amendments to the Tax Code of the Republic of Azerbaijan” dated 16 December 2016. 

This list will be used for the following purposes: 

a) Application of extra WHT of 10% under Article 125.1.9 of the Tax Code;

b) Determining controlled transactions for Transfer Pricing purposes in accordance with Article 14-1 of the Tax Code;

c) Taxation of income of a resident generated from countries with low tax jurisdictions pursuant to Article 128 of the Tax Code. 

The complete list of jurisdictions with preferential taxation is presented below: 

1 Andorra

2 Anguilla islands

3 Antigua and Barbuda

4 Aruba

5 Antilles islands (Netherlands)

6 Bahamas

7 Bahrain

8 Bermuda

9 British Virgin Islands

10 Belize

11 Barbados

12 Gibraltar

13 Jersey

14 Dominica

15 Hon Kong (China)

16 Cayman Islands

17 Cook Islands

18 Costa Rica

19 Guernsey

20 Grenada Islands

21 Liberia

22 Lichtenstein

23 Maldives

24 Isle of Man

25 Marshall Islands

26 Montserrat

27 Monaco

28 Macau (China)

29 Nauru

30 Niue

31 Panama

32 Palau

33 Seychelles

34 Saint Kitts and Nevis

35 Samoa

36 Saint Vincent and the Grenadines

37 Saint Lucia

38 Turks and Caicos Islands

39 Vanuatu

40 Virgin Islands (US)

 

Tax news July 2017

Tax News - June 2017: New changes in Tax Administration Procedures

On 16 June 2017, Ministry of Taxes of Azerbaijan held a presentation on upcoming changes in tax administration procedures  

According to the officials of the Ministry of Taxes, new changes to be made to the Rules on “Administration of international agreements for the avoidance of double taxation concluded between the Republic of Azerbaijan and other states’’ (“DTT administration rules”) as a continuation of improving business environment.  As per the expected changes to the DTT administration rules, non-residents will be able to submit DTA forms electronically (i.e. via online tax cabinet) for all types of income independently or via tax agent.  Previously, obtaining advance tax exemption or reducing tax rates was only possible for 4 types of income (i.e. interest, dividend, royalty and international transportation) and submission of necessary documentation was only in hard copies.  The upcoming changes, will significantly ease the process of using tax exemptions and privileges stipulated under the DTTs.  

Another significant change is expected to be in obtaining zero-rated VAT exemption certificate for foreign subcontractors operating under existing Production Sharing Agreements (“PSA”).  According to the upcoming changes taxpayers operating under the PSA taxation regime, will be able to apply and obtain such certificates electronically (i.e. via online tax cabinet) without undertaking any tiresome paperwork.

It is expected that all instructions related to the above mentioned changes to the tax administration procedures will be send to the online tax accounts of the taxpayers soon.

 

Tax news June 2017

Tax News - May 2017: Preparing for a changing landscape

The Law on amendments to the Tax Code has been approved

On 17 May 2017, The Azerbaijani Parliament approved the Law on amendments to the Tax Code of the Republic of Azerbaijan. New amendments cover several significant issues.

Introduction of “public legal entities” notion to the Tax Code

With the recent amendment definition of “public legal entities” has been added to the Tax Code.  Moreover, public legal entities are not allowed to be simplified taxpayers.

Clarified financial sanctions for violation of the law “On Cashless Payments”

The new law threw light on certain unclear aspects of implementation of the law “On Cashless Payments”, in particular range of responsible parties.  So the following taxpayers will be subject to a financial sanction of up to 40% of the transaction value for violating the cashless payment regulations:

• For settlements within a calendar month in excess of AZN 30,000 performed by VAT registered taxpayers and taxpayers within the trade or public catering industry, whose taxable transactions during one month of any consecutive twelve month period exceed AZN 200,000, and settlements of any other taxpayers within a calendar month in excess of AZN 15,000;

• Payment of salaries and other payments defined by the legislation and paid to employees by employers, except those engaged in retail trade, public catering and the service industry, whose taxable transactions during one month of any consecutive twelve month period are up to AZN 200,000; pensions, scholarships, financial aid, bonuses (including one-time bonuses), compensation and benefits;

