en
Rules for calculating and paying property tax for enterprises and individual entrepreneurs
Rules for calculating and paying property tax for enterprises and individual entrepreneurs
For tax purposes, the average annual residual value of fixed assets of an enterprise or individual entrepreneur is determined in accordance with Article 202 of the Tax Code. The topic is commented on by tax expert Ismayil Baghirov:
According to Article 202 of the Tax Code, the average annual residual value of fixed assets of an enterprise or individual entrepreneur is calculated using the following four methods:
1. The residual value of fixed assets at the beginning and end of the reporting year is added and divided by two.
Example 1: Suppose the residual value of the fixed assets subject to property tax of an enterprise is 20,000 AZN as of January 1, 2018, and 10,000 AZN as of December 31, 2018. In this case, the average annual residual value of the enterprise’s property for tax purposes is 15,000 AZN, and a property tax of 150 AZN is calculated:
(20,000 + 10,000) / 2 = 15,000 AZN;
15,000 x 1% = 150 AZN.
2. If the enterprise or individual entrepreneur was established or became a property tax payer during the reporting year, the residual value of its fixed assets as of the date of establishment or tax liability and as of year-end is summed, divided by 24, and then multiplied by the number of months from the month after establishment or tax liability to the end of the year.
Example 2: Suppose an individual entrepreneur was established on May 1, 2018, and the residual value of their fixed assets was 20,000 AZN at the time of establishment and 28,000 AZN as of December 31, 2018. In this case, the average annual residual value for tax purposes will be 14,000 AZN and a tax of 140 AZN will be calculated:
(20,000 + 28,000) / 24 x 7 = 14,000 AZN;
14,000 x 1% = 140 AZN.
3. If an enterprise or individual entrepreneur is liquidated during the reporting year, the residual value of the fixed assets at the beginning of the year and at the time of liquidation is summed, divided by 24, and multiplied by the number of months from the start of the year to the month of liquidation.
Example 3: Suppose an enterprise was liquidated on September 16, 2018. The residual value of its fixed assets was 20,000 AZN at the time of liquidation and 28,000 AZN as of January 1, 2018. In this case, the average annual residual value will be 16,000 AZN and the property tax will amount to 160 AZN:
(20,000 + 28,000) / 24 x 8 = 16,000 AZN;
16,000 x 1% = 160 AZN.
4. If a credit institution is declared bankrupt during the reporting year, the residual value of its fixed assets at the beginning of the year and at the date of bankruptcy is summed, divided by 24, and multiplied by the number of months from the start of the year to the month of bankruptcy.
Example 4: A credit institution declared bankrupt on May 20, 2023, had fixed assets with residual values of 150,000 AZN on January 1, 2023, and 50,000 AZN on May 20, 2023. For tax purposes, the average annual residual value of the bankrupt credit institution’s property is 33,333.32 AZN and the property tax will be 333.33 AZN:
(150,000 + 50,000) / 24 x 4 = 33,333.32 AZN;
33,333.32 x 1% = 333.33 AZN.
According to Article 201.1.1 of the Tax Code, if the fixed assets of an enterprise or individual entrepreneur are insured at a value higher than their residual value, the property tax is calculated based on the market value of the property as of the date of insurance, applying the tax rate under Article 14 of the Tax Code. When the insured value is determined based on the market value, the provisions of Article 202 do not apply.
Example 5: Suppose the residual value of company “A”'s property is 150,000 AZN, but it is insured for 180,000 AZN. As of the insurance date, the market value of the property is determined to be 160,000 AZN. In this case, the property tax will be calculated based on the market value of 160,000 AZN, not the average annual residual value:
160,000 x 1% = 1,600 AZN.
It should be noted that if the property is insured at a value equal to or less than its residual value, then the property tax is calculated based on the average annual residual value, as per Article 202 of the Tax Code.
The tax period for property tax for enterprises and individual entrepreneurs is the calendar year. Article 201.3 of the Code states that enterprises and individual entrepreneurs are required to make quarterly tax payments equal to 20% of the previous year's property tax amount, no later than the 15th day of the second month of each quarter.
Example 6: An enterprise calculated 640 AZN in property tax for 2023. Therefore, it must calculate a payment of 128 AZN for the first quarter of 2024 and pay it to the state budget by February 15:
640 x 20% = 128 AZN.
Enterprises and individual entrepreneurs who were not property taxpayers in the previous reporting year but become taxpayers in the following year, as well as newly established taxpayers, must make current tax payments equal to 20% of the annual property tax calculated for the quarter in which the fixed assets were acquired, no later than the 15th day of the second month of each following quarter.
