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How is dividend income received from a foreign company taxed?
An Azerbaijani citizen permanently residing in Azerbaijan owns shares in a foreign company operating in the field of artificial intelligence. Based on the company's financial results for the first half of 2026, a decision was made to distribute its retained earnings among shareholders in July 2026. Accordingly, the resident investor receives dividends amounting to USD 4,000 (equivalent to AZN 6,800). How should this dividend income be taxed for the investor?
The State Tax Service under the Ministry of Economy stated that, under the version of Article 101.2 of the Tax Code in force before January 1, 2026, dividend income received from a non-resident company was subject to tax at a rate of 14%.
Pursuant to the amendments made to Article 101.2 of the Tax Code effective January 1, 2026, the income tax rate on dividends received by individuals from non-resident companies has been reduced from 14% to 5%.
Accordingly, a resident individual receiving dividend income from a non-resident company must register with the tax authorities and obtain a taxpayer identification number (TIN/VÖEN), calculate income tax at a rate of 5% on the income received, and pay it to the state budget by submitting an income tax return to the tax authorities no later than March 31 of the following year (2027 in the case described).
Legal basis: Articles 101.2 and 149.2 of the Tax Code.
An Azerbaijani citizen permanently residing in Azerbaijan owns shares in a foreign company operating in the field of artificial intelligence. Based on the company's financial results for the first half of 2026, a decision was made to distribute its retained earnings among shareholders in July 2026. Accordingly, the resident investor receives dividends amounting to USD 4,000 (equivalent to AZN 6,800). How should this dividend income be taxed for the investor?
The State Tax Service under the Ministry of Economy stated that, under the version of Article 101.2 of the Tax Code in force before January 1, 2026, dividend income received from a non-resident company was subject to tax at a rate of 14%.
Pursuant to the amendments made to Article 101.2 of the Tax Code effective January 1, 2026, the income tax rate on dividends received by individuals from non-resident companies has been reduced from 14% to 5%.
Accordingly, a resident individual receiving dividend income from a non-resident company must register with the tax authorities and obtain a taxpayer identification number (TIN/VÖEN), calculate income tax at a rate of 5% on the income received, and pay it to the state budget by submitting an income tax return to the tax authorities no later than March 31 of the following year (2027 in the case described).
Legal basis: Articles 101.2 and 149.2 of the Tax Code.