• Utilization/expenditure of funds received under public procurement contracts;

• Leasing/Loan providers for receiving cash payments;

• Insurers and reinsurers for receiving and payment of insurance premiums and claims respectively;

• Recipients of cash payment of service fees and other payments made to government agencies, state-owned legal entities or legal entities, in which the state owns controlling interest, public legal entities and those funded by the State Budget;

• Recipients of cash in respect of payment of landline phone services and utility costs;

• To payers and recipients for cash payment and repayment of interest-free cash funds (except where such funds are provided by non-taxpayers) and other monetary allocations;

• For cash receipt of tuition and tourism agent fees;

More goods for excise tax

• Fur and leather products are also included in the list of goods subject to excise tax.

Tax news May 2017

Tax News - April 2017:

The Rules on “Accounting for income and expenses for taxation purposes in the field of public catering” and the Rule on “Accounting for income and expenses for taxation purposes in the field of retail trade” (together “Rules”) have been approved

The Rule on “Accounting for income and expenses for taxation purposes in the field of public catering” and the Rule on “Accounting for income and expenses for taxation purposes in the field of retail trade” (together “Rules”) have been approved by the Decree of the President of the Republic of Azerbaijan dated 19 April 2017.

According to the Rules, taxpayers in public catering and retail trade are imposed the following obligations:

•Accurate bookkeeping of income and expenses in a timely manner in accordance with the Tax Code;

•Depending on the applicable accounting method under to the Tax Code, recording income and expenses in periods when they obtained and incurred, respectively;

•Maintaining bookkeeping in a manner allowing  to track commencement, progress and completion of all transactions.

Additionally,the Rules contain the following requirements relating to public catering and retail trade:

•Documentation of goods received;

•Documentation of tansactions related to sale of goods and, in public catering, transactions related to consumption of goods for production;

•Methods for income and expense recognition;

•Methods of accounting  of closing inventory balance.

 

Tax news April 2017

Tax News - March 2017: Transfer price rules have been approved

On 27 January 2017 the Ministry of Taxes approved the Rules on transfer pricing and its application (“Rules”) that become effective from 8 February 2017.

In the attached newsletters, we are pleased to share with you highlights of the transfer pricing regulations, and we trust you will find them interesting and helpful. 

 

Transfer Price Rules - March 2017

Tax News - December 2016: Major Changes in the Tax Code

On 23 December 2016, the Azerbaijani Parliament approved the Law “On amendments to the Tax Code of the Republic of Azerbaijan”.

The Law introduces substantial changes to the Tax Code as a reflection of the reforms set forth by the Decree of the President dated 4 August 2016.

By magnitude and impact, the current changes can definitely be considered as the most substantial since the adoption of the Tax Code in 2000.

In this newsletter, we are pleased to share with you highlights of the most important changes and additions, and we trust you will find them interesting and helpful. 

Major Changes in the Tax Code - December 2016

Tax News - 23 December 2016: Ministry of Taxes undergoes significant structural changes

Ministry of Taxes undergoes significant structural changes

As per the press release of the Ministry of Taxes dated 20 December 2016, based on the order of the Minister of Taxes significant changes were made in the structure of the Ministry of Taxes.
According to the new changes, Main Department of Tax Crime Analysis and Tax Debt Collection and Main Department of Tax Audit and Operative Control were liquidated. On the basis of the liquidated departments, Department of Supervision over Compliance with Tax legislation and Department of Supervision for Fulfilment of Tax Liabilities were established.
Furthermore, the Minister of Taxes ordered liquidating Main Taxpayer Service Department and replacing it with Department of Taxpayer Service and Transparent Tax Partnership. Baku City Tax Department and Tax Department №1 were also replaced by Tax Departments of Special Revenue, Tax Department of Local Revenue and Department of Work with Small-sized Entrepreneurs.

