Tax Code

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Amendments
Azerbaijan 2025

Contents
1. At a Glance 5.Corporate Income Tax 9.Land Tax

2. Duties of Taxpayers 6.Value Added Tax 10.Road Tax

3. Sanctions 7.Excise Tax 11.Tax Control and Audits

4.Personal Income Tax 8.Property Tax 12.Contact us

 Tax Code of Azerbaijan:
2025 Tax Code Amendments
1. At a Glance


Below we explain the Amendments made into the Tax Code on 27
December 2024 (“Amendments”). The Amendments are primarily
related to additional duties of taxpayers; expanded exemptions for
personal income tax, including concessions for certain micro-
businesses with annual revenue of up to 45 000 AZN; corporate income
tax exemptions in diverse areas, including PPP energy projects and
high technology parks; additional VAT exemptions; expanded and
increased financial penalties; and additional tax control powers of the
tax authorities. For the ease of reading, the amendments are
categorized under subtopics as mentioned in the Contents page above.

With the exception of the followings, the amended articles are effective
from 1 January 2025:

Income derived from the investment of free funds in accordance

with the laws of the Republic of Azerbaijan "On Social Insurance"
and "On Unemployment Insurance” is exempt from corporate
income tax - is effective from 1 January 2024
VAT refund for services for theater performances, film screenings,
museum visits, and symphony orchestra - is effective from 1 July
2025 (see VAT section below)
New tax duties of market owners (see Duties of Taxpayers section),
corresponding powers of tax authorities (see Tax Control and
Audits section), sanctions for the breach of these duties (See
Sanctions section) - taking effect 9 months following the adoption
of the Amendments.

2. Duties of Taxpayers
Rights and obligations of tax authorities and taxpayers

The authority of tax authorities regarding market prices is expanded:

In cases where no transactions are conducted in the relevant goods (work, service) market with goods
(work, services) of the same type or kind, and it is not possible to collect information on market prices of
these goods (work, services) from official and public sources, the Amendments now allow market prices to
be determined directly based on an expert opinion obtained under a contractual agreement without
applying other methods (“subsequent sale” and “value accumulation methods”). Under the previous
provisions, expert opinions could only be used when market prices could not be determined using the
mentioned methods.

Notification requirements for importing goods are simplified:

When providing information to the tax authority regarding the import of goods, it will not be required to
provide "information on the place where the goods will be stored (unloaded) registered as an business entity
(facility) in the tax authorities.

Responsibilities of market owners are expanded:

When property is leased by market owners, ensuring that the lessee is allowed to operate in the
business entities (facilities), after business entity (facility) of the lessee of the property has been
registered with the tax authority;
When real estate in the markets is used for entrepreneurial purposes by the owners of that property
(managers if the markets are given to management), as well as by the lessee if the property is
leased, reflecting (placing) information (reference) on the registration of that business entity
(facility) with the tax authority (indicating the name and TIN of the taxpayer) at the entrance to the
business entity (facility);
Submitting the information, the form of which is approved by the body (institution) determined by
the relevant executive authority, on taxpayers whose lease agreements have been terminated by
market owners and who are not actually operating in that facility, as well as those who continue to
operate, in electronic form to the tax authority where the taxpayer is registered by the 20th of the
following month after the end of each quarter;

These requirements do not apply to agricultural markets and agricultural cooperative markets. These
obligations for market owners also apply to managers of markets when they are managed.

Simplification of advance payments

The requirement to show the demand letter, for advance payments in the payment order submitted to the
payment service provider executing the transaction - indicating that the destination is an advance payment,
or to provide information regarding the date and number of the contract concluded between the parties or
the addendum to that contract, when making a payment transaction between taxpayers, is canceled.

