tax guide 2019 foreign nationals coming to azerbaijan · azerbaijan currently has three taxation...
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Tax guide 2019Foreign nationals coming to Azerbaijan
Abbreviations 06
Arrival,Registration andWorkPermits 07
TaxResidencyStatus, Taxesand TaxRates 14
FilingRequirements 22
TaxPayments 28
TaxableIncome 32
SocialInsuranceContributions 36
UnemploymentInsurance 40
DoubleTaxTreaties 42
Contacts 44
Deloitteispleasedtoprovideyouwith thisbriefoverviewof theAzerbaijanipersonaltaxand complianceprocedures.For your convenience,thisguideis presentedasalistofFAQs
WelcometoAzerbaijan!
WiththeAzerbaijanitaxsystemundergoingconstantrapid development,werecommendthatyouuse this brochureforgeneralguidancepurposesonly.Azerbaijancurrentlyhasthreetaxationregimes—a statutoryregime,aPSAregime,andanHGAregime.Since mostPSAsin Azerbaijanaresimilar,wewillbereferringto the Azeri-Chirag-GuneshliPSAthroughoutthisbrochure.We will provideyouwithinformationonthesethreetaxationregimesinturn(foreachquestion,answer1willberelatedto thestatutorytaxationregime,answer2tothePSAtaxationregime,andanswer3totheHGAtaxationregime).Please contactustodiscussyourspecificsituation.
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Arrival, Registration and Work Permits
QuestionDoIhaveto notifythe taxauthoritiesuponmyarrival/departure?
Answer1. No,thereisnosuchrequirement.
However,ifyouareengagedinentrepreneurialactivityin Azerbaijanandareplanningto leavethecountry,youmustfileafinaltaxreturnwithin30daysof ceasingyouractivities.
2. No,therearenosuchrequirementswithregardtoPSAs.
3. No,therearenosuchrequirementswithregardtoHGAs.
Abbreviations
PSA ProductionSharingAgreement
HGA HostGovernmentAgreement
AZN AzerbaijaniManat
USD U.S.Dollar
PIT PersonalIncomeTax
VAT ValueAddedTax
SIC SocialInsuranceContributions
SSPF StateSocialProtectionFund
DTT DoubleTaxationTreaty
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QuestionDoIrequirea visatoenterAzerbaijan?If so, wheredo I obtainit?
Answer1. Ifyouareplanningtovisit
Azerbaijan,youmustobtainavisaifthereisavisaregimeapplicablebetweenAzerbaijanand your countryofresidence. AvisacanbeobtainedatAzerbaijaniembassiesandconsulatesinyourcountryofresidenceorotherdesignatedcountries.Alternatively,itispossibletoobtainanelectronicvisa(foranytypeofvisa)onlinethroughthewebsite:www.evisa.gov.az.Suchvisashallbeconsideredane-visa.Pleasenotethatane-Visaisonlyasingleentryvisaandtheperiodofstayunderane-visacannotexceed30days.E-visasshallbeprintedandprovidedattheborderalongwithapassporttobestamped.
2. Thesamerulesapplywith regard to PSAs.
3. Thesamerulesapplywith regard to HGAs.
QuestionDoIneedto registerwiththeAzerbaijanstateauthoritiesuponarrival?
Answer1. Yes.RegistrationwiththeState
MigrationServiceattheplaceof stay,mustbeperformedwithinfifteendaysofyourarrivalinAzerbaijan. Thisrequirementisapplicableonlyif youintendtostayfor more than fifteendaysin Azerbaijan.You orthe hostpartymayfilean application(togetherwithyourpassport)to the StateMigrationServiceviapost,email or inperson.
