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Taxation rules on rental income and declaration obligations for legal entities
Taxation rules on rental income and declaration obligations for legal entities
According to Article 150.1.6 of the Tax Code, legal entities, entrepreneurs, and individuals receiving income from non-entrepreneurial activities who make payments specified in Articles 124, 125, or 126 are required to withhold tax at the source of payment. The person from whom tax must be withheld at the source on rental income must transfer the tax to the state budget no later than the 20th day of the month following the quarter in which the income was paid and must submit the tax declaration for withholding tax to the tax authority.
It is noted that for legal entities, income from rent is considered entrepreneurial income. A legal entity renting out a property must calculate profit tax at a rate of 20% on the rental income, after deducting the expenses incurred in generating that income. The entity must submit the “Profit Tax Declaration” to the tax authority by no later than March 31 of the year following the reporting year and pay the calculated profit tax to the state budget by the same deadline.
According to Article 124.3 of the Tax Code, payments made in the Republic of Azerbaijan to resident enterprises or permanent establishments of non-residents are not considered taxable under this article. However, a resident enterprise or a permanent establishment of a non-resident earning income from the lease of movable or immovable property is required to pay profit tax at a rate of 20% on that income and declare it in their annual profit tax declaration.
If the lessor is a legal entity and the lessee is an individual entrepreneur, withholding tax is not applied since the lessor is a legal entity. In this case, the legal entity pays profit tax and declares it in its annual profit tax return. If both the lessor and the lessee are legal entities, withholding tax is also not applied. The legal entity pays profit tax and declares it in the annual profit tax return.
According to Article 150.1.6 of the Tax Code, legal entities, entrepreneurs, and individuals receiving income from non-entrepreneurial activities who make payments specified in Articles 124, 125, or 126 are required to withhold tax at the source of payment. The person from whom tax must be withheld at the source on rental income must transfer the tax to the state budget no later than the 20th day of the month following the quarter in which the income was paid and must submit the tax declaration for withholding tax to the tax authority.
It is noted that for legal entities, income from rent is considered entrepreneurial income. A legal entity renting out a property must calculate profit tax at a rate of 20% on the rental income, after deducting the expenses incurred in generating that income. The entity must submit the “Profit Tax Declaration” to the tax authority by no later than March 31 of the year following the reporting year and pay the calculated profit tax to the state budget by the same deadline.
According to Article 124.3 of the Tax Code, payments made in the Republic of Azerbaijan to resident enterprises or permanent establishments of non-residents are not considered taxable under this article. However, a resident enterprise or a permanent establishment of a non-resident earning income from the lease of movable or immovable property is required to pay profit tax at a rate of 20% on that income and declare it in their annual profit tax declaration.
If the lessor is a legal entity and the lessee is an individual entrepreneur, withholding tax is not applied since the lessor is a legal entity. In this case, the legal entity pays profit tax and declares it in its annual profit tax return. If both the lessor and the lessee are legal entities, withholding tax is also not applied. The legal entity pays profit tax and declares it in the annual profit tax return.