Income tax can be high in Azerbaijan

June 20, 2018

INDIVIDUAL TAXATION

Nonresidents are taxed on their Azerbaijan-sourced income. Married couples are taxed separately.

Foreign investors may own immovable property in Azerbaijan but they cannot purchase land. Foreign nationals and legal entities may only obtain the right to use land through lease agreements.

INCOME TAX

Income earned by nonresident foreigners is generally taxed at progressive rates, from 14% to 25%.

ANNUAL INCOME TAX

TAXABLE INCOME, AZN (US$) TAX RATE
Up to 30,000 (US$16,667) 14%
Over 30,000 (US$16,667) 25% on all income over US$16,667

MONTHLY INCOME TAX

TAXABLE INCOME, AZN (US$) TAX RATE
Up to 2,500 (US$1,389) 14%
Over 2,500 (US$1,389) 25% on all income over US$1,389

RENTAL INCOME
Gross rental income earned by nonresidents is taxed at a flat withholding tax rate of 14%. No deductions are allowed.

CAPITAL GAINS
Capital gains are considered as ordinary income and taxed at the standard income tax rates, from 14% to 25%. Capital gains are computed as market value of property or selling price less acquisition costs and related expenses.

PROPERTY TAXATION

Land Tax

Land tax is levied on all land at different rates. The applicable tax rate varies, depending on the location of the property, property use and property size.

In the country's capital Baku, land used for housing, farmland, and summer houses is taxed at AZN0.60 (US$0.33) per 100 sq. m. Land used for industry is taxed at AZN10 (US$5.56) per 100 sq. m.

Property Tax

Property tax is levied fixed assets, such as buildings. The applicable rate varies, from AZN0.10 (US$0.06) to AZN0.40 (0.22), and is multiplied by total square meters of the area of the building.

Property tax is deductible for profit tax purposes.

CORPORATE TAXATION

INCOME TAX

Income and capital gains earned by companies are subject to profits tax at a flat rate of 20%. Income-generating expenses are deductible when calculating taxable income.

Property Tax

Companies are required to pay property tax at a rate of 1% of the fixed assets' average annual residual value.

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