2. Yes,theaboverulesalso apply underPSAs.
3. Yes,theaboverulesalso apply underHGAs.
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withinacalendaryearwithinspecificfieldsofbusiness(i.e.miningindustry,processingindustry,electricity,gas,steamandairconditioningsupply,informationandcommunication,financeandinsurance,education,transport,watersupply,wastewaterandrefusetreatment); Aworkpermitisissueduponyour employer’sapplicationto theStateMigrationService.Thetimeframeforobtaininga workpermitis 20 workingdaysafterthesubmissionof the complete applicationpackage.The state fee payablefor a workpermitandfor anyextensionof thetermof the permitis AZN 350 for uptothreemonths,AZN 600foruptosixmonths,AZN 1,000 for one year.
2. ThesameconditionsapplywithregardtoPSAs.PriortothesubmissionoftheapplicationtotheStateMigrationService,theendorsementoftheStateOilCompanyoftheAzerbaijanRepublicneedstobeobtained.
3. ThesameconditionsapplywithregardtoHGAs.PriortothesubmissionoftheapplicationtotheStateMigrationService,theendorsementoftheStateOilCompanyoftheAzerbaijanRepublicneedstobeobtained.
QuestionDoIrequirea workpermittoworkin Azerbaijan?Ifso,howdoI obtaina permit,forhowlongis it valid,and whatis the timeframeand cost of obtainingit?
Answer1. Yes,foreignindividualswishing
to workinAzerbaijanmustobtainaworkpermitfromtheStateMigrationServiceoftheRepublicof Azerbaijanthroughtheiremployers.Aworkpermitisissuedforanunlimitednumberoftimeseachbeingnomorethan oneyear. However,youdonotrequireaworkpermitifyouare: – a permanent resident of Azerbaijan
– marriedtoanAzerbaijanicitizen,providedyourspouseisregisteredathis/herplaceofresidence
– engagedinentrepreneurialactivity
– employedinamanagerialpositionatanorganizationestablishedunderaninternationalagreement
– employedatadiplomaticrepresentativeofficeor an internationalorganization
– theheadordeputyheadof a branchorrepresentativeofficeofaforeignlegalentity in Azerbaijan
– theheadordeputyheadofalocallegalentitywithforeignshareholder
– assignedonbusinesstripsnotexceeding90dayscumulatively
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QuestionDoIneedalocalcontract?
Answer1. Yes,ifyouarelocallyemployed
atanAzerbaijanientity,or if you areemployedatabranchor representativeofficeofaforeignlegalentityinAzerbaijanandhavenotconcludedanemploymentagreementwiththeheadofficeof thatforeignlegalentity.
2. ThesamerulesapplywithregardtoPSAs.
3. Thesamerulesapplywithregardto HGAs.
QuestionDoIrequirea temporaryresidencepermit?Ifso,howdoIobtainoneand forhowlongisitvalid?
Answer1. Yourworkpermitservesas the basis
forobtaininga temporaryresidencepermit.Temporaryresidencepermitsareinitiallyissuedforupto oneyearbasedonthesubmittedapplicationand maysubsequentlybeextendedfornomorethantwoyearsata time.Thetimeframefor obtaininga temporaryresidencepermitis20workingdaysaftersubmissionof thecompleteapplicationpackage. Inordertoqualifyforatemporaryresidencepermitasaprivateentrepreneur,foreignnationalsengagedinentrepreneurialactivitymusthaveatleastfivefulltimeor10parttimeemployeeshiredunderlegally-bindingemploymentagreements.Atleast80percentoftheseemployeesmustbeAzerbaijanicitizens.
2. Thesamerulesapplywithregardto PSAs.
3. Thesamerulesapplywithregardto HGAs
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QuestionTowhattaxeswillmyincomebesubject?What rateswill apply?
Answer1. Taxresidentsaregenerallytaxed
attheratesdetailedinthetablebelow.Theseratesareappliedtotheirworldwideincomepaidincashand/orin-kind:
Allindividualsengagedinentrepreneurialactivitywillbetaxedatafixedrateof20percent.Taxableincomefromnon-entrepreneurialactivitieswillbetaxedattherateof14percent.
