en
Properties whose value is reduced when calculating property tax
Properties whose value is reduced when calculating property tax
According to Article 13.2.21 of the Tax Code, property is any movable or immovable property, including intangible assets, current assets and other objects of property rights. When calculating the amount of property tax payable by a legal entity and an individual entrepreneur, the value of the following properties is deducted from the value of the total property. Tax expert Ismayil Bagirov comments on these cases:
According to Article 199.4 of the Tax Code, for taxation purposes, the value of the property of an enterprise and an individual entrepreneur is reduced by the value of the following properties:
- fixed assets used for ecology and fire protection
Example 1: The residual value of the enterprise's property at the beginning of the year is 550,000 manat (including buildings 100,000 manat, facilities 50,000 manat, ecological equipment 50,000 manat, machines 60,000 manat, computing equipment 30,000 manat, fire protection equipment 90,000 manat, other property 170,000 manat), and at the end of the year it is 700,000 manat (including buildings 200,000 manat, facilities 190,000 manat, ecological equipment 50,000 manat, machines 60,000 manat, computing equipment 20,000 manat, fire protection equipment 70,000 manat, other property 110,000 manat). Now let's calculate the property tax that the enterprise must pay to the budget.
For taxation purposes, the value of the enterprise's property is reduced by the value of the property used for ecology and fire protection. The residual value of the enterprise's taxable property at the beginning of the year will be as follows:
550,000 – 50,000 – 90,000 = 410,000 manat.
The residual value of the enterprise's taxable property at the end of the year will be as follows:
700,000 – 50,000 – 70,000 = 580,000 manat.
In this case, the average annual residual value of the enterprise's taxable property will be 495,000 manat:
(410,000 + 580,000) : 2 = 495,000 manat.
After determining the average annual residual value of their fixed assets, enterprises pay property tax at a rate of 1 percent of its value:
495,000 x 1% = 4,950 manat.
Therefore, the property tax that the enterprise must pay will be 4,950 manat.
Example 2: The residual value of the property of an individual entrepreneur at the beginning of the year was 540,000 manat (including buildings 200,000 manat, facilities 100,000 manat, fire protection 190,000 manat, environmental equipment 50,000 manat), and at the end of the year it was 560,000 manat (including buildings 270,000 manat, facilities 50,000 manat, environmental equipment 40,000 manat, fire protection 200,000 manat). Let's calculate the property tax that the enterprise must pay:
(100,000 + 50,000) : 2 = 75,000 manat;
75,000 x 1% = 750 manat.
As can be seen, when calculating the property tax of an individual entrepreneur, objects used for ecology and fire protection are exempted from tax, as well as buildings on the balance sheet of individual entrepreneurs. Therefore, when determining the average annual residual value of the property of an individual entrepreneur, their value is reduced by the amount.
- civil defense properties owned (on the balance sheet) by enterprises and the list of which is approved by the body (organization) determined by the relevant executive authority (President of the Republic of Azerbaijan) (Cabinet of Ministers of the Republic of Azerbaijan);
- product pipelines, railways and highways, communication and power transmission lines, melioration and irrigation system facilities, satellites and other space objects;
Example 3: The residual value of the enterprise's property at the beginning of the year was 280,000 manat (including oil pipelines 200,000 manat, land reclamation and irrigation system facilities 80,000 manat), and at the end of the year it was 320,000 manat (including oil pipelines 210,000 manat, land reclamation and irrigation system facilities 110,000 manat). As can be seen from the relevant provision of the Tax Code, when calculating the enterprise's property tax, since oil pipelines, land reclamation and irrigation system facilities are exempt from tax, property tax will not be calculated.
- passenger cars owned by individuals that are not used in entrepreneurial activities;
Example 4: The residual value of the property of an individual entrepreneur at the beginning of the year was 600,000 manat (including buildings 300,000 manat, facilities 60,000 manat, cars not used in entrepreneurial activities 190,000 manat, power lines 50,000 manat), and at the end of the year it was 560,000 manat (including buildings 280,000 manat, facilities 40,000 manat, cars not used in entrepreneurial activities 40,000 manat, power lines 200,000 manat). Let's calculate the property tax that the enterprise must pay:
(60,000 + 40,000) : 2 = 50,000 manat;
50,000 x 1% = 500 manat.
As can be seen, when calculating the property tax of an individual entrepreneur, not only are cars and power transmission lines not used in entrepreneurial activities exempt from tax, but since buildings on the balance sheet are an exception, their value is reduced by the amount when determining the average annual residual value of the property.
- fixed assets used by taxpayers operating in the fields of education, medicine, culture and sports only for the purpose of these areas;
Example 5: The residual value of the property of an educational institution at the beginning of the year was 290,000 manat (including the building used in the field of education - 240,000 manat, the building used in the field of commerce - 50,000 manat,) and at the end of the year it was 260,000 manat (including the building used in the field of education - 220,000 manat, the building used in the field of commerce - 40,000 manat). Let's calculate the property tax that the institution must pay:
(50,000 + 40,000) : 2 = 45,000 manat;
45,000 x 1% = 450 manat.
As can be seen, since the building used for educational purposes is exempt from tax when calculating the property tax of the enterprise, a property tax of 450 manat is calculated for the building used only for commercial purposes.
