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Application of income tax incentives for micro-enterprises and the requirement for average monthly number of employees
Application of income tax incentives for micro-enterprises and the requirement for average monthly number of employees
We inform you that, according to the Decree of the President of the Republic of Azerbaijan regarding the implementation of the Law of the Republic of Azerbaijan No. 1033-VIQD dated December 5, 2023, “On Amendments to the Tax Code of the Republic of Azerbaijan” and the regulation of related issues, these amendments came into force on January 1, 2024.
Please note that, in accordance with Article 106.1.20 of the Tax Code, a 75% tax concession is applied to the income derived from entrepreneurial activities of legal entities that are micro-entrepreneurship subjects with an average monthly number of paid employees of no less than three and with no arrears in mandatory state social insurance contributions for the relevant year. The average monthly number of paid employees for the relevant year is determined by summing the number of employees throughout the calendar year and dividing by 12.
If a taxpayer does not meet the conditions specified in this article for the application of the tax concession, and in the following reporting year transitions from a micro-entrepreneurship entity to another category of business entity, 75% of the income tax calculated and paid based on the results of the previous three calendar years as a micro-entrepreneur is recognized as a tax concession and is deducted from the profit tax liability for the periods in which the entity belongs to another business category.
If the taxpayer conducts transactions without the transfer of goods, the tax concession established under this article does not apply to the income derived from such non-goods transactions.
In response to your inquiry, we inform you that if the taxpayer ceases operations, the average monthly number of paid employees, for the purposes of applying Articles 102.1.30 and 106.1.20 of the Tax Code, is determined based on the actual period during which activities were carried out.
We inform you that, according to the Decree of the President of the Republic of Azerbaijan regarding the implementation of the Law of the Republic of Azerbaijan No. 1033-VIQD dated December 5, 2023, “On Amendments to the Tax Code of the Republic of Azerbaijan” and the regulation of related issues, these amendments came into force on January 1, 2024.
Please note that, in accordance with Article 106.1.20 of the Tax Code, a 75% tax concession is applied to the income derived from entrepreneurial activities of legal entities that are micro-entrepreneurship subjects with an average monthly number of paid employees of no less than three and with no arrears in mandatory state social insurance contributions for the relevant year. The average monthly number of paid employees for the relevant year is determined by summing the number of employees throughout the calendar year and dividing by 12.
If a taxpayer does not meet the conditions specified in this article for the application of the tax concession, and in the following reporting year transitions from a micro-entrepreneurship entity to another category of business entity, 75% of the income tax calculated and paid based on the results of the previous three calendar years as a micro-entrepreneur is recognized as a tax concession and is deducted from the profit tax liability for the periods in which the entity belongs to another business category.
If the taxpayer conducts transactions without the transfer of goods, the tax concession established under this article does not apply to the income derived from such non-goods transactions.
In response to your inquiry, we inform you that if the taxpayer ceases operations, the average monthly number of paid employees, for the purposes of applying Articles 102.1.30 and 106.1.20 of the Tax Code, is determined based on the actual period during which activities were carried out.