Monthly Taxable Income Tax Rates
UptoAZN2,500 14%
OverAZN2,500AZN350+25%of the amountexceedingAZN 2,500
Reducedtaxrateswillbeinforceforasevenyearsperiodstartingfrom1January2019foremployeesofthenon-publicandnon-oilandgassectors.
Monthly Taxable Income Tax Rates
UptoAZN8,000 0%
OverAZN8,00014%oftheamountexceedingAZN8,000
AnincomeofAZN200isexemptfromtaxationifthemonthlyincomeisbelowAZN2,500,andanincomeofAZN2,400isexemptiftheannualincomeisbelowAZN30,000.
QuestionWhatarethetaxresidencyrulesin Azerbaijan?
Answer1. YouareconsideredanAzerbaijani
tax residentifyouhavebeenphysicallypresentinAzerbaijanforaperiodofmorethan182dayscumulativelyinacalendaryear(regardlessofnationality).
2. UnderPSAstherearethreetaxresidencyrulesforexpatriateemployees: – Anexpatriateemployeespendingmorethan30consecutivedaysinacalendaryearinAzerbaijanforordinarybusinesspurposesbecomesataxresident.Incomeearnedafterthe30thdayis taxable inAzerbaijan.
– Individualsspendinglessthan30consecutivedaysbutmorethan90cumulativedaysinAzerbaijaninacalendaryearalsobecometaxresidents.Incomeearnedafterthe 90thdaybecomestaxable.
– Individualsonrotationand expatriateswhoseprimaryplaceofemploymentis Azerbaijanarealsoconsideredtobetaxresidentsif theyspendmorethan90 cumulativedaysin Azerbaijanin acalendaryear.Theseindividualsaretaxedfromthefirstdayoftheirpresencein Azerbaijan.
Tax Residency Status, Taxes and Tax Rates
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asmicroorsmallentrepreneursareexemptforthreeyearsfromthedateofobtainingastartupcertificateand
• aportionofincomeofsmall-mediumenterprise(“SME”)clustermemberindividualentrepreneurearnedfromtheprovisionofgoods(services,works)underthecontractconcludedwithanSMEclustercompanyspentforcapitalexpendituresareexemptfromincometaxforsevenyears.
Inaddition,theincometaxamountpayablebytheentrepreneursengagingintradingandpubliccateringactivitiesfortheprovisionofgoodsunderretailsale,isdecreasedby25percentofthetaxamountgeneratedfromtheincomereceivedviaPOSterminalsforathreeyearperiodstartingfrom1January,2019. IfyouconductbusinessactivityinAzerbaijan,andthevolumeofyourtaxableoperationsdoesnotexceedAZN200,000inanyconsecutive12-monthperiod,youhavearighttoregisterasasimplifiedtaxpayer.
Theincomeofsoleentrepreneursoperatingintheindustrialparksisexemptfromtaxation.Moreover,50percentexemptiononpersonalincometaxisconsideredforindividualswhogetaninvestmentpromotioncertificate. Alongwiththeaboveexemptions,startingfrom2019newincometaxexemptionshavebeenstipulatedinthetaxlegislation;
• dividendincomeofindividualswhoarethefounders(shareholders)ofaresidententityisexemptfromincometaxifaresidententityisnotregisteredforVATpurposes,andthetaxableturnoverofsuchentityisuptoAZN200,000ina12-monthperiod,
• 50percentofataxpayer’sincomefromtheprovisionofsharesandparticipatinginterestsownedatleastforathreeyearperiod,
• 75percentoftheindividualentrepreneurs’incomefromentrepreneurialactivitiesclassifiedasamicro-entrepreneur,
• incomeofstartupsfromsuchactivitiesperformingtheirbusinessasindividualsclassified
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Ifyourincomeexceedstheabovethreshold,youwillbeobligatedto registerforVATpurposes. ThemaximumamountoftaxableoperationsthatenablesindividualentrepreneurstobecomesimplifiedtaxpayersissetasAZN200,000inanyconsecutive12-monthperiod. Simplifiedtaxiscalculatedfromtherevenuereceivedfromthesupplyofgoods,servicesandworkattherateoftwopercent.
