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How much tax and social contributions should dentists pay?
How much tax and social contributions should dentists pay?
Before starting their operations, medical institutions and individuals engaged in private medical practice must obtain a license in accordance with the Presidential Decree of the Republic of Azerbaijan dated December 21, 2015, titled "On approval of the list of activities requiring a license (excluding cases arising from state security considerations) and the amount of state duties payable for issuing such licenses." Individual dental practice is also among the activities that require a license. Expert Rafiq Najafli clarifies the tax and social obligations of dentists operating independently.
According to Article 218.5.13 of the Tax Code, individuals engaged in licensed activities lose the right to be considered simplified taxpayers. Therefore, depending on their turnover, a self-employed dentist may become subject to either income tax or VAT.
Income Tax
A self-employed dentist, as an income taxpayer, must pay income tax at a rate of 20% on the net income (i.e., income minus expenses) earned during the year.
Example 1:
If a self-employed dentist earns AZN 60,000 annually and incurs expenses of AZN 20,000, the income tax will be calculated as follows:
60,000 – 20,000 = 40,000 AZN
40,000 x 20% = 8,000 AZN (income tax)
According to Article 102.1.30-1 of the Tax Code, 75% of the income earned by individuals engaged in the following activities is exempt from income tax, provided their gross income (before expenses) does not exceed AZN 45,000 during the calendar year:
- Software development services
- Project design and decoration services
- Translation services
- Advertising services
- Research and analysis activities
- Services in science, education, culture, and sports
- Legal, independent auditing, accounting, and financial consultancy services
- Journalism
- Market research
- Valuation services
- Order delivery and courier services, except for freight transportation by motor vehicles
- Tourism guiding
- Export of services
As can be seen from Article 102.1.30-1, dental activity is not included in this list. Therefore, even if a self-employed dentist earns up to AZN 45,000 (gross), 75% of that income will not be exempt from income tax.
So, in what case can a self-employed dentist benefit from the 75% tax exemption?
According to Article 102.1.30 of the Tax Code (with the exception of the case mentioned in 102.1.30-1), if a self-employed individual qualifies as a micro-entrepreneur by employing no fewer than 3 salaried employees on average during the year and has no outstanding debt for compulsory state social insurance payments, then 75% of the income from their business activity is exempt from income tax.
The average monthly number of salaried employees for a given year is calculated by summing up the total number of employees for each month and dividing by 12.
Example 2:
If a self-employed dentist maintained active employment contracts with at least 3 employees in each month of the calendar year and paid all compulsory state social insurance contributions in full and on time, and if:
- Annual income = AZN 100,000
- Annual expenses = AZN 60,000
Then, the income tax is calculated as follows:
100,000 – 60,000 = 40,000 AZN
40,000 – (40,000 x 75%) = 10,000 AZN
10,000 x 20% = 2,000 AZN (income tax)
It should also be noted that according to amendments to the Tax Code effective from January 1, 2023, individuals engaged in private medical practice must conduct monetary transactions with the public using fiscal cash registers. Therefore, for each payment received for private dental services, the dentist must issue a receipt through a fiscal cash register.
Social Contributions of Dentists
According to Article 14.5 of the Law on Social Insurance, insured individuals earning income from non-salaried activities must pay compulsory state social insurance premiums at the following rates:
- For entrepreneurial activity — until January 1, 2026, calculated based on 25% of the minimum monthly wage in non-construction sectors and 50% in the construction sector, with location-specific coefficients:
- Baku city** – 100%
- Sumgait and Ganja** – 90%
- Other cities** – 80%
- District administrative centers and settlements** – 60%
- Rural areas** – 50%
Example 3: For a dentist operating individually in Baku in January 2025:
Minimum monthly wage x 25%
400 x 25% = AZN 100 (monthly social insurance payment)
For dentists in Sumgait and Ganja: AZN 90, In other cities: AZN 80, In district centers and settlements: AZN 60, In rural areas: AZN 50.