Tax News - 23 December 2016

Tax News - 16 December 2016: Transparent tax partnership rules

Trasparent tax partnership rules

On 12 December 2016, the Minister of Taxes has approved the “Rules for organization of work with taxpayers operating on the basis of transparent tax partnership” (“Transparent taxpayers”). According to the Rules, the following criteria are applied for determining taxpayers operating on the basis of transparent tax partnership:

  • Timely submission of tax returns
  • Fulfilling tax obligations in a timely manner
  • Declaring true number of employees and accurately reporting payroll cost
  • Applying national or international accounting standards
  • Using e-signature and e-documents
  • Absence of records of using false documentation and not having conviction for economic criminal activities.
    The Transparent taxpayer status is obtained both by way of granting by the tax authorities and based on a taxpayer application.

The Transparent taxpayers will receive all services stipulated in, but not limited to the Rules based on a “Green Corridor” principle. “Green Corridor” principle ensures provision of the said services on private and prompt basis. Moreover, a separate curator will be appointed for the Transparent taxpayers, who will be in-charge of the following issues with regard to such taxpayers:

  • Informing taxpayers of changes in the tax legislation and helping them with compliance with tax legislation
  • Replying to written inquiries of the Transparent taxpayers
  • Taking necessary measures to address any misunderstandings and discrepancies related to the services provided to such taxpayers
  • Assisting the Transparent taxpayers in resolution of any disputes and misunderstandings during tax audits
Tax News - 16 December 2016

Tax News - October 2016: Overview of the rules on improvement of tax administration

Introduction

For the implementation of Article 2 of the Decree of the President on “The courses of reforms to be carried on in the areas of taxation in 2016”, on 23 September 2016 the Collegium of the Ministry of Taxes approved the Rules “On approval of amendments to a number of legislative acts for the purpose of improvement of tax administration” (“Rules”).
The Rules contain provisions concerning the procedures for carrying out off-site, on-site and electronic tax audits. Additionally, the Rules introduce novelties such as model taxpayer.
 

Tax News - October 2016

Tax News - 4 August 2016

Tax reform directions for 2016 approved

On 4 August 2016, the President of the Republic of Azerbaijan Ilham Aliyev signed a Resolution approving the directions of tax reforms for 2016.

The Resolution announces the following tax reforms:

  • Simplification of tax administration procedures and tax burden reduction
  • Application of VAT on mark-up amount of goods sold by retailers
  • Introduction of indicators differentiating retail and wholesale trade
  • Application of Tax Free system at other border checkpoints in addition to airports
  • Definition of the list of products for application of differentiated VAT rates
  • Introduction of Advance Tax Ruling concept
  • Prohibition of desk tax audits by the tax authorities after 30 days from filing tax returns by taxpayers
  • Introduction of “Whistleblow” system allowing reporting of tax evasion
  • Introduction of Voluntary Tax Disclosure concept
  • Promotion of cashless payments and gradual restriction of cash payments
  • Introduction of Transfer Pricing regulations
  • Definition of spheres of activities that carry out cash transactions without application of cash register electronic equipment and definition of fixed monthly tax liability for individuals operating without application of cash register electronic equipment
  • Preparation of a mechanism for application of Common Reporting Standards
  • Simplification of tax administration procedures stipulated in double tax treaties concluded between Azerbaijan and other countries
  • Implication of Digital Economy to the tax system for the purposes of broadening the tax base
  • Introduction of rules for e-commerce taxation
  • Clarification of distinction between the production and processing of agricultural products
  • Conclusion of intergovernmental treaties allowing automatic exchange of financial information between the countries
  • Reconciling anti-avoidance rules contained in the Azerbaijan tax legislation with the international experience
  • Establishing effective tax controls over activities of tax residents of Azerbaijan in tax offshores and low tax jurisdictions
  • Undertaking necessary improvements in the legislation to obtain and maintain the OECD Global Forum’s high rating on the indicators of transparency and exchange of tax information

The Resolution also instructs the Ministry of Taxes to take following actions within three months:

  • to prepare the proposals regarding the improvement of the legislation for carrying out the above-noted reforms;
  • improvement of administration of tax audits and ensuring taxpayers’ participation in tax audits;
  • to define the criteria of exemplary taxpayer and simplify tax administration and expand the list of targeted services in respect of such taxpayers.
Tax News - 4 August 2016

Tax News - 17 June 2016

Important: Introduction of Tax Free System in Azerbaijan

According to the information available on the official web page of the Ministry of Taxes of Azerbaijan, on 17 June 2016 the Ministry has launched the Tax Free System in Azerbaijan. The Tax Free System is designed to allow foreign nationals to refund VAT paid during the purchase of goods (only if the cost of purchased goods per one e-tax invoice is not less than AZN 300, including VAT) not designed for production for commercial purposes at Tax Free labeled shops. The VAT refund is a three step process:

Step 1 - By informing a salesperson of intention to benefit from the Tax Free System, a foreign national will receive an electronic tax invoice enabling VAT refund. The e-tax invoice will contain the passport details of the foreign national and the amount of paid VAT.

Step 2 – Upon departure from Azerbaijan, foreign nationals are required to have their e-tax invoices verified by Customs officer.

Step 3 - The verified e-tax invoices will be presented to bank to receive the refund both in cash and non-cash forms. Regardless of the transfer method, foreign nationals will receive the refunded amount after deducting a service fee of 20 percent. The goods should be taken out of Azerbaijan’s territory within 90 days from the date of purchase. Following individuals are not eligible for benefiting from the Tax Free System:

  • citizens of the Republic of Azerbaijan;
  • foreign nationals and stateless persons who have been granted a residence and work permit in the territory of Azerbaijan;
  • persons who are the members of the crew directly serving in the air transport;
  • persons under 14 years age. VAT paid for the following goods are not subject to tax refund:
  • excised goods;
  • food stuffs;
  • medicines and medical equipment;
  • goods regarded as national cultural and historical treasures as well as those items that are considered to be significant in terms of protection of cultural heritage;
  • goods which are exempt from VAT in Azerbaijan;
  • goods requiring a license for export purposes;
  • unframed, raw or ungraded precious stones;
  • precious metals in bars;
  • goods taken out of the territory of Azerbaijan in an unaccompanied luggage;
  • vehicles and spare parts of thereof;
  • goods exported via post or internet service. 

It should be noted that currently the Tax Free System is being tested.

Tax News - 17 June 2016

Tax News - June 3 2016

Foreign trucks to be exempt from road tax effective from 1 June 2016

On 17 May 2016 the Parliament of Azerbaijan approved the Law “On Amendments to the Tax Code of the Republic of Azerbaijan”. Under the Law trucks, trailer and semi-trailer vehicles of foreign states are exempt from road tax for three years beginning from 1 June 2016 in accordance with the rules determined by the Cabinet of Ministers of the Republic of Azerbaijan in the following cases:

  •  When cargo carried by railway is transported to another country through the nearest customs checkpoint by transferring to trucks, trailer and semi-trailer vehicles of foreign states in the last railway station determined by the Cabinet of Ministers of the Republic of Azerbaijan within the territory of Azerbaijan; 
  •  When cargo carried by trucks, trailer and semi-trailer vehicles of foreign states is transported from the territory of another country through the nearest customs checkpoint to the first
Tax News - June 3 2016

Tax News - June 2 2016

New amendments to the Criminal Code of the Republic of Azerbaijan On 6 May 2016 the Parliament of Azerbaijan has passed the Law “On Amendments to the Criminal Code of the Republic of Azerbaijan”. Under the Law amended Article 213 of the Code envisages following sanctions for evasion of payment of taxes and mandatory state social insurance contributions in large amount:  

  • penalty from two to four times of the damage caused;
  • or correctional works up to two years; 
  • or imprisonment up to three years by being or not being deprived of right to hold certain position or engage in certain activities up to three years.

If the same violation of law is committed by an organized group or in substantial amount then sanctions will be:  penalty from three to five times of the damage caused;

  •  or imprisonment from three years up to seven years by being or not being deprived of right to hold certain position or engage in certain activities up to three years.