According to Article 13.2.21 of the Tax Code, property is any movable or immovable property, including intangible assets, current assets and other objects of property rights. When calculating the amount of property tax payable by a legal entity and an individual entrepreneur, the value of the following properties is deducted from the value of the total property. Tax expert Ismayil Bagirov comments on these cases:
According to Article 199.4 of the Tax Code, for taxation purposes, the value of the property of an enterprise and an individual entrepreneur is reduced by the value of the following properties:
- fixed assets used for ecology and fire protection
Example 1: The residual value of the enterprise's property at the beginning of the year is 550,000 manat (including buildings 100,000 manat, facilities 50,000 manat, ecological equipment 50,000 manat, machines 60,000 manat, computing equipment 30,000 manat, fire protection equipment 90,000 manat, other property 170,000 manat), and at the end of the year it is 700,000 manat (including buildings 200,000 manat, facilities 190,000 manat, ecological equipment 50,000 manat, machines 60,000 manat, computing equipment 20,000 manat, fire protection equipment 70,000 manat, other property 110,000 manat). Now let's calculate the property tax that the enterprise must pay to the budget.
For taxation purposes, the value of the enterprise's property is reduced by the value of the property used for ecology and fire protection. The residual value of the enterprise's taxable property at the beginning of the year will be as follows:
550,000 – 50,000 – 90,000 = 410,000 manat.
The residual value of the enterprise's taxable property at the end of the year will be as follows:
700,000 – 50,000 – 70,000 = 580,000 manat.
In this case, the average annual residual value of the enterprise's taxable property will be 495,000 manat:
(410,000 + 580,000) : 2 = 495,000 manat.
After determining the average annual residual value of their fixed assets, enterprises pay property tax at a rate of 1 percent of its value:
495,000 x 1% = 4,950 manat.
Therefore, the property tax that the enterprise must pay will be 4,950 manat.
Example 2: The residual value of the property of an individual entrepreneur at the beginning of the year was 540,000 manat (including buildings 200,000 manat, facilities 100,000 manat, fire protection 190,000 manat, environmental equipment 50,000 manat), and at the end of the year it was 560,000 manat (including buildings 270,000 manat, facilities 50,000 manat, environmental equipment 40,000 manat, fire protection 200,000 manat). Let's calculate the property tax that the enterprise must pay:
(100,000 + 50,000) : 2 = 75,000 manat;
75,000 x 1% = 750 manat.
As can be seen, when calculating the property tax of an individual entrepreneur, objects used for ecology and fire protection are exempted from tax, as well as buildings on the balance sheet of individual entrepreneurs. Therefore, when determining the average annual residual value of the property of an individual entrepreneur, their value is reduced by the amount.
- civil defense properties owned (on the balance sheet) by enterprises and the list of which is approved by the body (organization) determined by the relevant executive authority (President of the Republic of Azerbaijan) (Cabinet of Ministers of the Republic of Azerbaijan);
- product pipelines, railways and highways, communication and power transmission lines, melioration and irrigation system facilities, satellites and other space objects;
Example 3: The residual value of the enterprise's property at the beginning of the year was 280,000 manat (including oil pipelines 200,000 manat, land reclamation and irrigation system facilities 80,000 manat), and at the end of the year it was 320,000 manat (including oil pipelines 210,000 manat, land reclamation and irrigation system facilities 110,000 manat). As can be seen from the relevant provision of the Tax Code, when calculating the enterprise's property tax, since oil pipelines, land reclamation and irrigation system facilities are exempt from tax, property tax will not be calculated.
- passenger cars owned by individuals that are not used in entrepreneurial activities;
Example 4: The residual value of the property of an individual entrepreneur at the beginning of the year was 600,000 manat (including buildings 300,000 manat, facilities 60,000 manat, cars not used in entrepreneurial activities 190,000 manat, power lines 50,000 manat), and at the end of the year it was 560,000 manat (including buildings 280,000 manat, facilities 40,000 manat, cars not used in entrepreneurial activities 40,000 manat, power lines 200,000 manat). Let's calculate the property tax that the enterprise must pay:
(60,000 + 40,000) : 2 = 50,000 manat;
50,000 x 1% = 500 manat.
As can be seen, when calculating the property tax of an individual entrepreneur, not only are cars and power transmission lines not used in entrepreneurial activities exempt from tax, but since buildings on the balance sheet are an exception, their value is reduced by the amount when determining the average annual residual value of the property.
- fixed assets used by taxpayers operating in the fields of education, medicine, culture and sports only for the purpose of these areas;
Example 5: The residual value of the property of an educational institution at the beginning of the year was 290,000 manat (including the building used in the field of education - 240,000 manat, the building used in the field of commerce - 50,000 manat,) and at the end of the year it was 260,000 manat (including the building used in the field of education - 220,000 manat, the building used in the field of commerce - 40,000 manat). Let's calculate the property tax that the institution must pay:
(50,000 + 40,000) : 2 = 45,000 manat;
45,000 x 1% = 450 manat.
As can be seen, since the building used for educational purposes is exempt from tax when calculating the property tax of the enterprise, a property tax of 450 manat is calculated for the building used only for commercial purposes.