PersonsengagedinpubliccateringactivitieswhosetaxableturnoverexceedsAZN200,000inanymonthwithinconsecutivetwelvemonthsareentitledtoregisterassimplifiedtaxpayersattherateofeightpercent.
Soleentrepreneurs’cashwithdrawalsfromtheirbankaccountsaresubjecttosimplifiedtaxatarateofonepercent,whichshallbewithheldbylocalbanks,branchofficesofforeignbanksintheRepublicofAzerbaijan,andnationaloperatorsofpostalservices.
Incomefromthesaleofresidentialandnon-residentialproperty,includingpropertyacquiredfrompersonsengagedinconstruction,issubjecttosimplifiedtaxatarateofAZN15persquaremetermultipliedbythelocationzonerate,whichvariesfrom0.5to4.0.Theratefornon-residentialbuildingsis1.5regardlessofthelocation.
2. PITratesappliedunderPSAstoAzerbaijanitaxresidents’incomeearnedasadirectresultoftheiremploymentinAzerbaijanareasfollows:
3. ThesamePITratesasaboveapplyunderHGAsafteryoubecomeataxresident.
Monthly Taxable Income Tax Rates
UptoAZN2,500 14%
OverAZN2,500AZN350+25%oftheamountexceedingAZN2,500
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QuestionDoIpaytaxin Azerbaijanif I qualifyas a non-residentfortaxpurposes?
Answer1. Yes.Ifyouhavebeenphysicallypresent
inAzerbaijanfor a periodof lessthan183daysin a calendar year,youwillqualifyasanon-residentfortaxpurposesand will betaxedat the above ratesonyourAzerbaijani-sourcedemployment income. Non-residentsaretaxedontheirincomeobtainedfromotherAzerbaijansourcesasfollows:A. dividends—10%B. Interest,includingloaninterest
paidinconnectionwithfinancialleasingtransactions—10%
C. Royaltiesandrent—14%D. Internationalfreightor
communication—6%E. Insuranceandre-insurancefees
—4%F. OtherAzerbaijani-sourcedincome
—10%G. Paymentstocountrieswith
preferentialtaxation—10%. Azerbaijani-sourcedincomeincludesincomerelatedtodutiesperformedorservicesrenderedinAzerbaijanandincomefrompropertylocatedinAzerbaijan,irrespectiveofwhereitispaid.
2. No.
3. No.
QuestionArethereanyspecialtaxexemptionrules?Ifyes,whichindustriesaretheyapplicableto?
Answer1. Yes.TheAzerbaijanigovernment
offersaninvestmentpromotioncertificatethatgrantsexemptionfromseveraltypesoftaxesforsevenyearsinthoseindustriesthatareconsideredtobehighpriority.Moreover,small-mediumenterprisemembersandcompaniesenjoyseveraltaxexemptionsforsevenyearsfromthedatetheyreceiveacertificateofanSMEclustercompanyorSMEclustermember.Startupsclassifiedasamicroorsmallentrepreneurshipareexemptfromcertaintaxesforthreeyearsfromthedateofobtainingastartupcertificate.Also,75percentoftheincomeofindividualentrepreneursandprofitoflegalentitiesfromentrepreneurialactivitiesclassifiedasamicro-entrepreneurshipareexemptfromincometaxandprofittaxrespectively.
2. No.
3. No.
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Filing Requirements
QuestionDoIneedto fileataxreturnin Azerbaijan?
Answer1. No,providedyouronlyincome
is fromemployment,whichis subjecttowithholdingtax,deductedbytheentityorindividualfromwhichyoureceivetheincome However,ifyouareengagedinentrepreneurialactivityin AzerbaijanyouhavetofileeitheraPITreturnorasimplifiedtax return. VATpayersmustfileVATreturnson amonthlybasis.
