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What changes have been made regarding income tax for individuals in the Tax Code?
What changes have been made regarding income tax for individuals in the Tax Code?
In 2025, several important changes were made to the Tax Code of the Republic of Azerbaijan regarding income tax for individuals. Expert Jalə Abbasova explains these updates:
Tax Benefits for Micro-Entrepreneurs
Individuals engaged in business activities in certain service sectors with income (excluding expenses) of up to 45,000 manat per calendar year are exempt from paying 75% of the income tax on the income earned from their entrepreneurial activities. These sectors include:
- Software development services;
- Project design and decoration services;
- Translation services;
- Advertising services;
- Research and investigation activities;
- Services in the fields of science, education, culture, and sports;
- Legal, independent auditing, accounting, and financial consultancy services;
- Journalists' activities;
- Market research;
- Valuation activities;
- Delivery and courier services, excluding cargo transportation by vehicles;
- Tourism guiding;
- Export of services.
Except for the cases specified above, individual entrepreneurs who are micro-entrepreneurs, with an average number of employees of no less than 3 per month and no outstanding mandatory state social insurance contributions, are exempt from paying 75% of the income tax on the income earned from their entrepreneurial activities.
Example 1: An entrepreneur is engaged in advertising services, and their income at the end of the year is 43,000 manat. Since their annual income is below 45,000 manat, they are considered a micro-business and can benefit from tax incentives:
43,000 x 75% = 32,250 manat;
43,000 – 32,250 = 10,750 manat;
10,750 x 20% = 2,150 manat.
Therefore, despite earning 43,000 manat in income, the individual entrepreneur involved in advertising services pays only 2,150 manat in income tax instead of 8,600 manat.
Exemption from Insurance Premiums
For life and pension insurance contracts, after a period of 3 years from the date the contract takes effect, the amounts paid to the insured and the beneficiary will be exempt from income tax and receive tax benefits. This change applies to contracts concluded after January 1, 2025.
Renewable Energy Projects
In public-private partnership projects, the income earned from electricity generation projects using renewable energy sources is exempt from income tax for a period not exceeding 30 years.
Example 2: An individual carries out an infrastructure project under a public-private partnership for a period of 20 years, and the income earned during this period is exempt from income tax. This provides additional financial support to the company and accelerates the development of its projects.
Changes Regarding VAT
Individuals engaged in cultural and artistic activities will receive a 50% refund of the VAT paid for non-cash payments made by individuals for theater performances, film screenings, museum visits, and symphonic orchestra concerts. This change will come into effect on July 1, 2025.
Exemption from Profit Tax
For enterprises and film producers registered in accordance with the legislation and engaged in theater, museum, symphonic orchestra, and film production activities, 90% of the income earned from such activities will be exempt from income tax for a period of 5 years, starting from January 1, 2025.
These changes will generally accelerate the development of small and medium-sized businesses in the Azerbaijani economy and create new opportunities in areas such as culture, technology, education, and other sectors, while also supporting the production of local films.
In 2025, several important changes were made to the Tax Code of the Republic of Azerbaijan regarding income tax for individuals. Expert Jalə Abbasova explains these updates:
Tax Benefits for Micro-Entrepreneurs
Individuals engaged in business activities in certain service sectors with income (excluding expenses) of up to 45,000 manat per calendar year are exempt from paying 75% of the income tax on the income earned from their entrepreneurial activities. These sectors include:
- Software development services;
- Project design and decoration services;
- Translation services;
- Advertising services;
- Research and investigation activities;
- Services in the fields of science, education, culture, and sports;
- Legal, independent auditing, accounting, and financial consultancy services;
- Journalists' activities;
- Market research;
- Valuation activities;
- Delivery and courier services, excluding cargo transportation by vehicles;
- Tourism guiding;
- Export of services.
Except for the cases specified above, individual entrepreneurs who are micro-entrepreneurs, with an average number of employees of no less than 3 per month and no outstanding mandatory state social insurance contributions, are exempt from paying 75% of the income tax on the income earned from their entrepreneurial activities.
Example 1: An entrepreneur is engaged in advertising services, and their income at the end of the year is 43,000 manat. Since their annual income is below 45,000 manat, they are considered a micro-business and can benefit from tax incentives:
43,000 x 75% = 32,250 manat;
43,000 – 32,250 = 10,750 manat;
10,750 x 20% = 2,150 manat.
Therefore, despite earning 43,000 manat in income, the individual entrepreneur involved in advertising services pays only 2,150 manat in income tax instead of 8,600 manat.
Exemption from Insurance Premiums
For life and pension insurance contracts, after a period of 3 years from the date the contract takes effect, the amounts paid to the insured and the beneficiary will be exempt from income tax and receive tax benefits. This change applies to contracts concluded after January 1, 2025.
Renewable Energy Projects
In public-private partnership projects, the income earned from electricity generation projects using renewable energy sources is exempt from income tax for a period not exceeding 30 years.
Example 2: An individual carries out an infrastructure project under a public-private partnership for a period of 20 years, and the income earned during this period is exempt from income tax. This provides additional financial support to the company and accelerates the development of its projects.
Changes Regarding VAT
Individuals engaged in cultural and artistic activities will receive a 50% refund of the VAT paid for non-cash payments made by individuals for theater performances, film screenings, museum visits, and symphonic orchestra concerts. This change will come into effect on July 1, 2025.
Exemption from Profit Tax
For enterprises and film producers registered in accordance with the legislation and engaged in theater, museum, symphonic orchestra, and film production activities, 90% of the income earned from such activities will be exempt from income tax for a period of 5 years, starting from January 1, 2025.
These changes will generally accelerate the development of small and medium-sized businesses in the Azerbaijani economy and create new opportunities in areas such as culture, technology, education, and other sectors, while also supporting the production of local films.