en
Tax exemptions on interest income from bank deposits
Tax exemptions on interest income from bank deposits
According to Article 102.1.22-3 of the Tax Code, the portion of monthly interest income of individuals up to 200 AZN, accrued on deposits in national currency at each local bank (or branch of a foreign bank in the Republic of Azerbaijan), is exempt from income tax.
According to the newly added Article 102.1.22-4 of the Tax Code, if an individual places a deposit in national currency at a local bank or a branch of a foreign bank in Azerbaijan for a period of 18 months or more, and the deposit is not withdrawn earlier than the specified term, the full amount of interest income accrued is exempt from income tax for a period of 3 years.
For example, a taxpayer places 40,000 AZN in a deposit at 10% annual interest for one year. In this case, the portion of the monthly income up to 200 AZN is exempt from income tax. If the individual withdraws the deposit at the end of one year, the accrued interest will amount to 4,000 AZN. Since the tax exemption is 200 AZN per month, the total exempt amount for the year will be 2,400 AZN. Therefore, the bank will calculate withholding tax on the remaining 1,600 AZN (4,000 – 2,400). (The amounts mentioned are theoretical and not practical.)
In another example, if an individual deposits 40,000 AZN at 10% annual interest for a period of 2 years and receives the deposit after the contract term ends, the entire amount of accrued interest will be exempt from income tax. (The amounts mentioned are theoretical and not practical.)
According to Article 102.1.22-3 of the Tax Code, the portion of monthly interest income of individuals up to 200 AZN, accrued on deposits in national currency at each local bank (or branch of a foreign bank in the Republic of Azerbaijan), is exempt from income tax.
According to the newly added Article 102.1.22-4 of the Tax Code, if an individual places a deposit in national currency at a local bank or a branch of a foreign bank in Azerbaijan for a period of 18 months or more, and the deposit is not withdrawn earlier than the specified term, the full amount of interest income accrued is exempt from income tax for a period of 3 years.
For example, a taxpayer places 40,000 AZN in a deposit at 10% annual interest for one year. In this case, the portion of the monthly income up to 200 AZN is exempt from income tax. If the individual withdraws the deposit at the end of one year, the accrued interest will amount to 4,000 AZN. Since the tax exemption is 200 AZN per month, the total exempt amount for the year will be 2,400 AZN. Therefore, the bank will calculate withholding tax on the remaining 1,600 AZN (4,000 – 2,400). (The amounts mentioned are theoretical and not practical.)
In another example, if an individual deposits 40,000 AZN at 10% annual interest for a period of 2 years and receives the deposit after the contract term ends, the entire amount of accrued interest will be exempt from income tax. (The amounts mentioned are theoretical and not practical.)