According to the amendments, large amount means an amount over AZN 20,000 but not exceeding AZN 100,000 (previously from AZN 2,000 to AZN 50,000) and substantial amount means an amount over 100,000 AZN (previously over AZN 50,000).

Tax News - June 2 2016

Tax News - February 2016

Investment promotion certificate to be introduced in Azerbaijan


New changes to the Tax Code and the Customs Code envisages tax and customs exemptions for individuals and corporations holding investment promotion certificate. According to the Presidential Decree dated 18 January 2016, the certificate in question is to be issued by the Ministry of Economy.
Introduced tax and customs preferences are detailed below:


• 50% exemption on corporate income tax and personal income tax for legal entities and individuals accordingly.


• Full exemption from assets tax for the respective fixed assets


• Full exemption from land tax


• Full exemption from customs duties upon import of technological equipment for the high priority industry lines


• Full exemption from customs duties upon import of technological equipment by the management organization or operator of industrial and technological parks for construction and research & development purposes


• Full exemption from customs duties upon import of technological equipment by resident legal entities and individuals of industrial and technological parks for construction and research & development purposes.


The exemptions are valid for 7 years from the date of obtaining of investment promotion certificate.


Rules On Issuance of Certificate on Investment Promotion


The President of Azerbaijan has approved the Rules “On Issuance Certificate On Investment Promotion” as of 18 January 2016 (“Rules”).


According to the Rules, investment promotion certificate is issued to entrepreneurs provided that they have presented investment projects which comply with certain criteria specified in Rules. Certificate is issued for the purposes of obtaining concessions stipulated by the “Law On Customs Tariffs” and Tax Code of the Republic of Azerbaijan.

Tax News - February 2016

Tax and Legal Summary 2015

We introduce you Tax and Legal Summary 2015.

This section provides details of announced changes to tax legislation and policy in 2015.

Tax and Legal Summary 2015

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Law on amendments and changes to the Tax Code

The President of the Republic of Azerbaijan has signed the Law “On changes to the Tax Code” on 7 December 2015. The changes will be effective from 1 January 2016. Below is the summary of the main changes introduced by the law.

New Law on amendments and changes to the Tax Code

  •  Taxation of persons engaged in trading and catering activities 
  • Taxation of winnings from sports gambling 
  • Changes in personal income tax 
  • New exemptions from property tax 
  • Increase in mining tax rates 
  • New rights of the state tax authorities 
  • Taxation of the income of persons engaged in construction 
  • Taxation of the income from the sale of immovable property 
  • Changes in the registration and deregistration rules for value added tax purposes 
  • New exemptions from value added tax on imports 


Taxation of persons engaged in trading and catering activities

According to the changes to the Tax Code, persons engaged in trading and catering activities would be entitled to register as simplified taxpayers at the following rates, regardless of their taxable turnover:

  • For trading activities – 6%; 
  • For catering activities – 8%. 

Catering activities are defined as the provision of edible products to consumers produced (cooked) at a remote site or in the territory where the supplier operates.

Persons engaged in trading and catering activities will also be subject to specific penalty rates for non-compliance with the cash settlement rules stipulated by the Tax Code. The rates are as follows:

  • First offense during a calendar year – AZN 2,000
  • Second offense during a calendar year – AZN 4,000; 
  • Third or more offense during a calendar year – AZN 6,000

The penalty rates for violating the cash settlement rules remain unchanged for taxpayers who are not engaged in trading and catering activities.

Taxation of winnings from sports gambling

A 10% withholding tax is being introduced on winnings from sports gambling. These winnings were previously tax exempt. Withholding and paying the tax to the state budget will be the responsibility of those persons paying the winnings. Reporting period for the withholding tax of winnings from sports gambling will be a calendar month.

Changes in personal income tax

As a result of the amendments, taxpayers with a monthly income from employment of up to AZN 2,500 will now be allowed a tax exemption in the amount of living wage of the able bodied population (AZN 146 per month) effective from 1 January 2016.Previously, only taxpayers with a monthly income of up to AZN 250 qualified to this exemption. Additionally, income from the disposal of immovable property will be subject to a simplified tax at pre-determined rates rather than included in personal income tax.

