• Government Proposes New Tax Exemptions for Affected Businesses

Government Proposes New Tax Exemptions for Affected Businesses

Yunis Salayev , Managing Partner |

29 April 2020

In accordance with the Action Plan Ministry of Economy of the Republic of Azerbaijan has submitted draft amendments to Tax Code and Social Insurance Law to Milli Majlis with the aim to introduce long awaited tax discounts and holidays for businesses affected by the COVID-19 pandemic.

According to the proposal businesses affected by the pandemic are exempted from property and land taxes and depending on the chosen taxation method such businesses will be provided with additional tax discounts for one year starting from 1 January 2020, which include the following:

  • For taxpayers operating under corporate income tax (profit tax) regime – 75% of the profit.
  • For payers of simplified tax who operate in public catering and passenger transportation sectors – 50%.

Additional measures include:

  • Decrease of WHT rate on real estate lease for individuals – from 14% to 7%;
  • Exemption from quarterly profit tax advance payments and related reporting for 1 year;

Deadline extensions:

  • Payment of 2019 taxes – until 1 September 2020;
  • Payment of income and property taxes for 2019 for taxpayers who are not considered as micro-businesses – until 1 September 2020;
  • Right to choose the simplified tax method for 2020 by those who operate in public catering sector and are registered for VAT – until 1 September 2020;
  • Postponement of calculation of interest for unpaid taxes, compulsory state social insurance and unemployment insurance premiums – until 1 January 2021.

Draft legislation also considers special discounts for micro-businesses such as 50% reduction to simplified taxes (from 2% to 1%), extension of deadlines for declaring and paying simplified, profit and property taxes for first and second quarter of 2020 until 1 September 2020.

In addition, expenses made by any taxpayer with the aim to take necessary preventive measures (including disinfection) in order to prevent the epidemic and protect the population shall be deductible from income without any restriction. Also, certain types of products necessary for food and medical needs of the population, and import of similar products shall be temporarily exempt from VAT.

Social insurance

With the aim to reduce the burden of workers affected by the pandemic the draft legislation also considers decreasing the mandatory social insurance rate for non-employment activities for construction, trade (both 25%) and other areas (15%) by the amount of the minimum monthly salary (AZN 250) from 1 April 2020 until 1 January 2021 (application of differential rates by regions shall also be considered). Also, according to the draft legislation calculation of mandatory state social insurance contributions is envisaged to be decreased dependent on the area of operation (construction – 50%, others – 25%) from 1 January 2021 until 1 January 2026.

Decrease in mandatory state social insurance contributions for each family member of those who use their agricultural lands (2-10% dependent on the area) and lawyers, freelance accountants and auditors (10% of income after deduction of expenses) are also envisaged.