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Are expenses incurred on a rented property deductible from income?
Are expenses incurred on a rented property deductible from income?
We have a lease agreement dated 01.03.2024. However, since the facility has not started operating, we have not registered it with the tax authority. Currently, expenses related to this facility are being incurred. Will tax be calculated from the source of payment from 01.03.2024 until today after the facility is registered? Will these expenses be included in expenses deducted from income?
The State Tax Service under the Ministry of Economy reported that, according to Article 115.3 of the Tax Code, the deduction of repair costs for leased fixed assets from income is determined in accordance with Articles 115.4 - 115.6-1 of this Code.
According to Article 115.6-1 of the Tax Code, expenses incurred for the repair of fixed assets that are not recorded in the lessee's balance sheet and are not compensated by the lease payment or are not reimbursed by the lessor are deducted from income by amortizing them in proportional amounts over the years during the term of the concluded contract, but not less than 5 years. Expenses incurred for the repair of leased fixed assets are capitalized separately for each year and are depreciated in accordance with the procedure established by this article.
In order to register the business object (entity) you are leasing for tax purposes, you must submit the "Application for registration for tax purposes at the location of the taxpayer's branch, representative office or other business entity (entity)" to the tax authority in the area where the object is located, along with the lease agreement.
According to Article 58.2-1 of the Tax Code, for failure of a taxpayer to register an economic entity (facility) with the tax authorities in accordance with Article 33.2 of this Code by the body (organization) determined by the relevant executive authority and (or) providing distorted information about the area of the economic entity (facility), a financial sanction in the amount of 40 manats is imposed on micro-entrepreneurs, non-profit organizations and persons engaged in non-entrepreneurial activities, and in the amount of 400 manats on other persons.
According to Article 124.1 of the Tax Code, income from rent for movable and immovable property, as well as royalties paid by or on behalf of a resident or non-resident permanent representative office in the Republic of Azerbaijan, if it was obtained from an Azerbaijani source in accordance with Article 13.2.16 of this Code, is subject to tax at the source of payment at a rate of 14 percent.
If the lessor is a legal entity, there is no obligation to withhold tax at the source of payment.
We have a lease agreement dated 01.03.2024. However, since the facility has not started operating, we have not registered it with the tax authority. Currently, expenses related to this facility are being incurred. Will tax be calculated from the source of payment from 01.03.2024 until today after the facility is registered? Will these expenses be included in expenses deducted from income?
The State Tax Service under the Ministry of Economy reported that, according to Article 115.3 of the Tax Code, the deduction of repair costs for leased fixed assets from income is determined in accordance with Articles 115.4 - 115.6-1 of this Code.
According to Article 115.6-1 of the Tax Code, expenses incurred for the repair of fixed assets that are not recorded in the lessee's balance sheet and are not compensated by the lease payment or are not reimbursed by the lessor are deducted from income by amortizing them in proportional amounts over the years during the term of the concluded contract, but not less than 5 years. Expenses incurred for the repair of leased fixed assets are capitalized separately for each year and are depreciated in accordance with the procedure established by this article.
In order to register the business object (entity) you are leasing for tax purposes, you must submit the "Application for registration for tax purposes at the location of the taxpayer's branch, representative office or other business entity (entity)" to the tax authority in the area where the object is located, along with the lease agreement.
According to Article 58.2-1 of the Tax Code, for failure of a taxpayer to register an economic entity (facility) with the tax authorities in accordance with Article 33.2 of this Code by the body (organization) determined by the relevant executive authority and (or) providing distorted information about the area of the economic entity (facility), a financial sanction in the amount of 40 manats is imposed on micro-entrepreneurs, non-profit organizations and persons engaged in non-entrepreneurial activities, and in the amount of 400 manats on other persons.
According to Article 124.1 of the Tax Code, income from rent for movable and immovable property, as well as royalties paid by or on behalf of a resident or non-resident permanent representative office in the Republic of Azerbaijan, if it was obtained from an Azerbaijani source in accordance with Article 13.2.16 of this Code, is subject to tax at the source of payment at a rate of 14 percent.
If the lessor is a legal entity, there is no obligation to withhold tax at the source of payment.