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A Number of Proposed Amendments to the Tax Code for 2027 – OFFICIAL
A Number of Changes to Tax Legislation Are Proposed Starting in 2027
A number of amendments to tax legislation are proposed to take effect from January 1, 2027. According to the draft legislation, the main proposed changes are as follows:
1. Taxation of Rental Income
Two alternative mechanisms for taxing rental income are proposed:
- A tax of 14% on the rental amount;
- A tax of 20% on the income remaining after deducting expenses.
2. Introduction of an Hourly Wage System
The introduction of an hourly wage system is proposed for employees working under short-term employment contracts in the agricultural and catering sectors, as well as for employees whose weekly working hours are 20 hours or less.
3. Tax Incentives for the Catering Sector
The following changes are proposed for taxpayers operating cafés and restaurants:
- In certain cases, taxpayers whose turnover is subsequently determined to exceed AZN 200,000 may retain their eligibility for the simplified tax regime, subject to the applicable 10-day period;
- The possibility of continuing operations as simplified tax payers at a rate of 8%;
- Retention of eligibility for the simplified tax regime when carrying out multiple types of activities, provided that income and expenses are recorded separately.
4. Tax Relief on Financial Penalties
A 10% discount on financial penalties is proposed if the penalty is paid within 10 working days from the date of its imposition.
5. Tax Incentives in the Agricultural Sector
The existing 100% tax exemption in the agricultural sector is proposed to be abolished and replaced with a 90% tax relief mechanism for a period of five years.
6. Tax Exemption for Hotels
It is proposed that income earned by hotels from services provided to foreign nationals be exempt from income and corporate profit taxes for five years, starting from January 1, 2027.
7. Domestic Freight Transportation
Individuals and entities engaged in domestic freight transportation are proposed to be granted an alternative right to pay simplified tax at a rate of 8% for a period of five years.
8. Tax on Goods Purchased from Abroad
The abolition of the 2% tax applied to goods imported into the country through the Smart Customs system is proposed.
9. New Tax Rules for Barbershops and Beauty Salons
Barbershops and beauty salons are proposed to be granted the right to apply the simplified tax regime for a period of five years.
According to the proposal:
- 8% tax on cash transactions;
- 6% tax on non-cash transactions;
- VAT incentives are also envisaged.
10. Excise Tax on Sweetened Carbonated and Mineral Drinks
It is proposed that sweetened carbonated and mineral drinks be included in the list of excisable goods, with an excise tax of 10 gapiks per litre.
It should be noted that the above measures are proposals included in the draft legislative amendments. Their implementation will depend on the adoption of the relevant legislative changes.
A Number of Changes to Tax Legislation Are Proposed Starting in 2027
A number of amendments to tax legislation are proposed to take effect from January 1, 2027. According to the draft legislation, the main proposed changes are as follows:
1. Taxation of Rental Income
Two alternative mechanisms for taxing rental income are proposed:
- A tax of 14% on the rental amount;
- A tax of 20% on the income remaining after deducting expenses.
2. Introduction of an Hourly Wage System
The introduction of an hourly wage system is proposed for employees working under short-term employment contracts in the agricultural and catering sectors, as well as for employees whose weekly working hours are 20 hours or less.
3. Tax Incentives for the Catering Sector
The following changes are proposed for taxpayers operating cafés and restaurants:
- In certain cases, taxpayers whose turnover is subsequently determined to exceed AZN 200,000 may retain their eligibility for the simplified tax regime, subject to the applicable 10-day period;
- The possibility of continuing operations as simplified tax payers at a rate of 8%;
- Retention of eligibility for the simplified tax regime when carrying out multiple types of activities, provided that income and expenses are recorded separately.
4. Tax Relief on Financial Penalties
A 10% discount on financial penalties is proposed if the penalty is paid within 10 working days from the date of its imposition.
5. Tax Incentives in the Agricultural Sector
The existing 100% tax exemption in the agricultural sector is proposed to be abolished and replaced with a 90% tax relief mechanism for a period of five years.
6. Tax Exemption for Hotels
It is proposed that income earned by hotels from services provided to foreign nationals be exempt from income and corporate profit taxes for five years, starting from January 1, 2027.
7. Domestic Freight Transportation
Individuals and entities engaged in domestic freight transportation are proposed to be granted an alternative right to pay simplified tax at a rate of 8% for a period of five years.
8. Tax on Goods Purchased from Abroad
The abolition of the 2% tax applied to goods imported into the country through the Smart Customs system is proposed.
9. New Tax Rules for Barbershops and Beauty Salons
Barbershops and beauty salons are proposed to be granted the right to apply the simplified tax regime for a period of five years.
According to the proposal:
- 8% tax on cash transactions;
- 6% tax on non-cash transactions;
- VAT incentives are also envisaged.
10. Excise Tax on Sweetened Carbonated and Mineral Drinks
It is proposed that sweetened carbonated and mineral drinks be included in the list of excisable goods, with an excise tax of 10 gapiks per litre.
It should be noted that the above measures are proposals included in the draft legislative amendments. Their implementation will depend on the adoption of the relevant legislative changes.