2. No.However,anemployeris responsibleforfilingareturnto thetaxauthoritiesregardingallAzerbaijanPITpaymentsmadeduringthecalendarquarterinrespectofforeignemployeetaxresidents.
3. No.However,anemployeris responsibleforfilingareturnto thetaxauthoritiesregardingall AzerbaijaniPITpaymentsmadeduringthecalendarquarterinrespectofforeignemployeetaxresidents.
QuestionWhatis the taxyearin Azerbaijan?
Answer1. Thetaxyearisacalendaryear.
2. UnderPSAsthetaxyearisalsoa calendaryear.
3. Similarly,underHGAsthetaxyearis acalendaryear.
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QuestionWhendoIhaveto fileataxreturn?
Answer1. Ifyouremployerisregistered
as a VATpayerorsimplifiedtaxpayer,thentheyareresponsibleforfilingareturnto thetaxauthoritiesinregardtoPITpaymentsmadeduringacalendaryearinrespectofitsforeignemployeetaxresidentsby 31 Januaryfollowingthecalendaryear.Otherwise,youremployerisresponsibleforfilingquarterlyPITreturnsbythe20th dayof themonthfollowingthe calendar quarter. IndividualentrepreneursareobligedtofileaPITreturnon31Marchoftheyearfollowingthetaxyearattheplaceoftaxregistration(residence).Thisdeadlinecanbeextendedbyuptothreemonthsuponfilinganapplication,providedthattheamountoftaxdueispaid. Thedeadlineforfilinga simplifiedtaxreturnisthe20dayof the monthfollowingtheendof thecalendarquarter.
Ifyouceaseyourentrepreneurialactivityduringthetaxyear,youarerequiredtofileataxreturnwithin 30days. VATpayersmustfileVATreturnsno laterthanthe20th
of the monthfollowingtheendof the calendar month.
2. YouremployerisresponsibleforfilingareturntothetaxauthoritiesinregardtoPITpaymentsmadeduringthecalendarquarterinrespectofitsforeignemployeetaxresidentsbythe20thdayofthemonthfollowingtheendofthecalendarquarter.Inaddition,theemployermustprovidetheMinistryofTaxeswithasummaryofallAzerbaijaniPITpaymentsmadeduringthecalendaryearinrespectofitsforeignemployeetaxresidentsintheformofanaddendumtothePITreturnforthefourthquarter.
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3. Similarly,underHGAs,youremployerisresponsibleforfilingareturntothetaxauthoritiesin regardtoPITpaymentsmadeduringthecalendarquarterin respectofitstaxresidentforeignemployeesbythe20thdayofthemonth followingtheendof the calendarquarter. Inaddition,anemployermustprovidetheMinistryofTaxeswithasummaryofallAzerbaijaniPITpaymentsmadeduringthecalendaryearinrespectofitsforeignemployeetaxresidentsbefore1 Aprilof thefollowingcalendaryear.
QuestionIsthereanyrequirementforfilingadvancetaxreturnsinAzerbaijan?
Answer1. No,unlessyouareanentrepreneur
subjecttoPIT.Ifyouare,youmayberequiredtofilequarterlyadvancetaxcalculationsby the 15thdayof themonthfollowing the calendar quarter.
2. No.
3. No.
QuestionInwhatcurrencyshouldIreportmytaxableincome?
QuestionAretherepenalties for late filingof taxreturns?
QuestionCanjointreturnsbefiled(taxpayerandspouse)?
Answer1. Allincomereceivedshouldbe
reportedinAZN.
2. YouremployershouldreportyourtaxableincomeinAZNorUSD.
3. YouremployershouldreportyourtaxableincomeinAZNorUSD.
Answer1. Yes,penaltiesmaybecharged
in an amountuptoAZN40.
2. Thesamepenaltyappliesto taxpayersworkingunderthe PSA regime.
3. Thesamepenaltyappliesto taxpayersworkingunderthe HGA regime.
Answer1. No.
