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Taxes and social payments for a self-employed accountant
Taxes and social payments for a self-employed accountant
The topic is explained by the chief expert Mirjafar Rzazade. According to Article 102.1.30-1 of the Tax Code, individuals engaged in the following types of activities, whose income from these activities for the calendar year (excluding expenses) does not exceed 45,000 manat, are exempt from paying income tax on 75% of their income:
- Services in the field of software development;
- Project design and decoration services;
- Translation services;
- Advertising services;
- Research and investigation activities;
- Services in science, education, culture, and sports;
- Legal, freelance auditing, accounting, and financial consulting services;
- Journalists' activities;
- Market research;
- Valuation activities;
- Delivery services and courier activities, excluding cargo transportation by motor vehicles;
- Tourism guiding;
- Export of services.
As seen above, the accounting field is also included in the listed activities. This means that if an individual accountant’s annual income does not exceed 45,000 manat, they can benefit from a 75% tax exemption.
Example 1: An individual entrepreneur providing accounting services has an income of 38,000 manat and expenses of 12,000 manat in 2025. In this case, the accountant's income tax will be calculated as follows:
Profit before tax = Income – Expenses:
38,000 – 12,000 = 26,000 manat;
The 75% exemption provided by the Tax Code:
26,000 x 75% = 19,500 manat;
Income tax = (Profit before tax – 75% exemption) * 20% - (26,000 – 19,500) x 20% = 1,300 manat.
Now let’s see how the process would be regulated if the income of the individual entrepreneur providing accounting services exceeds 45,000 manat in 2025.
Example 2: An individual entrepreneur providing accounting services has an income of 60,000 manat and expenses of 25,000 manat in 2025. As seen, since the annual income of the individual entrepreneur exceeds 45,000 manat, they will not be able to benefit from the 75% exemption under Article 102.1.30-1 of the Tax Code.
Income tax = (60,000 – 25,000) x 20% = 7,000 manat.
What if the individual entrepreneur’s annual income exceeds 45,000 manat? Will they still be able to use the 75% tax exemption?
According to Article 102.1.30 of the Tax Code, except for the cases provided for in Article 102.1.30-1, individual entrepreneurs who are micro-enterprises with an average number of employees of no less than 3 persons per month and have no outstanding liabilities for mandatory state social insurance contributions, are exempt from income tax on 75% of the income derived from their entrepreneurial activities. This means that if an individual entrepreneur providing accounting services has an annual income exceeding 45,000 manat, but their average monthly number of employees is no less than 3 and they do not have any outstanding social insurance debts, they can still benefit from the 75% tax exemption.
The average monthly number of employees for the relevant year is determined by summing the number of employees for each month of the calendar year and dividing it by 12.
Example 3: An individual entrepreneur providing accounting services has 3 employees under active labor contracts each month in 2025. The entrepreneur has made mandatory social insurance payments on time, in compliance with legislative requirements. During the period, the entrepreneur’s income was 85,000 manat, and expenses amounted to 49,000 manat. Let’s calculate the income tax for the individual entrepreneur:
Profit before tax: 85,000 – 49,000 = 36,000 manat;
The 75% exemption is applied: 36,000 – (36,000 x 75%) = 9,000 manat;
Income tax: 9,000 x 20% = 1,800 manat.
Regarding the social insurance payments of the individual entrepreneur, this is also regulated by legislation. According to Article 14.5 of the "Social Insurance Law," the mandatory state social insurance contribution for insured persons earning income from activities not related to wage employment is paid at the following rates:
For entrepreneurial activities – until January 1, 2026, 50% of the minimum monthly wage in the construction sector, and 25% in other sectors:
- 100% in Baku city;
- 90% in Sumgayit and Ganja cities;
- 80% in other cities;
- 60% in administrative centers of district administrative territorial units and settlements;
- 50% in rural areas.
It should be noted that the current minimum monthly wage in Azerbaijan is 400 manat.
Example 4: The social insurance contribution for an individual entrepreneur providing accounting services in Sumgayit city in January 2025 is calculated as follows:
400 x 25% = 100 manat.
Since the entrepreneur operates in Sumgayit city, they must pay 90% of this amount:
100 x 90% = 90 manat.
In addition, according to Article 15-10.1.3 of the "Mandatory Health Insurance Law," regardless of the area in which they operate, individual entrepreneurs are required to pay a mandatory health insurance contribution of 4% of the minimum monthly wage:
400 x 4% = 16 manat.