3. Sanctions
The amount of the sanction for failure to submit reports on transfer pricing and income of controlled
foreign enterprises within the established deadlines or for providing incorrect information in the
certificates is increased from 2,000 manats to 6,000 manats;
If the documents stipulated in the Rules for determining and applying transfer prices are not submitted
within 60 days at the request of the tax authority, a financial sanction of 6,000 manats will be on
imposed to the taxpayer;
 If market owners fail to submit information, on taxpayers whose lease agreements have been
terminated and who are not actually operating in that business facility (“object”), as well as those who
continue to operate, in an electronic form to the tax authority where they are registered by the 20th of
the following month after the end of each quarter; or if distorted information is submitted, a sanction of
1,000 manats will be imposed on the taxpayer;
For failure to provide information (certificate) on the registration of the business facility with the tax
authority (indicating the name and TIN of the taxpayer) at the entrance of the business facility in the
markets, a financial sanction of 40 manats will be imposed on micro-business entities, non-profit
organizations and persons engaged in non-entrepreneurial activities, and 400 manats on other
taxpayers. This article shall enter into force nine months after the adoption of these Amendments;
Where after the property is leased by market owners and the business facility of the lessee registered
with the tax authority, conditions are not created for its operation in those business facility, a financial
sanction of 2,000 manats will be applied if such a situation is detected for the first time during the
calendar year, 4,000 manats if detected for the second time, and 6,000 manats if detected three or more
times. This article shall enter into force nine months after the adoption of these Amendments, and
within 6 months after its entry into force, the registration of the business facility, which are not
registered with the tax authority, and the registration of the business entity facility of the lessee of such
business facility with the tax authority, shall be ensured.

4. Personal Income Tax

The tax object of the sale of publicly offered and traded stocks on a regulated market on the territory of
the Republic of Azerbaijan, as well as on a stock exchange outside the country, is defined as the
difference between the selling price of the stock and the purchase price and other expenses incurred. In
this case, the calculation rule for income attributable to other shares and stocks (i.e., difference
between net asset value and nominal value) will not be applied.
For taxpayers operating as residents of the technology park but engaged in activities outside the
technology park, such as system integration, software development, and improvement, the monthly
income tax on the salaries of specialists working in this field is levied at a rate of 0 percent for a monthly
income of up to 8,000 manats for a period of 3 years from January 1, 2023, 5 percent for an amount
exceeding 8,000 manats, and 5 percent for a period of 7 years from January 1, 2026

Exemptions and concessions from personal income tax

The following additional exemptions and concessions are granted:

Exemptions and concessions from personal income tax apply only when the contract pertains to the
non-state sector for any amounts paid to the insured and the beneficiary under life accumulation
insurance and pension insurance contracts after a period of 3 years from the effective date of the
contract. This amendment applies to insurance premiums paid under life accumulation insurance and
pension insurance contracts concluded after January 1, 2025;
For taxpayers not classified as belonging to the non-state sector, the tax benefit in effect until January
1, 2025, under life accumulation insurance and pension insurance contracts concluded for a period of at
least 3 years before January 1, 2025, and not yet reaching the 3-year term by that date, applies only to
insurance premiums paid within 3 years from the date the contract was concluded. For such taxpayers,
 the tax benefit effective until January 1, 2025, under life accumulation insurance and pension insurance
contracts concluded for a period of at least 3 years and having completed the 3-year term by that date,
applies only to insurance premiums paid up to January 1, 2025;
Dividend income earned by individuals who are participants in resident legal entities engaged in
agricultural production (including industrial methods) in this specific sector is exempt from personal
income tax for a period of 4 years starting from January 1, 2023;
Dividends paid by individuals who carry out system integration, software development and
development activities outside the technology park as residents of the technology park – for a period of
10 years starting from the reporting year in which the technology park registration certificate is
received;
Royalty income from the use of copyrights or the granting of usage rights on intangible assets related to
the activities of theaters, museums, symphony orchestras, as well as film production, broadcasting and
dubbing in the Republic of Azerbaijan – for a period of 5 years from January 1, 2025;
90 percent of the income of individuals engaged in film production and dubbing and the film producer
from that activity – for a period of 5 years from January 1, 2025;
Income received by individual entrepreneurs who are private partners in public-private partnership
projects, as well as producers in electricity generation projects using renewable energy sources with the
state's purchase obligation, in the amount not lower than the amount determined by the body
(organization) determined by the relevant executive authority, on those projects - is exempt from
personal income tax for the period determined in the public-private partnership agreement concluded
in accordance with the Law of the Republic of Azerbaijan "On Public-Private Partnership" or the
electricity purchase agreement concluded in accordance with the Law of the Republic of Azerbaijan "On
the Use of Renewable Energy Sources in Electricity Generation", respectively, but not more than 30
years (including the construction period);
75 percent of the income of individuals engaged in the following types of activities, provided that
income from these types of activities (excluding expenses) per calendar year is up to 45,000 manats is
exempted:
services in the field of software development;
project-design and decoration services;
translation services;
advertising services;
research and investigation activities;
services provided in the field of science, education, culture and sports;
consulting services in the field of law, independent auditors, accounting and finance;
activities of journalists;
study of market conditions;
evaluation activity;
delivery of orders and courier activities, except for freight transport by motor vehicles;
tourist guidance;
export of services.