2. No.
3. No.
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Tax Payments
QuestionHowistaxpaidin Azerbaijan?
Answer1. PITcanbepaideithervia
withholdingatsourcewhenthe payingentityisobligatedto do so,orpersonallyifyouare obligatedtofileataxreturn. PayersofsimplifiedtaxandVATare obligedtopaytaxpersonally.
2. UnderPSAs,PITispaidviawithholdingatsourceby the employer.
3. UnderHGAs,PITispaidviawithholdingatsourceby the employer.
Answer1. Ifyouronlyincomeisfrom
employmentinAzerbaijan,youremployerisresponsibleforwithholdingincometaxand remittingittotheStateBudget. However,ifyoureceiveincomefromentrepreneurialactivityandyouareaPITpayer,theincometaxdueforthecurrentyearshouldbepaidinadvancetotheStateBudgetbyonlyawiretransferfromyourpersonalbankaccountbythe15thdayofthemonthfollowingeachquarter.Itshouldbenotedthattheamountofadvancepaymentsshouldnotbelessthan75percentofthetotalincometaxdueforthatspecifictaxyear.Thefinalpaymentshouldbemadebeforefilinganannualincometaxreturn,i.e.before31Marchofthefollowingyear. Ifyouareasimplifiedtaxpayeryouareobligedtomakeataxpaymentnolaterthanthe20thdayofthemonthfollowingtheendofthecalendarquarter.
QuestionIfIhavetopaytaxpersonally,howdoIdothis?
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Ifyougenerateincomefromthesaleofresidentialandnon-residentialproperty,thesimplifiedtaxshallbewithheldandpaidbynotary. IfyouareaVATpayeryoushouldmakeataxpaymentnolaterthanthe 20thdayofthemonthfollowingthe endofthecalendarmonth.
2. No,youdonothavetopayany PIT personally.
3. No,youdonothavetopayany PIT personally.
Answer1. AzerbaijaniPITshouldbepaid
in AZN.
2. UnderPSAs,anemployermaypaytheAzerbaijanPITofitsforeignemployeetaxresidentsinAZNor USD.
3. UnderHGAs,anemployermaypaytheAzerbaijanPITofitsforeignemployeetaxresidentsinAZNor USD.
QuestionInwhatcurrencydoIpaytax?
Answer1. Yes,youremployermustremit
thetaxestotheStateBudgeton your behalf.
2. Employersarerequiredtomakethesepaymentsonyourbehalfin accordancewithPSAs.
3. Employersarerequiredtomakethesepaymentsonyourbehalfin accordancewithHGAs.
Answer1. Yes,latepaymentinterestischarged
atarateof0.1percentofthetaxpayableforeachdayofdelay.
2. UnderPSAs,anemployershouldpayinterestatarateofLIBOR+ 4 percentperannumforeachdayofdelayof thetaxpayment.
3. UnderHGAs,anemployershouldpayinterestatarateofLIBOR+ 3.5 percentperannumforeachdayof delayofthetaxpayment.
QuestionCanmyemployermaketaxpaymentson my behalf?
QuestionArethereanypenaltiesforlatepaymentoftax?
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Taxable Income
Answer1. Employmentincome,including:
– Salary – Bonuses – Otherin-kindbenefits. Incomefrominvestments,including:
– Dividends – Interest – Rent – Royalties – CapitalgainsMiscellaneous: – Inheritance – Gifts – Winningsfromsportsgambling Incomefromentrepreneurialactivity,includingincomefrom:
– Supplyofgoods – Provisionofservices – Performanceofwork.
QuestionWhataspectsof myremunerationare taxable?
2. UnderPSAs,almostallincomeofforeignemployeesearnedin Azerbaijanistaxable,includingwages,salaries,bonuses,personaltravelcosts,educationexpensesfor familymembers,etc.