Changes in taxable base of property tax

According to the amendments, legal entities would be exempt from property tax with regard to satellites and other space objects that they own.

Increase in mining tax rates

In accordance with the amendments, mining tax rates, which are calculated based on each cubic meter of excavated mineral resources, will approximately double.

New rights of the state tax authorities

With the changes, the tax authorities will gain the right to seek a court decision to temporarily prevent individuals or company executives from leaving the country if the person or company has an unpaid tax debt, including any applicable financial sanctions or interest. The amendments also enable the tax authorities to have operative (current) control over any excised goods.

It is also important to note that according to new amendments to the Criminal Code and the Code of Administrative Offences, administrative and criminal liability was established for violating a number of regulations related to turnover of excised goods.

Taxation of income of persons engaged in construction

Persons engaged in the construction of buildings will be entitled to register as simplified taxpayers voluntarily according to the changes. Previously such registration was mandatory.However, it will not be possible to change the selected taxation method for a particular construction project until its completion.

Simplified tax for construction of buildings will be calculated at a rate of AZN 45 multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location.

Taxpayers that have commenced construction works before the changes will take effect will be able to maintain their previous taxation method by notifying the tax authorities and other respective state authorities.

Taxation of income from sale of immovable property

According to the amendments, income from sale of residential and non-residential property, including property acquired from persons engaged in construction, will be subject to a simplified tax. The simplified tax will be calculated at a rate of AZN 15 per square meter multiplied by the location zone rate, which varies from 0.5 to 4.0. The rate for non-residential buildings is 1.5 regardless of location. Personal income from disposal of residential property that an individual has owned and was registered at for at least five years would be exempt from taxation. Public notary approving the contract of the sale of residential and non-residential property will be responsible for calculating, withholding and remitting the simplified tax amount to the State Budget within one banking day. The notary will also be responsible for filing a monthly tax return with the tax authorities no later than 20th day following the reporting month.

Changes in registration and deregistration rules for VAT purposes

Persons engaged in business activities with taxable turnover more than 200,000 AZN within any consecutive 12-months period will be liable to submit an application for VAT registration. Previously the threshold for mandatory registration was 120,000 AZN. Accordingly, minimum amount of taxable turnover, which entitles a taxpayer to cancel the VAT registration, was increased from 60,000 to 100,000 AZN.

New exemptions from VAT

The amendments also add to the list of goods that are exempt from VAT upon import. Some of the new exemptions include fixed assets imported for financial leasing and goods imported into special economic zones, with the exception of excised goods.

New Amounts of the Living Wages for 2016

On 7 December 2015, the President of the Republic of Azerbaijan signed a Decree “On Approval of the Law on the living wage for 2016”.

According to the Law, living wages in Azerbaijan are set as follows:

  •  AZN 136 for the main socio-demographic groups of population; 
  •  AZN 146 for able bodied population; 
  •  AZN 115 for pensioners;
  •  AZN 117 for children. 

The Law comes into force from 1 January 2016.

Law on the 2016 State Budget

On 7 December 2015, the President of the Republic of Azerbaijan signed a Law “On State Budget of the Republic of Azerbaijan for the year 2016 ” and a resolution on implementation of the Law.

New Law on amendments and changes to the Tax Code

New Rules on grants from foreign donors

The Cabinet of Ministers of the Republic of Azerbaijan by the Resolution #339 of 22 October 2015 has approved the “Rules on Obtaining the Grant Awarding Right by Foreign Donors in the Republic of Azerbaijan” (“Rules”). The approved Rules regulate the procedures of getting the right for awarding grants in the Republic of Azerbaijan by international organizations, their representative offices, foreign states and their missions, charities and international humanitarian organizations, financial organizations, public organizations, including foundations, associations, federations, committees, Azerbaijan-registered branches and representative offices of legal entities operating in the sphere of development of science, education, art and sport. The Rules also cover provision of sub-grants, conclusion of an additional contract or an amendment to the grant agreements, excluding the grant agreements that are concluded on behalf of the government of the Republic of Azerbaijan.

