Code to be valid from 01 January 2022. The Law was published on 31
December 2021.
General provisions
- Tax payers, excluding subjects of micro and small entrepreneurship, engaged in production activity must file tax return on norms of consumption of raw materials and materials required per unit of produced product by 31 January each year. In case of any change in norm consumption or production of new products tax payers shall file adjusted tax return within calendar year.
- New definition of controllable enterprise added to the Tax Code as an overseas company with over 50% shares owned by Azerbaijani resident. Notification of such enterprises must be filed to the tax authorities within 90 days after each year end.
- Tax payers must provide access to hard and soft data upon request from the tax authorities. Subjects of medium (when number of employees ranges from 51 to 250 and revenue ranges from AZN 3M to AZN 30M) and large entrepreneurship (when number of employees exceeds 251 and revenue exceeds AZN 30M) must provide such access also to their financial statements.
- Transportation of commercial goods by road must be supported with electronic consignment note and electronic waybill. Rules of usage of such documents shall be declared by the Cabinet of Ministers and then this requirement will become valid.
- Tax payers, excluding those engaged in oil-gas and public sectors, shall provide tax authorities with Notification on goods to be imported into country before import made. Such information shall include place of storage (offloading) and customer if goods ordered. Form of the notification shall be declared by the Cabinet of Ministers. The tax authorities now have right to visit storage place and inspect the goods within 3 working days after import of such goods. Such inspection shall be formalized by a protocol. Failure to provide notification to the tax authorities on time or with distorted information will result in penalty of 2% of invoice value of imported goods for subjects of micro entrepreneurship and 5% for others.
- VAT registered tax payers must file Notification on debtors and creditors together with annual profit (income) tax return. Form of the return shall be approved by the Cabinet of Ministers. Failure to provide such notification will result in penalty of 100 AZN. This change will apply to subjects of small entrepreneurship from 01 January 2023 for 2022 and shall be filed by 31 March 2023.
- Tax payers shall include below information in their payment order when remitting funds:
- Contract date and number as well as series and number of e-
invoice if payment made for goods, services and works
- For foreign trade - series and number of import declaration and invoice date and number
- Contract or invoice date and number if payment made as per loan agreement and payment description shall mention loan
- Contract or invoice date and number if advance payment made
Failure to meet the above requirements will result in penalty of 100 AZN per payment order.
- Tax authorities may remotely audit profit (income) tax returns within 60 working days. In the meantime other tax returns will continue being audited remotely within 30 working days as before.
- Sale of goods with e-invoice by Seller without detailed information of sold goods will result in reduction of purchase value of such goods by dividing value by 1.2
- Payments made by legal entities and tax registered individuals of income of individuals without tax registration such as bonuses, financial aid, advocates from bureaus shall be taxed at 14% rate at source of payment.
- Income of individuals without tax registration from provision of below products will be subject to 5% now instead of 2% tax at source of payment:
- paper, plastic and glass products intended for utilization.
- Used tires intended for utilization
- Supply of raw leather
- Receipt of agricultural products from agricultural producers
- Business trips within country shall be tax deductible as per supporting receipts (excluding daily rates) within fixed norms. In case of absence of hotel receipt only 50% of daily rate shall be considered as tax deductible cost.
- Repair costs of rented off-balance fixed assets shall be capitalized and depreciated as per rates applicable on each category of fixed assets.
- Transportation between destination points outside Azerbaijan as well as transit transportation shall not be subject to taxation in Azerbaijan within provisions of Article 125 of the Tax Code.
- Subjects of micro entrepreneurship may keep records of revenue and expenses on accrual or cash basis. Subjects of small, medium and large entrepreneurship must use accrual method only. This change will be valid for subjects of small entrepreneurship from 01 January
- 2023.
- Invoices from companies (including branches and representative offices in other countries) established/registered or having bank accounts in countries with preferential taxation are subject to additional tax of 10% on accrual basis now. These countries include Andorra, Angila, Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Cabo Verde, Cook Islands, Dominica, Fiji, Gibraltar, Grenada, Hong Kong (CPR), Jersey, Liberia, Liechtenstein, Maldives, Marshall Islands, Monaco, Montserrat, Niue, Palau, Panama, Saint Vincent and the Grenadines, Samoa, St. Kitts and Nevis, St. Lucia, Thailand, Taiwan (CPR), Trinidad and Tobago, Turks and Caicos Islands, Vanuatu, Virgin Islands (US).
VALLUE ADDED TAX (VAT)
- VAT exemption will apply on import of media products, books, textbooks, irrigation and other facilities, machines of agricultural nature; provision of agro-technical services to producers of agricultural products; import and sale of hybrid cars with production date no more than 3 years and engine volume below 2500 cubic centimeters- for 3 years; import and sale of chargers of 2nd and 3rd levels for electric cars- for 3 years;
- Forwarding services provided for international and transit transportation shall be subject to VAT at 0% rate.