3. Similarly,inaccordancewithHGAs,almostallincomeofforeignemployeesearnedinAzerbaijanis taxable,includingwages,salaries,bonuses,personaltravelcosts,educationexpensesforfamilymembers,etc.
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Answer1. Thereareseveraltypesof income
thatareexemptfromtaxin Azerbaijan.Theseinclude: – Gifts,financialaidandinheritancereceivedfromfamilymembers
– Alimony – Saleofimmovablepropertywhereataxpayerhasregisteredand residedduringatleastfive years
– Compensationfeesfordamages – Certainbusiness-relatedexpenses – Dividendincomeofindividualswhoarethefounders(shareholders)ofaresidententityisexemptfromincometaxifaresidententityisnotregisteredforVATpurposes,andthetaxableturnoverofsuchentityisupto200,000manatswithinanymonth(months)ina12-monthperiodandtheentitykeepsrecordsofitsincomeandexpenseinaccordancewiththerespectivelegislation.
– AnnualinterestincomepaidtoindividualsbyalocalbankorabranchofaforeignbankinAzerbaijanforsevenyearsbeginningfrom1February2016.
QuestionWhatincomecanIexcludeordeductfromtaxableincome?
Deductionsincludeallexpensesincurredwithinincome–generatingactivities,withspecificexceptionsprovidedforbythelaw
2. AccordingtoPSAs,incomesuchashousingallowance,meals,transportation expenses are not taxableprovidedthattheyarewellsupported(e.g.byarentalagreement,checks,invoices,etc.).
3. Similarly,accordingtoHGAs,in determiningAzerbaijantaxableincome,foreignemployeesareentitledtoapplytheexemptionsprovidedbytheTaxCodeasdetailedintheanswerabove.
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Social Insurance Contributions
Answer1. Yes.SICarechargedata
rateof threepercentofyourAzerbaijani-sourcedincome.Inaddition,employersare requiredtopaySICatarateof22percentof the grossincomeofemployees.Youremployerisresponsiblefor remittingthreepercentand22percentSICon the dayofsalarypaymentthanthe15thdayof the monthfollowingthecalendarmonthtowhichtheSICisrelated.
Theincomeofinsuredpersonsworkinginnon-publicandnon-oilandgassectorsissubjecttoSICatthefollowingratesforaseven-yearperiodstartingfrom1January2019.
QuestionDoIpaySICinAzerbaijanwhileIamon an assignmentor engaged in entrepreneurialactivity?How areSICpaid?
Monthly Taxable Income
Total Social insurance contribution rates
Deduction from income of insured
Paid at the expense of the insurer
UptoAZN200 25% 3% 22%
OverAZN200 25%
AZN6+10%oftheamountexceedingAZN200
AZN44+15%oftheamountexceedingAZN200
Individualentrepreneurscarryingoutoperationsintradeandconstructionareobligatedtopay50percentoftheminimummonthlysalarysetinAzerbaijan,i.e.AZN90;inotherfieldstheyareobligatedtopay25percentoftheminimummonthlysalary,i.e.AZN36.Please,notethatthiswillbeinforceuntil1January2020.Afterthatdateallindividualentrepreneurswillhavetopay25percentoftheiractualincome .
2. ForeignemployeesofcontractorsandforeignsubcontractorsoperatingunderPSAsare exempt fromSIC.
3. ForeignemployeesofcontractorsandforeignsubcontractorsoperatingunderHGAsare exempt fromSIC.
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Answer1. Yes.SICappliesatarateof22
percentofthegrossincome.Ifanemployeeisemployedinanon-publicandnon-oilandgassectors,theSICratewillbe15percentofthegrossincomepaidattheexpenseoftheemployer.
2. No.
3. No.
Answer1. Ifyouronlyincomeisfrom
employment,youremployeris responsibleforfilingareportto theMinistryofTaxesinregardto SICpaidduringacalendarquarterinrespectofitsforeignemployeesbythe20thdayof the monthfollowingtheendof thecalendarquarter. Ifyouareanentrepreneur,it willbe yourresponsibilitytofilea reporttotheMinistryofTaxesby the20thdayofthemonthfollowingtheendofthecalendarquarter.
