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Donations to which sectors are deductible from taxable profit?
Donations to which sectors are deductible from taxable profit?
According to Article 106.1.18 of the Tax Code, excluding public legal entities established on behalf of the state, the portion of a taxpayer’s annual profit that does not exceed 15 percent and is transferred to institutions, administrations, and organizations operating in the fields of science, education, healthcare, sports, and culture—provided they meet the criteria set by the relevant executive authority—and to public and social purpose foundations approved by the same authority, shall be exempt from tax for a period of 5 years starting from January 1, 2024.
The provisions of this article apply only to cashless (non-cash) payments. The topic is explained by expert Mahmud Abasquliyev.
It should be noted that by order of the head of state, the following charity funds have been officially listed:
Heydar Aliyev Foundation;
Karabakh Revival Fund;
YASHAT Fund.
This article applies only to legal entities. No tax exemption is provided under Article 102 of the Tax Code for donations made by individuals through cashless transactions.
Legal entities that transfer funds within the calendar year to institutions, administrations, and organizations operating in the fields of science, education, healthcare, sports, and culture, as well as to approved foundations, are allowed to **deduct up to 15% of their profit**. When calculating the exemption, the lower of the actual donation amount and the 15% threshold is considered, and the remaining amount is subject to profit tax.
Example 1: In 2025, Company "AA" transferred AZN 70,000 to the Karabakh Revival Fund. The company’s total taxable income for the year was AZN 500,000, and its expenses related to income generation were AZN 200,000. Thus, the taxable profit is:
500,000 – 200,000 = AZN 300,000.
Calculating the 15% exemption:
300,000 × 15% = AZN 45,000.
Since the 15% amount is less than the actual donation, the 45,000 AZN will be used as the deductible. As a result, the taxable profit will be:
300,000 – 45,000 = AZN 255,000;
Profit tax: 255,000 × 20% = AZN 51,000.
Example 2: In 2025, Company "BB" transferred AZN 70,000 via cashless payment to the bank account of a sports organization that meets the criteria set by the Cabinet of Ministers. The company’s total taxable income for the year was AZN 1,700,000, and the expenses related to income generation were AZN 800,000. The taxable profit is:
1,700,000 – 800,000 = AZN 900,000.
Since the donation amount is below the 15% threshold:
900,000 × 15% = AZN 135,000.
Because the actual donation (70,000 AZN) is less than the 15% limit, this amount will be used in the calculation.
Taxable profit:
900,000 – 70,000 = AZN 830,000;
Profit tax: 830,000 × 20% = AZN 166,000.
According to Article 106.1.18 of the Tax Code, excluding public legal entities established on behalf of the state, the portion of a taxpayer’s annual profit that does not exceed 15 percent and is transferred to institutions, administrations, and organizations operating in the fields of science, education, healthcare, sports, and culture—provided they meet the criteria set by the relevant executive authority—and to public and social purpose foundations approved by the same authority, shall be exempt from tax for a period of 5 years starting from January 1, 2024.
The provisions of this article apply only to cashless (non-cash) payments. The topic is explained by expert Mahmud Abasquliyev.
It should be noted that by order of the head of state, the following charity funds have been officially listed:
Heydar Aliyev Foundation;
Karabakh Revival Fund;
YASHAT Fund.
This article applies only to legal entities. No tax exemption is provided under Article 102 of the Tax Code for donations made by individuals through cashless transactions.
Legal entities that transfer funds within the calendar year to institutions, administrations, and organizations operating in the fields of science, education, healthcare, sports, and culture, as well as to approved foundations, are allowed to **deduct up to 15% of their profit**. When calculating the exemption, the lower of the actual donation amount and the 15% threshold is considered, and the remaining amount is subject to profit tax.
Example 1: In 2025, Company "AA" transferred AZN 70,000 to the Karabakh Revival Fund. The company’s total taxable income for the year was AZN 500,000, and its expenses related to income generation were AZN 200,000. Thus, the taxable profit is:
500,000 – 200,000 = AZN 300,000.
Calculating the 15% exemption:
300,000 × 15% = AZN 45,000.
Since the 15% amount is less than the actual donation, the 45,000 AZN will be used as the deductible. As a result, the taxable profit will be:
300,000 – 45,000 = AZN 255,000;
Profit tax: 255,000 × 20% = AZN 51,000.
Example 2: In 2025, Company "BB" transferred AZN 70,000 via cashless payment to the bank account of a sports organization that meets the criteria set by the Cabinet of Ministers. The company’s total taxable income for the year was AZN 1,700,000, and the expenses related to income generation were AZN 800,000. The taxable profit is:
1,700,000 – 800,000 = AZN 900,000.
Since the donation amount is below the 15% threshold:
900,000 × 15% = AZN 135,000.
Because the actual donation (70,000 AZN) is less than the 15% limit, this amount will be used in the calculation.
Taxable profit:
900,000 – 70,000 = AZN 830,000;
Profit tax: 830,000 × 20% = AZN 166,000.