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Taxation of Salaries in the Private Sector
Will salary tax deductions begin for private-sector employees in 2026?
An individual works as a designer under an employment contract at a private company and receives a monthly salary of AZN 1,500. Upon receiving their salary for January 2026, they notice that a lower amount has been transferred to their account than before. The accounting department has informed them that taxes have started to be deducted from employees' income this year. Is this correct?
The State Tax Service under the Ministry of Economy stated that, pursuant to Article 101.1-1 of the Tax Code, from January 1, 2019, for a period of seven years, monthly employment income of up to AZN 8,000 earned by individuals working for taxpayers operating outside the oil and gas sector and belonging to the non-governmental sector was exempt from taxation.
According to the amendments made to this article effective January 1, 2026, tax will be withheld from individuals' monthly employment income of up to AZN 2,500 at a rate of 3% until January 1, 2027, 5% from January 1, 2027, to January 1, 2028, and 7% starting January 1, 2028.
Accordingly, for January 2026, employment income of up to AZN 2,500 earned by individuals working for taxpayers in the non-governmental sector that do not operate in the oil and gas industry will be subject to a 3% tax rate, taking into account the exemptions specified in Article 102 of the Tax Code. There have been no changes to the insurance contributions deducted from salaries.
Legal basis: Article 101.1-1 of the Tax Code.
Will salary tax deductions begin for private-sector employees in 2026?
An individual works as a designer under an employment contract at a private company and receives a monthly salary of AZN 1,500. Upon receiving their salary for January 2026, they notice that a lower amount has been transferred to their account than before. The accounting department has informed them that taxes have started to be deducted from employees' income this year. Is this correct?
The State Tax Service under the Ministry of Economy stated that, pursuant to Article 101.1-1 of the Tax Code, from January 1, 2019, for a period of seven years, monthly employment income of up to AZN 8,000 earned by individuals working for taxpayers operating outside the oil and gas sector and belonging to the non-governmental sector was exempt from taxation.
According to the amendments made to this article effective January 1, 2026, tax will be withheld from individuals' monthly employment income of up to AZN 2,500 at a rate of 3% until January 1, 2027, 5% from January 1, 2027, to January 1, 2028, and 7% starting January 1, 2028.
Accordingly, for January 2026, employment income of up to AZN 2,500 earned by individuals working for taxpayers in the non-governmental sector that do not operate in the oil and gas industry will be subject to a 3% tax rate, taking into account the exemptions specified in Article 102 of the Tax Code. There have been no changes to the insurance contributions deducted from salaries.
Legal basis: Article 101.1-1 of the Tax Code.