In the event that the employment contract of a natural person working as a hired employee in the fields of
activity specified in the last paragraph is terminated, he/she engages in that activity as an individual
entrepreneur and provides the same services in full or in part to the previous employer within 1 year from
the date of starting the activity as an individual entrepreneur, the above-mentioned exemption does not
apply to that individual entrepreneur. If a natural person engaged in these fields of activity is also engaged in
another field of activity, he may exercise the right to the exemption provided for in that article provided that
the specific weight of the annual income derived from the said fields of activity in the annual total income is
not less than 50 percent.

Except as provided for in the above paragraphs, 75 percent of the income earned from entrepreneurial
activities of individual entrepreneurs, who are micro-entrepreneurs with an average monthly number of
employees of not less than 3 people for the relevant year and who do not have debts on mandatory state
social insurance contributions, is exempt from personal income tax.

5. Corporate Income Tax

Under the Amendments, the tax object of the sale of stocks offered publicly and admitted to trading on a
regulated market on a stock exchange in the territory of the Republic of Azerbaijan, as well as outside the
country, is defined as the difference between the sale price of the stock and the purchase price and other
expenses incurred.

Exemptions and concessions from corporate income tax

The following income are exempted from the corporate income tax:

dividends paid by persons carrying out system integration, software development and implementation
activities outside the technology park as residents of the technology park – for a period of 10 years
starting from the reporting year in which the technology park registration certificate is received;
90 percent of the profit earned by a theater, museum, symphony orchestra, as well as a
cinematographic enterprise and a film producer registered in the Republic of Azerbaijan in accordance
with the procedure established by law and carrying out film production and dubbing, from that activity
- from January 1, 2025 for a period of 5 years;
profits obtained by legal entities that are private partners in public-private partnership projects, as well
as producers in electricity generation projects using renewable energy sources with the state's
purchase obligation, not lower than the amount determined by the body (organization) determined by
the relevant executive authority, on those projects – for the period determined in the public-private
partnership agreement concluded in accordance with the Law of the Republic of Azerbaijan "On Public-
Private Partnership" or the electricity purchase agreement concluded in accordance with the Law of the
Republic of Azerbaijan "On the Use of Renewable Energy Sources in Electricity Generation",
respectively, but not more than 30 years (including the construction period);
Income from the investment of free funds in accordance with the laws of the Republic of Azerbaijan “On
Social Insurance” and “On Unemployment Insurance” (applicable from January 1, 2024).

Non-deductible Expenses

The following additional exceptions have been incorporated into the provision allowing limited cash
expenses (capped at 2 percent of the higher of the taxpayer's annual income or expenses in each case) based
on a purchase act and a cash register receipt: precious stones, precious metals, and items made from
precious stones and precious metals.
 Changes in provisions relating to personal and corporate income tax

When paying the rent by an individual who is not registered as a taxpayer, the tax payment at a rate of 14
percent in accordance with the relevant article may be carried out not only by the lessor himself, but also by
a tax agent appointed by him.

The tax rate on any amount transferred from the net profit of a non-resident's permanent establishment in
Azerbaijan to that non-resident has been set at 5 percent.

Recording of income and expenses

The determination of the share of income and expenses deducted from the income under long-term
contracts for the provision of residential and non-residential areas by persons engaged in building
construction activities for each reporting year is carried out in the following manner:

the costs incurred for each building under construction are compared with the total estimated costs for
the building and the specific weight of the actual costs incurred in the total costs is determined;
the sale price of residential and non-residential premises provided from that building is attributed to
the taxable income in proportion to the volume determined by the method specified in the paragraph
above;
the actual expenses incurred are deducted from income.

6. Value Added Tax

The period for calculating value added tax (VAT) only on the basis of trade mark-up during the wholesale and
retail sale of agricultural products (domestic and foreign origin) has been extended for another 2 years (from
January 1, 2022 to 5 years). Accordingly, the period of non-compensation of value added tax (VAT) amounts
paid on agricultural products by taxpayers engaged in wholesale and retail sales of agricultural products has
also been extended by 2 years.

With the change in the definition of services for VAT purposes, in addition to the transfer of ownership of
money and land to another person, the lease of land is also excluded. Thus, income from the lease of land is
now exempt from VAT.

