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20-Year Tax Incentive for IT and Innovation Companies in Azerbaijan
Starting from January 1, 2027, the duration of tax incentives for technology park residents that meet the established criteria and obtain a residency certificate is expected to be extended to 20 years.
Under the proposed changes, tax incentives applicable to income and profits derived by residents from the relevant activities, dividends paid from such activities, as well as property and land used by them, will be provided for a period of 20 years. The incentives are also expected to apply to residents operating outside the territory of the technology park.
In addition, a 0% personal income tax rate is planned to apply for 20 years to the employment income of employees engaged in the relevant activities of residents.
For new residents, the existing option regarding the calculation of social insurance contributions for employees engaged in the relevant activities will also be extended from 10 to 20 years.
For residents classified as large-scale business entities, eligibility for tax incentives will be subject to export performance indicators and the condition that income derived from exports is transferred to bank accounts in Azerbaijan.
At the same time, to encourage research and development activities, certain operating expenses related to the development of innovative products are expected to be deductible from taxable income using a 2.5 multiplier. A 2 multiplier is also planned to apply to depreciation rates for equipment used in these activities and accounted for separately.
In addition, relevant tax exemptions are expected to apply to the export of equipment incorporating software, innovative products or know-how developed by the resident.
Starting from January 1, 2027, the duration of tax incentives for technology park residents that meet the established criteria and obtain a residency certificate is expected to be extended to 20 years.
Under the proposed changes, tax incentives applicable to income and profits derived by residents from the relevant activities, dividends paid from such activities, as well as property and land used by them, will be provided for a period of 20 years. The incentives are also expected to apply to residents operating outside the territory of the technology park.
In addition, a 0% personal income tax rate is planned to apply for 20 years to the employment income of employees engaged in the relevant activities of residents.
For new residents, the existing option regarding the calculation of social insurance contributions for employees engaged in the relevant activities will also be extended from 10 to 20 years.
For residents classified as large-scale business entities, eligibility for tax incentives will be subject to export performance indicators and the condition that income derived from exports is transferred to bank accounts in Azerbaijan.
At the same time, to encourage research and development activities, certain operating expenses related to the development of innovative products are expected to be deductible from taxable income using a 2.5 multiplier. A 2 multiplier is also planned to apply to depreciation rates for equipment used in these activities and accounted for separately.
In addition, relevant tax exemptions are expected to apply to the export of equipment incorporating software, innovative products or know-how developed by the resident.