For tax purposes, the average annual residual value of fixed assets of an enterprise or individual entrepreneur is determined in accordance with Article 202 of the Tax Code. The topic is commented on by tax expert Ismayil Baghirov:
According to Article 202 of the Tax Code, the average annual residual value of fixed assets of an enterprise or individual entrepreneur is calculated using the following four methods:
1. The residual value of fixed assets at the beginning and end of the reporting year is added and divided by two.
Example 1: Suppose the residual value of the fixed assets subject to property tax of an enterprise is 20,000 AZN as of January 1, 2018, and 10,000 AZN as of December 31, 2018. In this case, the average annual residual value of the enterprise’s property for tax purposes is 15,000 AZN, and a property tax of 150 AZN is calculated:
(20,000 + 10,000) / 2 = 15,000 AZN;
15,000 x 1% = 150 AZN.
2. If the enterprise or individual entrepreneur was established or became a property tax payer during the reporting year, the residual value of its fixed assets as of the date of establishment or tax liability and as of year-end is summed, divided by 24, and then multiplied by the number of months from the month after establishment or tax liability to the end of the year.
Example 2: Suppose an individual entrepreneur was established on May 1, 2018, and the residual value of their fixed assets was 20,000 AZN at the time of establishment and 28,000 AZN as of December 31, 2018. In this case, the average annual residual value for tax purposes will be 14,000 AZN and a tax of 140 AZN will be calculated:
(20,000 + 28,000) / 24 x 7 = 14,000 AZN;
14,000 x 1% = 140 AZN.
3. If an enterprise or individual entrepreneur is liquidated during the reporting year, the residual value of the fixed assets at the beginning of the year and at the time of liquidation is summed, divided by 24, and multiplied by the number of months from the start of the year to the month of liquidation.
Example 3: Suppose an enterprise was liquidated on September 16, 2018. The residual value of its fixed assets was 20,000 AZN at the time of liquidation and 28,000 AZN as of January 1, 2018. In this case, the average annual residual value will be 16,000 AZN and the property tax will amount to 160 AZN:
(20,000 + 28,000) / 24 x 8 = 16,000 AZN;
16,000 x 1% = 160 AZN.
4. If a credit institution is declared bankrupt during the reporting year, the residual value of its fixed assets at the beginning of the year and at the date of bankruptcy is summed, divided by 24, and multiplied by the number of months from the start of the year to the month of bankruptcy.
Example 4: A credit institution declared bankrupt on May 20, 2023, had fixed assets with residual values of 150,000 AZN on January 1, 2023, and 50,000 AZN on May 20, 2023. For tax purposes, the average annual residual value of the bankrupt credit institution’s property is 33,333.32 AZN and the property tax will be 333.33 AZN:
(150,000 + 50,000) / 24 x 4 = 33,333.32 AZN;
33,333.32 x 1% = 333.33 AZN.
According to Article 201.1.1 of the Tax Code, if the fixed assets of an enterprise or individual entrepreneur are insured at a value higher than their residual value, the property tax is calculated based on the market value of the property as of the date of insurance, applying the tax rate under Article 14 of the Tax Code. When the insured value is determined based on the market value, the provisions of Article 202 do not apply.
Example 5: Suppose the residual value of company “A”'s property is 150,000 AZN, but it is insured for 180,000 AZN. As of the insurance date, the market value of the property is determined to be 160,000 AZN. In this case, the property tax will be calculated based on the market value of 160,000 AZN, not the average annual residual value:
160,000 x 1% = 1,600 AZN.
It should be noted that if the property is insured at a value equal to or less than its residual value, then the property tax is calculated based on the average annual residual value, as per Article 202 of the Tax Code.
The tax period for property tax for enterprises and individual entrepreneurs is the calendar year. Article 201.3 of the Code states that enterprises and individual entrepreneurs are required to make quarterly tax payments equal to 20% of the previous year's property tax amount, no later than the 15th day of the second month of each quarter.
Example 6: An enterprise calculated 640 AZN in property tax for 2023. Therefore, it must calculate a payment of 128 AZN for the first quarter of 2024 and pay it to the state budget by February 15:
640 x 20% = 128 AZN.
Enterprises and individual entrepreneurs who were not property taxpayers in the previous reporting year but become taxpayers in the following year, as well as newly established taxpayers, must make current tax payments equal to 20% of the annual property tax calculated for the quarter in which the fixed assets were acquired, no later than the 15th day of the second month of each following quarter.