VAT exemptions and concessions

Under the Amendments, VAT will not be levied on the following types of supply of goods, performance of
works and provision of services, as well as on the following types of imports:

Sale of buses manufactured in the territory of the Republic of Azerbaijan, as well as import of spare
parts for buses for production purposes by legal entities based on a confirmation document from the
body (organization) determined by the relevant executive authority - for a period of 8 years from
January 1, 2025;
 Import of machinery, technological equipment and devices by individual entrepreneurs and legal
entities who are private partners within the framework of public-private partnership projects, as well as
producers under electricity generation projects using renewable energy sources with the state's
purchase obligation, for an amount not lower than that determined by the relevant executive authority,
based on a confirmation document of the body (organization) determined by the relevant executive
authority – for the period determined in the public-private partnership agreement concluded in
accordance with the Law of the Republic of Azerbaijan "On Public-Private Partnership" or the electricity
purchase agreement concluded in accordance with the Law of the Republic of Azerbaijan "On the Use
of Renewable Energy Sources in Electricity Generation", respectively, but not more than 30 years
(including the construction period).
The requirement that the products be produced by individuals engaged in the design, production, sale,
repair and maintenance of defense-related products in order to be exempt from VAT when selling,
repairing and maintaining them has been eliminated
the period of exemption from value added tax (VAT) for the import of equipment and materials within
the framework of reconstruction projects of large oil refineries (with an annual crude oil processing
capacity of not less than 3 million tons), based on a confirmation document from the body
(organization) determined by the relevant executive authority, has been extended for one year.
the provision of services for the repair of ships, other marine and water transport vehicles, and
hydraulic installations by shipbuilding and ship repair enterprises on the order of a non-resident has
been included in the list of services subject to zero (0) rate of value added tax (VAT).

VAT Refund

The procedure for refunding VAT paid by foreigners and stateless persons on goods purchased in the
territory of the Republic of Azerbaijan and not intended for production or commercial purposes, as well as
on medical services provided to foreigners and stateless persons by medical institutions and individuals
engaged in private medical practice, shall be determined by the relevant executive authority. VAT on medical
services provided to foreigners and stateless persons shall be refunded only on non-cash payments.

The procedure for refunding VAT paid by consumers who are individuals for goods purchased from
individuals engaged in retail trade or public catering activities in the territory of the Republic of Azerbaijan
(except for oil and gas products, cars, alcoholic beverages and tobacco products), services provided in the
field of theater performances, film screenings, museum visits and symphony orchestra concerts, as well as
medical services provided by medical institutions and individuals engaged in private medical practice shall
be determined by the relevant executive authority. The amount refunded in accordance with this article is
17.5 percent of VAT paid in cashless form and 5 percent of VAT paid in cash. The amount refunded for
services provided in the field of theater performances, film screenings, museum visits and symphony
orchestra concerts is only 50 percent of the VAT paid in cashless form. The changes set forth in this
paragraph shall enter into force on July 1, 2025.

7. Excise Tax
The amount of the taxable transaction (tax base) for these imported excise goods is their quantity:

· tobacco products and their substitutes;

 · disposable electronic cigarettes, hookahs and their substitutes;
· liquid for electronic cigarettes;
· drinking alcohol, beer (except for non-alcoholic beer) and all types of alcoholic beverages;
· energy drinks;
· petroleum products.
The taxable base for these imported excise goods is determined by their engine volume:

· passenger cars (with the exception of special-purpose motor vehicles equipped with special signs and
equipment);
· buses (except for buses powered by compressed gas);
· motorcycles subject to state registration;
· yachts for recreation or sports and other floating vehicles intended for these purposes.

The taxable transaction (tax base) for imported platinum is each gram of platinum, for gold, jewelry and
other household products made from it - the amount of gold in thousand weight units, for processed,
sorted, framed and set diamonds - the carat of the diamond.

The amount of the taxable transaction (tax base) for imported fur and leather products is the customs value
of the goods (excluding excise duty and VAT), determined in accordance with the Customs Code of the
Republic of Azerbaijan, but not lower than the wholesale market price.

8. Property Tax
Following additional exemptions are granted:

In addition to industrial or technology parks established by a body (institution) determined by the

relevant executive authority, the managing organization or operator of industrial districts is also now
exempt from property tax for their property located in the territory of industrial or technology parks
and industrial districts.
Individual entrepreneurs and legal entities that are private partners in public-private partnership
projects, as well as producers in electricity generation projects using renewable energy sources with the
state's purchase obligation, for an amount not lower than the amount determined by the relevant body
(institution) – are exempt from paying property tax on property used within the framework of those
projects for the period determined in the public-private partnership agreement concluded in
accordance with the Law of the Republic of Azerbaijan "On Public-Private Partnership" or the electricity
purchase agreement concluded in accordance with the Law of the Republic of Azerbaijan "On the Use
of Renewable Energy Sources in Electricity Generation", respectively, but not more than 30 years
(including the construction period).