- VAT paid to customs on goods imported into country on temporary regime can be claimed only after the goods moved to ‘free circulation’ (permanent) customs regime.
- Tax payers engaged in wholesale and retail sale of agricultural products cannot claim VAT on purchased agricultural products for 3 years starting from 01 January 2022.
Excise tax
Excise tax rates will change as below:
- Vodka, cognac and cognac materials, liquor and liquor materials – 4
AZN per liter
- Champagne – 2.6 AZN per liter
- Vine and vine materials – 0.2 AZN per liter
- Beer and beer containing drinks (excluding non-alcoholic ones) – 0.4
AZN per liter
- Energetic drinks – 3.1 AZN per liter
- Liquid for electronic cigarettes – 100 AZN per liter
- Cigarettes – 38.5 AZN per 1000 pcs
- Cigars – 1 AZN per pcs
Property tax
Value of cars now will be subject to property tax.
Medical Insurance rate changes
Mandatory medical insurance contributions for those working in non-oil and
non-gas sector shall be 2% on employee and 2% on employer from 01
January 2022.
Non-cash payments Law
The law introduces number of new restrictions for use of cash.
Below payments can be made in non-cash form only:
- Sale of cars at car salons
- Retail sale for amounts over 2,000 AZN per deal (excluding furnitureand appliances)
- Sale of furniture and appliances for amounts over 10,000 AZN perdeal
- Medical services provided by medical organizations for amountexceeding 500 AZN per transaction
Minimum monthly salary change
The President signed Decree to fix monthly minimum salary of 300 AZN in
country from 01 January 2022.
The Decree lists cases that are considered labor relationships between the parties and states that they are not allowed to be formalized with a service contract. A written employment contract must be concluded from the day one of these cases is discovered rather than services contract. The cases are as follows:
1. The contract between the Parties provides detailed information about the employee and the employer, the contract includes the employee's place of work, position, profession, term of the contract, employee's job function and responsibilities, work and rest time, salary, vacation time;
2. Labor book presented and recorded;
3. Relationships between the parties took the form of recruitment to a profession or position, holding a position on a competitive basis, employment on a quota basis;
4. Relationships between the parties arises in connection with the performance of work (services) related to the main activity of the employer.
5. Employee substitutes another person on temporary basis;
6. Extension of the service contract;
7. Payment for the work (service) performed in the service contract consists of a monthly salary, supplement and bonuses.
8. If the employment contract contains issues provided for in Articles 10, 77, 112, 179 and 186 of the Labor Code (the employee's main responsibilities, types of leave, disciplinary liability for violation of labor and executive discipline.);
Law on suspension of the audits
The President signed Decree on approval of changes to the Law on suspension of the audits.
According to the Law audits to be conducted by the local authorities other than those connected to the tax, customs, fire protection, radiation safety,
construction safety and health of population (medicament and food quality control) get suspended till 01 January 2022.
Medical insurance implementation will start from 01 January 2021 in Azerbaijan apart from Baku and Sumgait starting from April 2021. The contributions for mandatory medical insurance will be as follows:
Activity type Monthly income
Up to 8,000 AZN Over 8,000 AZN
Responsibility Employer Employee Employer Employee
Public and oil
sector 2% 2% AZN 160+0.5% AZN 160+0.5
of amount %of amount
exceeding exceeding
8,000 AZN 8,000 AZN
Non- oil and AZN 80+0.5% of AZN 80+0.5%
non- public amount of amount
sector in 2020 1% 1% exceeding exceeding
8,000 AZN 8,000 AZN
Non- oil and AZN 160+0.5% of AZN 160+0.5
non- public 2% 2% amount of amount
sector from exceeding exceeding
2021 8,000 AZN 8,000 AZN
Tax registered
individuals
(freelancers, 4% of minimum monthly salary
private
notaries, bar
members)
Individuals 2% of income 160 AZN +1% of amount
without tax exceeding 8000 AZN
registration
Medical insurance contributions shall be paid within 15 days after month end
In addition to the above below payments shall be paid as follows:
- Motor petrol, diesel fuel and liquid gas produced in Azerbaijan for domestic
consumption and imported into Azerbaijan -0.02 AZN per liter;
- Vodka, enhanced drinks and beverage drinks – 0.2 AZN of excise rate per liter
- Beer (excluding non-alcoholic ones) -0.05 AZN of excise rate per liter
- Slim cigars and cigarettes made from tobacco and its substitutes -1.5 AZN of excise rate on 1000 pieces
- Energy drinks -0.1 AZN of excise rate per liter