2. No.
3. No.
QuestionDoesmyemployerpaySIC?Ifyes,whatis theapplicableSICrate?
QuestionDoIneedto filea reporttotheSSPFin Azerbaijan?If yes,whendoIhavetofilethe report?
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Unemployment Insurance
Answer1. Employeesasinsuredparties,
employersasinsurersandtheSSPFasanintermediarygovernmententitymanagingtheprocessoftheunemploymentinsurancearesubjectsoftheLaw“Onunemploymentinsurance”dated30June2017whichiseffectivestartingfrom1January,2018. Unemploymentinsurancecontributionsaremandatoryandchargedatarateof0.5percentofyourAzerbaijani-sourcedincome.Inaddition,employersarerequiredtopayunemploymentinsurancecontributionsatarateof0.5percentofthegrossincomeofemployees.Youremployerisresponsibleforremitting0.5percentasyourportionand0.5 percentasitsportiononthedayofsalarypaymentbutnolaterthanthe15thdayofthemonthfollowingthecalendarmonthtowhichtheunemploymentinsurancecontributionisrelated.
QuestionIsunemploymentinsuranceamandatorysocialcontribution?Howareunemploymentinsurancecontributionspaid?
2. ForeignemployeesofcontractorsandforeignsubcontractorsoperatingunderPSAsareexemptfromanycontributionsofthe Azerbaijanistatesocialinsuranceandotherpaymentsof a similarnature.
3. ForeignemployeesofcontractorsandforeignsubcontractorsoperatingunderHGAsareexemptfromanycontributionsofAzerbaijanstatesocialinsuranceandotherpaymentsofasimilarnature.
Answer1. Youremployerisresponsible
forfilingareporttotheMinistryofTaxeswithregardtotheunemploymentinsurancepaidduringacalendarquarterinrespectofitsforeignemployeesbythe20th
dayofthemonthfollowingtheendofthecalendarquarter.
2. No.
3. No.
QuestionHowisthereportingoftheunemploymentinsurancecarriedout?
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Double Tax Treaties
Answer1. Youshouldfindoutifyourhome
countryhasconcludedaDTTwith Azerbaijan.SomeDTTscontainprovisionsprovidingexemptionfromAzerbaijanitaxforcertaintypesofincome.
2. ThesameshouldbeconsideredifyoufallunderthePSAtaxation regime.
3. ThesameshouldbeconsideredifyoufallundertheHGAtaxation regime.
QuestionIsitpossiblefor anexpatriatetobeexemptfromAzerbaijaniincometaxes?
Answer1. Inordertoclaimtheexemption,
youneedtofileataxreturnandanapplicationfortheexemption.YoushouldalsobepreparedtoprovidetheAzerbaijanitaxauthoritieswithanofficialconfirmationfromthetaxauthoritiesofyourcountryofresidence.Inaddition,theAzerbaijanitaxauthoritiesmayrequestconfirmationofthetaxespaidinyourhomecountry.Bothdocumentsmustbeissuedbythetaxauthoritiesofthecountryoftaxresidency.ObtainingDTTreliefinAzerbaijanhashistoricallybeenacomplicatedandtime-consumingprocess.
2. ThesameproceduresapplyifyoufallunderthePSAtaxationregime.
3. ThesameproceduresapplyifyoufallundertheHGAtaxationregime.
QuestionHowcanIclaima DTTexemption?
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Contacts
Pleasedonothesitatetocontactus:
Nuran Kerimov PartnerTax&[email protected]
Our Baku Office Address:DeloitteandToucheLLACBakuWhiteCityOfficeBuilding25ENobelAve.,Baku,AZ1025,AzerbaijanTel:+994(12)4041210Fax:+994(12)4041211www.deloitte.az
.
Notes
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