9. Land Tax
Following additional exemptions are granted:
 The managing organization or operator of industrial or technology parks and industrial districts
established by the body (institution) determined by the relevant executive authority - for the lands used
by it in the territory of industrial or technology parks and industrial districts;
Individual entrepreneurs and legal entities that are private partners in public-private partnership
projects, as well as producers in electricity generation projects using renewable energy sources with the
state's purchase obligation, for an amount not lower than that determined by the relevant body
(institution) – for the period determined in the public-private partnership agreement concluded in
accordance with the Law of the Republic of Azerbaijan "On Public-Private Partnership" or the electricity
purchase agreement concluded in accordance with the Law of the Republic of Azerbaijan "On the Use
of Renewable Energy Sources in Electricity Generation", respectively, but not more than 30 years
(including the construction period) for the lands used within the framework of those projects;
Theaters, museums, symphony orchestras, as well as cinematographic institutions and film producers
registered in the Republic of Azerbaijan in accordance with the procedure established by law and
carrying out film production and dubbing, for the lands they use for that activity for a period of 5 years
from January 1, 2025, are exempt from paying land tax.

10. Road Tax

According to the Amendments, the road tax for gasoline, diesel fuel and liquefied gas produced in the
territory of the Republic of Azerbaijan and intended for domestic consumption (sold wholesale) is calculated
at the rate of 0.02 manats per liter and is added to the wholesale price (including VAT and excise duty). The
road tax for imported gasoline, diesel fuel and liquefied gas is calculated at the rate of 0.02 manats per liter
and is added to the customs value (including import duty, excise duty and VAT) determined in accordance
with the Customs Code of the Republic of Azerbaijan, but not lower than their wholesale market price.

Trucks, trailers and semi-trailers of foreign countries are exempt from road tax for a period of 2 years from
January 1, 2025 in the following cases, in accordance with the procedure determined by the relevant body
(organization):

when cargo transported by rail is transferred to trucks, trailers and semi-trailers of foreign countries at
the last railway station determined by the relevant body (organization) in the territory of the Republic of
Azerbaijan and transported to another state by passing through the nearest customs border
checkpoint;
when cargo is transported by trucks, trailers and semi-trailers of foreign countries from the territory of
another state to the first railway station determined by the relevant body (organization) in the territory
of the Republic of Azerbaijan through the nearest customs border checkpoint.

11.Tax Control and Audits

The period of tax audits related to foreign income has been specified:
In cases where a request is received from the competent authorities of foreign states or relevant information
on income obtained abroad is received, desk tax audits cover the period of 5 years preceding the date of
receipt of the request or information, and field tax audits cover the period preceding the date of the tax
authority's decision to conduct the audit, and for tax audits assigned in accordance with the Criminal
Procedure Code of the Republic of Azerbaijan, the period determined by the term of criminal liability in
accordance with the Criminal Code of the Republic of Azerbaijan.

The scope of operational tax control also includes the following issues:

detection of cases of creating conditions for lessees to operate in markets (objects) without ensuring
that the entities (objects) leased in the markets are registered with the tax authority, with the exception
of agricultural product markets and agricultural cooperative markets;
control over the display (posting) of information (certificate) on the registration of the business entity
(facility) with the tax authority (indicating the name and TIN of the taxpayer) at the entrance of the
business entity (facility) used for entrepreneurial activity purposes in the markets, with the exception of
agricultural product markets and agricultural cooperative markets. This article shall enter into force
nine months after the adoption of these amendments.

12. Questions? Contact us!

 Firangiz Heydarova
Tax Manager
Ms Heydarova is responsible for Tax and Accounting team at CLC. She supervises and advises on domestic tax,
international and double taxation, PSA and tax filing issues. Having accounting degree from UNEC, she is PAC
certified, and currently pursuing Ms Finance at Lund University.

Email: [email protected]

 Laman Karimli

Senior Tax Accounant

Ms Karimli oversees accounting work of our accounting team for full compliance with IFRS and tax purposes.
She has finance and accounting degree from UNEC and possesses Professional Accountant Certificate
provided by the State Tax Service.

Email: [email protected]

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