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Several Tax Incentives Are Set to Expire at the End of 2026
Interest income from bank deposits. The period of full tax exemption for interest income earned on deposits placed by individuals in the national currency for 18 months or longer, where the deposit amount cannot be withdrawn before 18 months, is coming to an end. However, the separate exemption for up to AZN 200 of monthly interest income per bank is indefinite. (Articles 102.1.22-3 and 102.1.22-4)
Social insurance payments of micro-entrepreneurs. The period allowing individual micro-entrepreneurs to deduct 25% of the mandatory state social insurance contributions they pay for themselves from calculated income or simplified tax is coming to an end. (Articles 152.3 and 221.1-1)
Agricultural producers. The period of tax exemptions for the profit earned by legal entities from agricultural production, the VAT exemption on producers’ sales turnover from their own products, the simplified tax exemption on their proceeds, and the property tax exemption for property used in such activities is coming to an end. The temporary exemptions applicable to non-operating income and subsidies of legal entities from these activities, as well as dividend income earned by participants in this sector, are also expiring. (Articles 102.1.11-1, 106.1.14, 106.1.14-1, 164.1.18, 199.9 and 218-1.1.1)
Wheat, flour, bread and meat. The VAT exemptions for the import and sale of wheat, the production and sale of wheat flour and bread, as well as the sale of animal and poultry meat provided for by law, are coming to an end. The VAT exemption applicable to the sale of approved feed and feed additives is also expiring. (Articles 164.1.27, 164.1.37 and 164.1.46)
Trade in agricultural products. The five-year special rule allowing VAT to be calculated on the trade margin for the wholesale and retail sale of domestic and foreign-origin agricultural products under specified conditions is coming to an end. Fish products of foreign origin are not covered by this rule. (Articles 153.3, 159.1, 174.4 and related Article 175.12)
Medical services. The VAT exemption for medical services provided using funds from the compulsory health insurance fund and other funds specified by law, as well as services provided by medical institutions operating as educational bases, is coming to an end. The incentive allowing 50% of turnover generated through POS-terminal payments for medical services that comply with legal requirements to be deducted from VAT-taxable turnover is also expiring. (Articles 164.1.51, 164.1.51-1 and 174.5)
Hotels and sanatoriums in the regions. The 75% reduction in property tax for real estate used as accommodation facilities in hotel and sanatorium activities in cities and districts other than Baku, Sumgayit, Khirdalan and Absheron District, including Nakhchivan, is coming to an end. (Article 199.21)
Electric vehicles. The VAT exemption for the import and sale of Level 2 and Level 3 charging equipment for electric vehicles is coming to an end. The one-year VAT incentive for industrial park residents, under certain conditions, on the import of electric buses for assembly purposes and their sale after assembly is also expiring. (Articles 164.1.41 and 164.1.41-2)
Jewelry and motorcycle imports. The VAT exemption for the import of equipment for the production and processing of jewelry based on a supporting document is coming to an end. The exemptions from excise tax on the import of certain precious metals, jewelry products and diamonds, as well as motorcycles with an engine displacement of no more than 125 cubic centimeters, are also expiring. (Articles 164.1.54, 188.1.7 and 188.1.8)
Other temporary exemptions. Exemptions applicable to certain transactions involving goods, works, services and royalties under Formula 1 and Formula 2, the import of crude oil and natural gas under swap arrangements, and works and services provided by certain public legal entities using budget funds are also coming to an end. (Articles 106.1.28, 164.1.48, 164.1.49 and 164.1.62)
International freight transportation. The period of exemption from road tax applicable to foreign freight vehicles transporting goods between the railway stations specified by law and the nearest customs border crossing points is coming to an end. (Article 212-1.1)
If the exemption periods are to be extended, businesses need to know this in advance. If they are not extended, the additional tax burden that will arise should also be calculated now.
Note: By the end of the year, the periods of the tax incentives may be extended or their conditions may be changed.