In addition, according to Article 15-10.1.3 of the Law on Mandatory Health Insurance, regardless of the area of activity, self-employed individuals are required to pay a mandatory health insurance contribution amounting to 4% of the minimum monthly wage:
400 x 4% = AZN 16
Before starting their operations, medical institutions and individuals engaged in private medical practice must obtain a license in accordance with the Presidential Decree of the Republic of Azerbaijan dated December 21, 2015, titled "On approval of the list of activities requiring a license (excluding cases arising from state security considerations) and the amount of state duties payable for issuing such licenses." Individual dental practice is also among the activities that require a license. Expert Rafiq Najafli clarifies the tax and social obligations of dentists operating independently.
According to Article 218.5.13 of the Tax Code, individuals engaged in licensed activities lose the right to be considered simplified taxpayers. Therefore, depending on their turnover, a self-employed dentist may become subject to either income tax or VAT.
Income Tax
A self-employed dentist, as an income taxpayer, must pay income tax at a rate of 20% on the net income (i.e., income minus expenses) earned during the year.
Example 1:
If a self-employed dentist earns AZN 60,000 annually and incurs expenses of AZN 20,000, the income tax will be calculated as follows:
60,000 – 20,000 = 40,000 AZN
40,000 x 20% = 8,000 AZN (income tax)
According to Article 102.1.30-1 of the Tax Code, 75% of the income earned by individuals engaged in the following activities is exempt from income tax, provided their gross income (before expenses) does not exceed AZN 45,000 during the calendar year:
- Software development services
- Project design and decoration services
- Translation services
- Advertising services
- Research and analysis activities
- Services in science, education, culture, and sports
- Legal, independent auditing, accounting, and financial consultancy services
- Journalism
- Market research
- Valuation services
- Order delivery and courier services, except for freight transportation by motor vehicles
- Tourism guiding
- Export of services
As can be seen from Article 102.1.30-1, dental activity is not included in this list. Therefore, even if a self-employed dentist earns up to AZN 45,000 (gross), 75% of that income will not be exempt from income tax.
So, in what case can a self-employed dentist benefit from the 75% tax exemption?
According to Article 102.1.30 of the Tax Code (with the exception of the case mentioned in 102.1.30-1), if a self-employed individual qualifies as a micro-entrepreneur by employing no fewer than 3 salaried employees on average during the year and has no outstanding debt for compulsory state social insurance payments, then 75% of the income from their business activity is exempt from income tax.
The average monthly number of salaried employees for a given year is calculated by summing up the total number of employees for each month and dividing by 12.
Example 2:
If a self-employed dentist maintained active employment contracts with at least 3 employees in each month of the calendar year and paid all compulsory state social insurance contributions in full and on time, and if:
- Annual income = AZN 100,000
- Annual expenses = AZN 60,000
Then, the income tax is calculated as follows:
100,000 – 60,000 = 40,000 AZN
40,000 – (40,000 x 75%) = 10,000 AZN
10,000 x 20% = 2,000 AZN (income tax)
It should also be noted that according to amendments to the Tax Code effective from January 1, 2023, individuals engaged in private medical practice must conduct monetary transactions with the public using fiscal cash registers. Therefore, for each payment received for private dental services, the dentist must issue a receipt through a fiscal cash register.
Social Contributions of Dentists
According to Article 14.5 of the Law on Social Insurance, insured individuals earning income from non-salaried activities must pay compulsory state social insurance premiums at the following rates:
- For entrepreneurial activity — until January 1, 2026, calculated based on 25% of the minimum monthly wage in non-construction sectors and 50% in the construction sector, with location-specific coefficients:
- Baku city** – 100%
- Sumgait and Ganja** – 90%
- Other cities** – 80%
- District administrative centers and settlements** – 60%
- Rural areas** – 50%
Example 3: For a dentist operating individually in Baku in January 2025:
Minimum monthly wage x 25%
400 x 25% = AZN 100 (monthly social insurance payment)
For dentists in Sumgait and Ganja: AZN 90, In other cities: AZN 80, In district centers and settlements: AZN 60, In rural areas: AZN 50.
In addition, according to Article 15-10.1.3 of the Law on Mandatory Health Insurance, regardless of the area of activity, self-employed individuals are required to pay a mandatory health insurance contribution amounting to 4% of the minimum monthly wage:
400 x 4% = AZN 16