Foreign donors are required to obtain the approval of the Ministry of Finance of Azerbaijan for awarding grants in the Republic of Azerbaijan.

According to the Rules, in case a foreign donor has not been entitled to award a grant in the territory of the Republic of Azerbaijan, a grant agreement between the foreign donor and a local organization may not be concluded.

New Rules on grants from foreign donors

Double Tax Treaty with San Marino

Double Tax Treaty between San Marino and Azerbaijan has been signed on 8 September 2015. Together with this treaty, a number of signed Double Tax Treaties of Azerbaijan has reached 49. Currently the Government of Azerbaijan negotiates the tax treaties with Malta, Denmark, India and some other countries. Ministry of Internal Affairs establishes hotline for entrepreneurs

Double Tax Treaty with San Marino

Ministry of Internal Affairs establishes hotline for entrepreneurs

Following the Law of 20 October 2015 “On suspension of inspections in entrepreneurship” (“Law”), and the Presidential Decree dated 26 October 2015 on application of the Law, the Ministry of Internal Affairs (MIA) established “Hotline” for entrepreneurs and business organizations. In this regard, it is encouraged to immediately report to the MIA’s Hotline #1002 about cases of illegal intervention by the employees of internal affairs bodies through abuse of their official powers in the activities of entrepreneurs and businesses.

Ministry of Internal Affairs establishes hotline for entrepreneurs

Changes in the structure of the Ministry of Taxes

According to the Order of the Minister of Taxes dated 15 September 2015 the units for the collection of tax debts functioning under the Special Regime Tax Service Department, Baku Tax Department, as well as under the regional tax offices were replaced with the Division for Enforcement of Tax Debts under the Department of Primary Investigation of Tax Crimes (the “Department”).
Different to the previously existing practices, the Department now will be handling tax debt cases starting from the date of occurrence of each debt rather than dealing with tax debts only with a criminal content.

Changes in the structure of the Ministry of Taxes

New Resolution of the Constitutional Court

On 3 September 2015 the Constitutional Court of Azerbaijan adopted the Resolution “On interpretation of certain provisions of Articles 175.1 and 176.4 of the Tax Code” (the “Resolution”).
According to the Resolution, the definition of “cashless payments” referred to in Article 175.1 of the Tax Code means cashless payment (via bank transfer) of the principal amount of goods sold, works rendered or services provided. Under the Resolution, the definition of “cash transactions” stated in Article 176.4 of the Tax Code implies payment of the principal and associated VAT amounts for supply of goods, works or services in cash. Therefore, recovery of the associated VAT amount is not allowed if either principal or VAT amount is paid in cash (not paid via bank transfer).
Summarizing the above interpretation made by the Constitutional Court, under Article 175.1 and 176.4 of the Tax Code, VAT amount can be recovered if:
i. the principal amount of the supplied services, works and goods was paid through a cashless payment (via bank transfer) in full; and
ii. corresponding VAT amount was paid from the VAT deposit account or through transactions carried out within the VAT deposit account of a taxpayer.
Should you have any question concerning the above resolution of the Constitutional Court and its impact for your business, please feel free to contact one of our consultants.
 

New Resolution of the Constitutional Court

New Decree #211 of the Cabinet of Ministers on reporting requirements with regard to foreign legal entities

The decree of the Cabinet of Ministers of Azerbaijan #209, dated 3
June 2015 approved the “Rules on regulation and monitoring of
prices on state registered medicines” (“Rules”).
Under the Rules, wholesale and retail prices of state registered
medicines will be defined by the Tariff Council of Azerbaijan with
consideration of the basic prices. The basic prices will be
determined with consideration of official sale prices to wholesale
chemistries in reference countries. The Tariff Council will select at
least five reference countries on an annual basis.
Information used by the Tariff Council in defining the prices must
be published on the web site thereof. Control over retail prices of
medicines will be conducted by the Ministry of Economy and
Industry of Azerbaijan.

Decree on reporting requirements with regard to foreign legal entities and natural persons 19 June 2015

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