Interest income from bank deposits. The period of full tax exemption for interest income earned on deposits placed by individuals in the national currency for 18 months or longer, where the deposit amount cannot be withdrawn before 18 months, is coming to an end. However, the separate exemption for up to AZN 200 of monthly interest income per bank is indefinite. (Articles 102.1.22-3 and 102.1.22-4)
Social insurance payments of micro-entrepreneurs. The period allowing individual micro-entrepreneurs to deduct 25% of the mandatory state social insurance contributions they pay for themselves from calculated income or simplified tax is coming to an end. (Articles 152.3 and 221.1-1)
Agricultural producers. The period of tax exemptions for the profit earned by legal entities from agricultural production, the VAT exemption on producers’ sales turnover from their own products, the simplified tax exemption on their proceeds, and the property tax exemption for property used in such activities is coming to an end. The temporary exemptions applicable to non-operating income and subsidies of legal entities from these activities, as well as dividend income earned by participants in this sector, are also expiring. (Articles 102.1.11-1, 106.1.14, 106.1.14-1, 164.1.18, 199.9 and 218-1.1.1)
Wheat, flour, bread and meat. The VAT exemptions for the import and sale of wheat, the production and sale of wheat flour and bread, as well as the sale of animal and poultry meat provided for by law, are coming to an end. The VAT exemption applicable to the sale of approved feed and feed additives is also expiring. (Articles 164.1.27, 164.1.37 and 164.1.46)
Trade in agricultural products. The five-year special rule allowing VAT to be calculated on the trade margin for the wholesale and retail sale of domestic and foreign-origin agricultural products under specified conditions is coming to an end. Fish products of foreign origin are not covered by this rule. (Articles 153.3, 159.1, 174.4 and related Article 175.12)
Medical services. The VAT exemption for medical services provided using funds from the compulsory health insurance fund and other funds specified by law, as well as services provided by medical institutions operating as educational bases, is coming to an end. The incentive allowing 50% of turnover generated through POS-terminal payments for medical services that comply with legal requirements to be deducted from VAT-taxable turnover is also expiring. (Articles 164.1.51, 164.1.51-1 and 174.5)
Hotels and sanatoriums in the regions. The 75% reduction in property tax for real estate used as accommodation facilities in hotel and sanatorium activities in cities and districts other than Baku, Sumgayit, Khirdalan and Absheron District, including Nakhchivan, is coming to an end. (Article 199.21)
Electric vehicles. The VAT exemption for the import and sale of Level 2 and Level 3 charging equipment for electric vehicles is coming to an end. The one-year VAT incentive for industrial park residents, under certain conditions, on the import of electric buses for assembly purposes and their sale after assembly is also expiring. (Articles 164.1.41 and 164.1.41-2)
Jewelry and motorcycle imports. The VAT exemption for the import of equipment for the production and processing of jewelry based on a supporting document is coming to an end. The exemptions from excise tax on the import of certain precious metals, jewelry products and diamonds, as well as motorcycles with an engine displacement of no more than 125 cubic centimeters, are also expiring. (Articles 164.1.54, 188.1.7 and 188.1.8)
Other temporary exemptions. Exemptions applicable to certain transactions involving goods, works, services and royalties under Formula 1 and Formula 2, the import of crude oil and natural gas under swap arrangements, and works and services provided by certain public legal entities using budget funds are also coming to an end. (Articles 106.1.28, 164.1.48, 164.1.49 and 164.1.62)
International freight transportation. The period of exemption from road tax applicable to foreign freight vehicles transporting goods between the railway stations specified by law and the nearest customs border crossing points is coming to an end. (Article 212-1.1)
If the exemption periods are to be extended, businesses need to know this in advance. If they are not extended, the additional tax burden that will arise should also be calculated now.
Note: By the end of the year, the periods of the tax incentives may be extended or their conditions may be changed.