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How much tax should barbers pay?
How much tax should barbers pay?
The topic is commented on by tax expert Cavid Vəlizadə.
Individuals who engage in barber activities and earn income without hiring employees fulfill their tax obligations by obtaining a receipt for the “payment of fixed amount under the simplified tax, mandatory state social insurance, and mandatory medical insurance” for their tax obligations. According to the legislation, these individuals must be registered with the tax authorities, obtain a tax identification number (TIN), and voluntarily receive a receipt for the “payment of fixed amount under the simplified tax, mandatory state social insurance, and mandatory medical insurance” from the State Tax Service for the following month, quarter, half-year, or year before starting their activities.
According to Article 220.10 of the Tax Code, the simplified tax amount for individuals who engage in barber activities (regardless of whether they are male or female) is set at 15 manat per month. Article 220.11 of the Code indicates that the monthly tax amount for individuals engaged in the activities outlined in Article 220.10 is determined based on the location, applying the following coefficients:
- In Baku city (including villages and settlements) – 2;
- In the cities of Ganja, Sumgait, and Khirdalan – 1.5;
- In the settlements and villages of Absheron district (except Khirdalan city), and in the cities of Shirvan, Mingachevir, Nakhchivan, Lankaran, Yevlakh, Sheki, and Naftalan – 1.0;
- In other regions (cities) and settlements (villages) – 0.5.
Furthermore, to calculate the mandatory state social insurance contributions, the following coefficients are applied to the 3% of the minimum monthly salary (i.e., 400 manat):
- In Baku city (including villages and settlements) – 2.0;
- In Absheron district, Sumgait, and Ganja cities – 1.5;
- In other cities and regions – 1.0.
As for compulsory health insurance, payments should be made in all cities, regions, and villages of the country at 4% of the minimum monthly salary.
Example: A barber operating in Baku city can obtain a fixed receipt by making the following payments:
Simplified tax: 15 x 2 = 30 manat;
State Social Insurance: (400 x 3%) x 2 = 24 manat;
Compulsory Health Insurance: 400 x 4% = 16 manat;
Total: 30 + 24 + 16 = 70 manat.
Additionally, if the premises for barber activities are rented from an individual, according to Article 124 of the Tax Code, tax at a rate of 14% is withheld from the rent payment by the person renting the property and declared to the tax authorities. For example, if the premises are rented for 500 manat per month, the tax on the payment source will be 70 manat:
500 x 14% = 70 manat.
If the payments mentioned above are not made, the barber who operates without obtaining a fixed receipt will be subject to a financial penalty calculated based on Article 58.12 of the Tax Code as follows:
- 40% of the fixed tax amount, mandatory state social insurance, and mandatory health insurance if such cases occur for the first time within the calendar year;
- 100% of the amount if such cases occur two or more times within the calendar year.
Moreover, if the premises are not registered, according to Article 58.2-1 of the Tax Code, a financial penalty of 40 manat is applied.
According to Article 16.1.8 of the Tax Code, a barber can operate without a cash register.
Regarding the use of POS terminals for cashless payments, the legislation does not specify a strict requirement. According to the Cabinet of Ministers' Decision on “Rules for the Installation, Use, and Application of POS Terminals in the Territory of the Republic of Azerbaijan” and the “Criteria for Determining Objects for POS Terminals,” POS terminals must be installed at all business establishments (premises) of taxpayers whose average quarterly turnover exceeds 2,000 manat. Since barbers do not pay tax on turnover, it is difficult to calculate and prove their quarterly turnover.
The topic is commented on by tax expert Cavid Vəlizadə.
Individuals who engage in barber activities and earn income without hiring employees fulfill their tax obligations by obtaining a receipt for the “payment of fixed amount under the simplified tax, mandatory state social insurance, and mandatory medical insurance” for their tax obligations. According to the legislation, these individuals must be registered with the tax authorities, obtain a tax identification number (TIN), and voluntarily receive a receipt for the “payment of fixed amount under the simplified tax, mandatory state social insurance, and mandatory medical insurance” from the State Tax Service for the following month, quarter, half-year, or year before starting their activities.
According to Article 220.10 of the Tax Code, the simplified tax amount for individuals who engage in barber activities (regardless of whether they are male or female) is set at 15 manat per month. Article 220.11 of the Code indicates that the monthly tax amount for individuals engaged in the activities outlined in Article 220.10 is determined based on the location, applying the following coefficients:
- In Baku city (including villages and settlements) – 2;
- In the cities of Ganja, Sumgait, and Khirdalan – 1.5;
- In the settlements and villages of Absheron district (except Khirdalan city), and in the cities of Shirvan, Mingachevir, Nakhchivan, Lankaran, Yevlakh, Sheki, and Naftalan – 1.0;
- In other regions (cities) and settlements (villages) – 0.5.
Furthermore, to calculate the mandatory state social insurance contributions, the following coefficients are applied to the 3% of the minimum monthly salary (i.e., 400 manat):
- In Baku city (including villages and settlements) – 2.0;
- In Absheron district, Sumgait, and Ganja cities – 1.5;
- In other cities and regions – 1.0.
As for compulsory health insurance, payments should be made in all cities, regions, and villages of the country at 4% of the minimum monthly salary.
Example: A barber operating in Baku city can obtain a fixed receipt by making the following payments:
Simplified tax: 15 x 2 = 30 manat;
State Social Insurance: (400 x 3%) x 2 = 24 manat;
Compulsory Health Insurance: 400 x 4% = 16 manat;
Total: 30 + 24 + 16 = 70 manat.
Additionally, if the premises for barber activities are rented from an individual, according to Article 124 of the Tax Code, tax at a rate of 14% is withheld from the rent payment by the person renting the property and declared to the tax authorities. For example, if the premises are rented for 500 manat per month, the tax on the payment source will be 70 manat:
500 x 14% = 70 manat.
If the payments mentioned above are not made, the barber who operates without obtaining a fixed receipt will be subject to a financial penalty calculated based on Article 58.12 of the Tax Code as follows:
- 40% of the fixed tax amount, mandatory state social insurance, and mandatory health insurance if such cases occur for the first time within the calendar year;
- 100% of the amount if such cases occur two or more times within the calendar year.
Moreover, if the premises are not registered, according to Article 58.2-1 of the Tax Code, a financial penalty of 40 manat is applied.
According to Article 16.1.8 of the Tax Code, a barber can operate without a cash register.
Regarding the use of POS terminals for cashless payments, the legislation does not specify a strict requirement. According to the Cabinet of Ministers' Decision on “Rules for the Installation, Use, and Application of POS Terminals in the Territory of the Republic of Azerbaijan” and the “Criteria for Determining Objects for POS Terminals,” POS terminals must be installed at all business establishments (premises) of taxpayers whose average quarterly turnover exceeds 2,000 manat. Since barbers do not pay tax on turnover, it is difficult to calculate and prove their quarterly turnover.