Drastic amending to Tax Code approved in Azerbaijan


November 30, Fineko/abc.az. The Azerbaijani MPs endorsed today the amendments to the Tax Code of the country within the framework of approval of the Draft State Budget 2019.

The amendments envisage income tax exemption for employees in the private non-oil sector with salary of up to AZN 8,000 and use of a 14% tax on wages above AZN 8,000. This tax will be in effect for 7 years starting from 1 January 2019.

The amendments also provide for use of an excise tax on alcohol (2 manats a liter) and non-alcoholic (3 manats a liter) energy drinks produced in Azerbaijan and another 20 manats a liter for e-cigarette liquid. The excise tax for tobacco cigarettes will be increased from 12 manats up to 20 manats per 1,000 units.

Current simplified tax of 6% for entrepreneurs involved in trade will be eliminated, while tax of 8% for public catering entrepreneurs will be kept.

The valid simplified tax of 4% for Baku and 2% for districts and Nakhchivan will be calculated at the rate of 2%. At that, workers (waiters) of catering facilities, as well as hairdressers and tailors will pay simplified tax. Waiters will consistently pay 30 manats, hairdressers 20 manats and tailors 10 manats a month.

Besides, it is expected introduction of differentiated rate on social contributions. So, if the employee's salary is up to 200 manats, he pays 3% of the salary, while the employer 22% for social insurance. If the salary exceeds 200 manats, the employee will pay 6 manats + 10% of the amount exceeding 200 manats and the employer will pay 44 manats + 15% of the amount exceeding 200 manats.

The amendments also stipulate 7-year tax breaks on income tax, land tax and VAT for micro-, small- and medium-sized businesses. Import of machinery, technological equipment and devices for production or processing for such companies is also exempt from VAT. Part of the income from services rendered by entrepreneurs - members of the cluster of small and medium-sized businesses designed for capital expenditures is exempt from income tax for 7 years. Benefits to micro-business entrepreneurs include exemption from income tax and profit tax of 75% of income and profit from entrepreneurial activities. In addition, legal entities and private entrepreneurs who are micro-entrepreneurs are exempt from property tax.

Increase of excise tax for import of cars is also envisaged. In particular, excise tax on engine capacity of up to 2,000 cu cm will be calculated as 0.30 manat for each cu m (currently AZN 0.20), on engine capacity of up to 3,000 cu cm – AZN 600 (currently 400 manats)+capacity from 2001 to 3000 cu cm 5 manat (3 manat). For engine of up to 4,000 cu cm – 5,600 manats (now 3,400 manats) + for volume of 3001 - 4000 cu cm - 13 manats (8 manats), for engine of up to 5,000 cu cm - 18 600 manats (11,400 manats)+another 35 manats (20 manats) for volume of 4001-5000 cu cm. Also excise tax of AZN 53,600 (AZN 31,400) will be levied for engine capacity exceeding 5,000 cu cm and 70 manats (40 manats) per every cu cm exceeding 5,000 cu cm.

Excise tax will also cover imported buses. So, if bus engine capacity is up to 4,000 cu cm, it will be subject to excise tax of 2 manats per cu cm; capacity of up to 6,000 cu cm – AZN 8,000 and another 4 manats for each cu cm 4,001-6,000 cu cm. For buses with engine capacity of up to 8,000 cu cm – AZN 16,000 and another 6 manats for capacity of 6,001-8,000 cu cm. If bus engine capacity is up to 10,000 cu cm, then excise tax will be AZN 10,000 plus 8 manats per every cu cm of volume 8,001-10,000 cu cm. Excise duty on buses with engine capacity over 10,000 cu cm will amount to AZN 44,000 plus 10 manats for every 10,000 cu cm.