Tax policy, enforcement and collection of taxes in the Republic of Azerbaijan is the responsibility of the Ministry of Taxes. On the legislative level, the Tax Code describes the general principles of taxation in the Azerbaijan Republic including rules for determination, payment and collection of taxes; rights and responsibilities of taxpayers and State tax authorities; forms and methods of enforcement; liability for violations of tax laws and procedures for filing complaints of unlawful actions (or failure to take actions) committed by tax agencies and officials thereof. Definitions, procedures and rules determined by the Tax Code are provided for the purpose of enhanced governance in related areas of tax compliance, payment of respective liabilities and are used only within the scope of taxation and enforcement regulated by the Code and other legislative acts.
The taxes levied in the Republic of Azerbaijan, pursuant to the Tax Code, shall be as follows:
· State taxes
· Taxes of autonomous republic
· Local (municipal) taxes
State taxes are those taxes that are stipulated by the Tax Code and are obligatory for compliance and payment within the entire territory of the Azerbaijan Republic. Within the territory of the Azerbaijan Republic taxes are calculated and paid in the currency of the Azerbaijan Republic – Manats (AZN).
Property tax in Azerbaijan
The tax calculated and paid for fixed assets per the Balance Sheets and assets registers of the enterprises is defined as Property Tax.
Payers of Property Tax
Resident enterprises, as well as non‐resident enterprises carrying our business activity through its permanent establishment in the Republic of Azerbaijan, are subject to property tax.
Property Tax Rate
The annual property tax shall be calculated and paid by Legal Entities at the rate of 1% of the average annual net book value of fixed assets (except for transportation fixed assets).
Tax Payment and Reporting Requirements
Payers of Property Tax shall make advance payments of 20% of the amount of property tax of the previous year prior by the 15th of the second month of every quarter. Legal entities shall submit annual Property Tax declarations along with the Profits Tax declaration to the State Tax Departments.
The Azerbaijani Tax Code, which has entered into force on the 1st of January 2001, regulates taxation and tax administration as codified law. The Tax Code of Azerbaijan is a special law, prevails over other laws with regard to taxation issues.
The Tax Code prescribes the following government taxes in Azerbaijan:
Corporate Tax: 20% as a general rate, 5% for micro-businesses. Withholding taxes of non-residents is deducted at 10% by the paying resident;
Personal Income Tax: 14%-25%;
Value Added Tax: 18%, some works, and services are taxed with 0% VAT;
Excises: this tax is added to the sales price of certain goods imported to or produced in Azerbaijan. The rates vary, for example, excise rate of alcoholic drinks such vodka is 2 manats per liter, 1000 unit of cigarettes 20 manats;
Property Tax of Legal Entities (Companies): 1% of the asset value annually;
Land Tax: different tax rates apply to lands depending on the location and type of land. For example, Industrial lands in Baku are taxed as 10 manat per square meter where the land size is below 10 000 square meters, and 20 manat when above this threshold. Land Tax is taxed annually;
Road Tax (Vehicle Tax): the object of road tax is vehicles entering or leaving Azerbaijan, as well as petrol, diesel, liquid gas imported to or produced in Azerbaijan;
MiningTax: different tax rates apply in mining operations, such as 26% for oil, 20% for gas;
Simplified Tax: this tax is imposed on smaller businesses with maximum annual revenue of 200 000 manats without VAT registration (2%), businesses providing public catering services where their annual revenue is above 200 000 manats (8%) and businesses engaged in the construction of buildings and companies providing transportation services (different rates apply depending on several factors).