All company types available in Azerbaijan are liable to taxation. The local legislation distinguishes between personal taxation, applicable to natural persons obtaining a taxable income from activities developed in this country, and corporate taxation, applicable to legal entities developing commercial operations here. We can offer advice on the local tax system; below, you can find the highlights of the corporate tax and the withholding taxes charged in Azerbaijan: 

• the corporate income tax, applicable to legal entities or to branch offices of foreign companies, is charged at a rate of 20%;

• A resident of a technology park who has received a technology park registration certificate in accordance with the relevant procedure may benefit from a number of tax benefits and exemptions;

• companies in Azerbaijan with a yearly turnover of up to AZN 200,000 can be registered as simplified taxpayers;

• simplified taxpayers offering trading services will be taxed at a rate of 6% on their yearly profits; 

• businesses operating in the catering industry are taxed at a rate of 8%.

• The resident legal entity shall deduct 5% of dividends at the source while distributing among shareholders. Similar to dividend tax, payments by the permanent establishment of a non-resident in Azerbaijan from net profit to the non-resident (head office) are subject to 5% withholding tax (10% until 2025). Resident legal entities and private entrepreneurs shall deduct 4% of insurance premiums for insurance or re-insurance of risk and 6% of payments made for international transportation and international telecommunication services.

• The income of non-resident legal entities and private entrepreneurs from providing services or performing works and other income from sources in Azerbaijan shall be subject to 10% withholding tax. In practice, most of the withholding taxes for services in Azerbaijan are subject to this clause, even where the services are provided outside of Azerbaijan – since the source of income or profit is Azerbaijan, withholding tax for services are deducted.

• Payments from residents and permanent establishment of non-residents in Azerbaijan to bank accounts, including legal entities registered in low-tax jurisdictions or branches and representative offices of such legal entities in third countries shall be subject to additional 10% withholding tax. The list of low-tax jurisdictions is annual approved by the President of Azerbaijan.

• Rental fees received due to movable property used in Azerbaijan and immovable property located in Azerbaijan would be subject to 14% withholding tax.

• Payments received from royalties is subject to 14% withholding tax.

• Banks shall deduct 10% of funds transferred to electronic money accounts provided by non-residents.

The Employer (government body or in oil-gas industry) shall deduct 14% or 25% of payments made to employees as wages, awards and any other similar income. Private non-oil industry enjoys exemption from income tax for up to 8000 AZN/month.