The topic is explained by the chief expert Mirjafar Rzazade. According to Article 102.1.30-1 of the Tax Code, individuals engaged in the following types of activities, whose income from these activities for the calendar year (excluding expenses) does not exceed 45,000 manat, are exempt from paying income tax on 75% of their income:
- Services in the field of software development;
- Project design and decoration services;
- Translation services;
- Advertising services;
- Research and investigation activities;
- Services in science, education, culture, and sports;
- Legal, freelance auditing, accounting, and financial consulting services;
- Journalists' activities;
- Market research;
- Valuation activities;
- Delivery services and courier activities, excluding cargo transportation by motor vehicles;
- Tourism guiding;
- Export of services.
As seen above, the accounting field is also included in the listed activities. This means that if an individual accountant’s annual income does not exceed 45,000 manat, they can benefit from a 75% tax exemption.
Example 1: An individual entrepreneur providing accounting services has an income of 38,000 manat and expenses of 12,000 manat in 2025. In this case, the accountant's income tax will be calculated as follows:
Profit before tax = Income – Expenses:
38,000 – 12,000 = 26,000 manat;
The 75% exemption provided by the Tax Code:
26,000 x 75% = 19,500 manat;
Income tax = (Profit before tax – 75% exemption) * 20% - (26,000 – 19,500) x 20% = 1,300 manat.
Now let’s see how the process would be regulated if the income of the individual entrepreneur providing accounting services exceeds 45,000 manat in 2025.
Example 2: An individual entrepreneur providing accounting services has an income of 60,000 manat and expenses of 25,000 manat in 2025. As seen, since the annual income of the individual entrepreneur exceeds 45,000 manat, they will not be able to benefit from the 75% exemption under Article 102.1.30-1 of the Tax Code.
Income tax = (60,000 – 25,000) x 20% = 7,000 manat.
What if the individual entrepreneur’s annual income exceeds 45,000 manat? Will they still be able to use the 75% tax exemption?
According to Article 102.1.30 of the Tax Code, except for the cases provided for in Article 102.1.30-1, individual entrepreneurs who are micro-enterprises with an average number of employees of no less than 3 persons per month and have no outstanding liabilities for mandatory state social insurance contributions, are exempt from income tax on 75% of the income derived from their entrepreneurial activities. This means that if an individual entrepreneur providing accounting services has an annual income exceeding 45,000 manat, but their average monthly number of employees is no less than 3 and they do not have any outstanding social insurance debts, they can still benefit from the 75% tax exemption.
The average monthly number of employees for the relevant year is determined by summing the number of employees for each month of the calendar year and dividing it by 12.
Example 3: An individual entrepreneur providing accounting services has 3 employees under active labor contracts each month in 2025. The entrepreneur has made mandatory social insurance payments on time, in compliance with legislative requirements. During the period, the entrepreneur’s income was 85,000 manat, and expenses amounted to 49,000 manat. Let’s calculate the income tax for the individual entrepreneur:
Profit before tax: 85,000 – 49,000 = 36,000 manat;
The 75% exemption is applied: 36,000 – (36,000 x 75%) = 9,000 manat;
Income tax: 9,000 x 20% = 1,800 manat.
Regarding the social insurance payments of the individual entrepreneur, this is also regulated by legislation. According to Article 14.5 of the "Social Insurance Law," the mandatory state social insurance contribution for insured persons earning income from activities not related to wage employment is paid at the following rates:
For entrepreneurial activities – until January 1, 2026, 50% of the minimum monthly wage in the construction sector, and 25% in other sectors:
- 100% in Baku city;
- 90% in Sumgayit and Ganja cities;
- 80% in other cities;
- 60% in administrative centers of district administrative territorial units and settlements;
- 50% in rural areas.
It should be noted that the current minimum monthly wage in Azerbaijan is 400 manat.
Example 4: The social insurance contribution for an individual entrepreneur providing accounting services in Sumgayit city in January 2025 is calculated as follows:
400 x 25% = 100 manat.
Since the entrepreneur operates in Sumgayit city, they must pay 90% of this amount:
100 x 90% = 90 manat.
In addition, according to Article 15-10.1.3 of the "Mandatory Health Insurance Law," regardless of the area in which they operate, individual entrepreneurs are required to pay a mandatory health insurance contribution of 4% of the minimum monthly wage:
400 x 4% = 16 manat.