The Law of the Republic of Azerbaijan, dated 5 December 2023 "On Amendments to the Tax Code of the Azerbaijan Republic " was approved by the President of the Republic of Azerbaijan (published on 28 December 2023).

The Tax Code includes changes covering financial and capital markets, healthcare, agriculture, tourism, transport and other matters. Please find below some significant changes:

  • The rate of withholding tax on dividends paid by a resident enterprise will be reduced to 5%;
  • The time of receipt of funds to the VAT deposit account will be determined as the time of the VAT charged transaction;
  • A particular e-tax invoice for VAT purposes will be provided for the advances received;
  • Expenses for the purchase of certain goods from non-tax registered individuals on the basis of a purchase deed or a cashier's check can be deducted from income at the limit of 2% of income and expenses (of the highest);
  • Expenses incurred for the repair of fixed assets not recorded in the lessee's balance and not reimbursed by the rent (or not reimbursed by the lessor) will be deducted from income by depreciation in proportional amounts over the years during the term of the concluded contract (but not less than 5 years);
  • The deductible amount of repair cost for tax purposes related to the repair of trucks will be increased to 8%;
  • Property and lands that credit institutions take as collateral for unpaid debts will be exempted from property and land taxes for 2 years after being taken into balance;
  • Banks declared bankrupt will have the right to deduct its created reserves for taxation purposes (to be determined by the Cabinet of Ministers);
  • The period of tax incentives for the agricultural sector, which expires in 2024, is extended for another 3 years;
  • The deductible amount for profit tax purposes for the amounts transferred to enterprises, departments and organizations operating in the fields of science, education, health, sports and culture and funds created for other social purposes (meeting certain criteria) is established at 15%;
  • Persons who engaged in cargo transportation with their own or leased vehicles (with turnover exceeding AZN 200K in 12 month period) cannot be simplified tax payers;
  • The existing grounds for identifying risky taxpayers will be reduced and the procedure and conditions for removing taxpayers from the list of risky taxpayers will be determined;
  • Deduction of housing and food expenses related to representation, employees, as well as expenses related to certain products and tools given to employees working in harmful working conditions and other jobs will be carried out according to the rules to be established by the Cabinet of Ministers;
  • Exemption from import VAT of fixed assets under the leasing contract will be determined only based on list to be determined;
  • Taxpayers who provide utility and communication services will have a liability to submit information to the tax authority, including duration, volume, cost, payments and other economic indicators of the services provided to subscribers and which are the basis for calculating taxes;
  • Financial sanctions will be applied to the risky taxpayers within the framework of non-commodity transactions;
  • If taxable income is not declared by a taxpayer, but the related information on deductible expenses is available, taxable profit (income) will be calculated by considering profitability of 50%;
  • When calculating the tax from the income obtained in connection with the transaction of participation or shares, other expenses incurred in connection with the acquisition of that income will also be deducted;
  • Up to AZN 200 of monthly interest income calculated on national currency deposits of individuals in local banks or foreign bank's branch in Azerbaijan will be exempted from tax;
  • If the national currency deposit of individuals is placed in banks for a period of 18 months or more, and the amount of the deposit is paid no earlier than 18 months, the full part of the interest income calculated by the local bank or the branch of the foreign bank in Azerbaijan will be exempted from tax for 3 years;
  • In order to apply a 75% exemption to taxable income (profit) of micro-entrepreneurial entities, the requirement of hiring at least 3 employees and not having debt on mandatory state social insurance fees will be applied.
29 Dec, 2023