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Taxation of income from a non-resident’s share participation
Taxation of income from a non-resident’s share participation
We would like to inform that in the case of the transfer of a share participation by a non-resident company to a resident person registered with the tax authorities, the amount paid by the resident person is considered income from the non-resident’s Azerbaijani source of income and is taxed at a rate of 10 percent at the source of payment, without deductions for expenses, in accordance with Article 125.1.5 of the Tax Code.
According to the provisions of Article 13.2.16.6 of the Tax Code, the income derived from the sale or transfer of a share participation in a resident legal entity is considered income from Azerbaijani sources.
At the same time, according to Article 149.1.3-1 of the Tax Code, the declaration is submitted by the tax agent appointed by the non-resident in cases where it is not possible to withhold tax at the source of payment on the income obtained by the non-resident from Azerbaijani sources.
When a non-resident company transfers a share participation within the territory of the Republic of Azerbaijan to other non-resident persons or to persons not registered with the tax authorities of the Republic of Azerbaijan, the tax liabilities on the income derived from Azerbaijani sources are carried out either by the non-resident themselves by registering with the tax authorities of the Republic of Azerbaijan and being subject to profit tax, or by the tax agent appointed by the non-resident.
In this case, the tax is calculated from the difference between the total income obtained and the amount of expenses incurred in relation to the earning of that income, which can be deducted from the income.
Additionally, according to Article 106.1.19 of the Tax Code, 50 percent of the income derived from the transfer of a share or stock owned by the taxpayer for at least three (3) years is exempt from profit tax.
We would like to inform that in the case of the transfer of a share participation by a non-resident company to a resident person registered with the tax authorities, the amount paid by the resident person is considered income from the non-resident’s Azerbaijani source of income and is taxed at a rate of 10 percent at the source of payment, without deductions for expenses, in accordance with Article 125.1.5 of the Tax Code.
According to the provisions of Article 13.2.16.6 of the Tax Code, the income derived from the sale or transfer of a share participation in a resident legal entity is considered income from Azerbaijani sources.
At the same time, according to Article 149.1.3-1 of the Tax Code, the declaration is submitted by the tax agent appointed by the non-resident in cases where it is not possible to withhold tax at the source of payment on the income obtained by the non-resident from Azerbaijani sources.
When a non-resident company transfers a share participation within the territory of the Republic of Azerbaijan to other non-resident persons or to persons not registered with the tax authorities of the Republic of Azerbaijan, the tax liabilities on the income derived from Azerbaijani sources are carried out either by the non-resident themselves by registering with the tax authorities of the Republic of Azerbaijan and being subject to profit tax, or by the tax agent appointed by the non-resident.
In this case, the tax is calculated from the difference between the total income obtained and the amount of expenses incurred in relation to the earning of that income, which can be deducted from the income.
Additionally, according to Article 106.1.19 of the Tax Code, 50 percent of the income derived from the transfer of a share or stock owned by the taxpayer for at least three (3) years is exempt from profit tax.