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Amendments to the Tax Code of the Azerbaijan Republic

On December 7, 2015 the President of the Republic of Azerbaijan Ilham Aliyev has signed a Law, introducing amendments to the Tax Code of the Azerbaijan Republic," dated 20th of October 2015. The law comes into force on 1 January 2016.

The major points of the amendments to the Tax Code of the Republic of Azerbaijan are the following:

1. The amount brought to the simplified tax increased from 120.000 manats to 200.000 mantas for proceeds over the past 12 months and hence the coverage of the simplified taxpayers will expanded. Thus, henceforth companies with turnover up to 200,000 manat will benefit from a simplified tax system (4% in Baku and 2% outside of the Baku).

2. Important change in the area of simplified tax is that the simplified tax payers carry out their activity in trading and catering, and if their business activity, volume of taxable operations in any month (months) of consecutive 12-month period exceed 200.000 manats, they will still remain as the simplified taxpayers and will be taxed as follow:

For trading activities - 6%

For catering facilities - 8%

3. Taxpayers (both, individuals and companies) must register as VAT payers if their turnover within preceding 12-month period exceeds 200.000 AZN (in USD currency is 191.000$), currently this threshold is 120.000 AZN (in USD currency 114.000).

4. At the same time will change the procedure for the cancellation of registration on VAT, thus the taxpayers whose total taxable operation during the preceding 12 months do not exceed the volume equal to 100000 manats may apply for the cancellation of registration.

5. Taxation of the housing construction will be simplified in Azerbaijan. The legal entities and individuals which are carry out in Azerbaijan housing construction activity will received the right to be payers of simplified tax only. Thus simplified tax will calculated by application the coefficients, according to the zones of cities and districts, to the amount of 45 manats (in USD is 43$) (currently is 10 manats) per each square meter of the taxable object (residential and nonresidential areas of the building under construction). 

6. Also, the taxes on gains from the sale of real estate will be reduced by several times. From the next year, physical persons at the sale of residential and non-residential areas, owned by them, will pay only simplified tax, which defined as a fixed 15 manat per square meter. However at sale of residential and non-residential areas, owned by physical person for at least 5 years then the income obtained from sale are exempt from tax.

7. In accordance with the amendments, monthly salaries under 2,500 manat (in USD $2,386) will be taxed at 14 percent only after deductions of a non-taxable portion of 136 manat, which is the amount of a living wage in the country for 2016. If today income tax was charged from a salary under 250 manat (after the deduction of non-taxable portion of 140 manat), the scope of the privileged income will be expanded. That is, a greater number of people will use this preference.

8. The list of goods exempted from VAT payments has expanded. Among these there are fixed assets subject of a lease agreement, goods exported to special economic zones (with the exception of excise goods), and imported equipment and materials in connection with oil-gas export purposes (in case if by local executive authorities having filed with customs authority the list of approved materials and equipment exported in the Republic of Azerbaijan for purposes of oil and gas export.

9. However, import of goods and equipment used for production purpose, providing advance technologies, stipulated for specific period with provision of development of specific area, in the event of impossibility to satisfy the production needs from local resources will once again be taxed VAT.

10. Also according to the amendment the cash winnings on sports gambling are involved in 10% surge tax.

11. Amendments to the Tax Code also specify the list of taxpayers who are not entitled to be the simplified taxpayers. Among these there are parties producing excise goods, crediting and insurance entities, investment funds, professional security market participants, non-governmental pension funds; obtaining incomes from letting the property or royalty, subjects of natural monopolies , the residual value of owned fixed assets at the year start for the amount exceeding 1 000 000 manats (in USD currency $952562).

12. Also, law tightens penalties for violation of the rules of cash transactions, the amount of which for the subjects of simplified taxation increased from 400 (in USD currency $381) to 2,000 manats (in USD currency $1905) (in case of re - 4,000 manat (in USD currency $3810) and 6,000 manat (in USD currency $5715).

13. Royalties on minerals increased about twice as following:

Royalty is calculated for each cubic meter dependent on the following types of produced natural resources at following rates:

Names of natural           Royalty tax rates              Royalty tax rates
resources, subject               (currently)                (as of 01 January 2016)
to royalty tax

Non-metallic natural resources:

Zeolite                                  0,5 AZN (in USD is $0.47) 1,0 AZN (in USD is $0.95)

Barite                                    0,5 AZN (in USD is $0.47) 1,0 AZN (in USD is $0.95)

Sawn stone                         0,5 AZN (in USD is $0.47) 2,0 AZN (in USD is $1.90)

Rubbles                                0,5 AZN (in USD is $0.47) 1,0 AZN (in USD is $0.95)

Clays for production      0,5 AZN (in USD is $0.47) 1,0 AZN (in USD is $0.95)
of light fillers  
(claydite, nodulizer) 

Bentonite clays                0,5 AZN (in USD is $0.47) 1,0 AZN (in USD is $0.95)

Brick and tiling clays     0,5 AZN (in USD is $0.47) 1,0 AZN (in USD is $0.95)

Volcano ash and              0,5 AZN (in USD is $0.47) 1,0 AZN (in USD is $0.95)

Quartz sands                     0,5 AZN (in USD is $0.47) 1,0 AZN (in USD is $0.95)

Construction sands        0,5 AZN (in USD is $0.47) 1,0 AZN (in USD is $0.95)

Cement stuff                      0,5 AZN (in USD is $0.47) 1,0 AZN (in USD is $0.95)
(limestone, marl-clay,
 volcano ash)

Mask stones (marble,     1 AZN (in USD is $0.95) 1,0 AZN (in USD is $0.95)
gabbro, tufs, travertine,
marbled limestone) 

Precious and half              4 AZN (in USD is $3.81) 6,0 AZN (in USD is $5.71)
precious jewelry stones

Rock salt                              4 AZN (in USD is $3.81) 6,0 AZN (in USD is $5.71)

Iodine bromine mixed  0,02 AZN (in USD is $0.01) 0,04 AZN (in USD 
waters                                    is $0.038)

Mineral waters                   6 AZN (in USD is $5.71) 10,0 AZN (in USD is $ 9.52

14. Also an amendment to the Tax Code specifies empowerment Ministry of the Taxes. Thus Ministry will empower to apply to the courts with an initiative to restrict exit tax debtors (in particular management of the companies) abroad. 

We consider the above amendments to the Tax Code as positive, because they are provide simplification of the taxation in a number of small and medium business, namely in the construction, trade sectors and catering in order to create favorable conditions for entrepreneurship, to ensure the separation of tax burden among different segments of the population for social-economic developments in Azerbaijan.

For more detailed information on any above issues, please contact Aygun Abbasova at: +994 12 4978948 or

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