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Will a tax benefit be granted to the entrepreneur who ceased operations in the first quarter of this year?
Will a tax benefit be granted to the entrepreneur who ceased operations in the first quarter of this year?
In January 2025, I was engaged in entrepreneurial activity and calculated salaries for my employees. In February, since there was no activity, I did not calculate salaries for my employees and terminated each of their employment contracts. As an entrepreneur, I ceased my activity in March. I would like to know whether, according to Article 102.1.30 of the Tax Code, I can indicate 75 percent of the income I earned from entrepreneurial activity for the relevant year as a tax exemption in the income tax return.
The State Tax Service under the Ministry of Economy has stated that, in accordance with the Decree of the President of the Republic of Azerbaijan “On the application 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 on the regulation of a number of related issues,” these amendments entered into force on January 1, 2024.
According to Article 106.1.20 of the Tax Code, a 75 percent exemption on income derived from entrepreneurial activity applies to legal entities that are classified as micro-entrepreneurship subjects, provided their average number of monthly employees for the relevant year is not less than three, and they have no outstanding debts for mandatory state social insurance contributions. The average monthly number of employees for the relevant year is determined by summing the number of employees during the calendar year and dividing by 12.
If a taxpayer does not meet the conditions specified in this article and in the following reporting year moves from the micro-entrepreneurship category to another entrepreneurship category, then, based on the results of the previous three calendar years during which the legal entity was a micro-entrepreneur, a tax exemption equal to 75 percent of the income tax calculated and paid is applied, and this amount is deducted from the profit tax liability for the periods during which the entity is classified under another entrepreneurship category. In cases where the taxpayer conducts non-goods transactions, the tax exemption specified in this article does not apply to income derived from such transactions.
In response to the inquiry, it is reported that if the taxpayer ceases activity, for the purposes of applying Articles 102.1.30 and 106.1.20 of the Tax Code, the average monthly number of employees is determined in accordance with the actual period of activity. Since you did not have employees in March, the average monthly number of employees will be less than three, and therefore you will not be entitled to use the exemption.
In January 2025, I was engaged in entrepreneurial activity and calculated salaries for my employees. In February, since there was no activity, I did not calculate salaries for my employees and terminated each of their employment contracts. As an entrepreneur, I ceased my activity in March. I would like to know whether, according to Article 102.1.30 of the Tax Code, I can indicate 75 percent of the income I earned from entrepreneurial activity for the relevant year as a tax exemption in the income tax return.
The State Tax Service under the Ministry of Economy has stated that, in accordance with the Decree of the President of the Republic of Azerbaijan “On the application 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 on the regulation of a number of related issues,” these amendments entered into force on January 1, 2024.
According to Article 106.1.20 of the Tax Code, a 75 percent exemption on income derived from entrepreneurial activity applies to legal entities that are classified as micro-entrepreneurship subjects, provided their average number of monthly employees for the relevant year is not less than three, and they have no outstanding debts for mandatory state social insurance contributions. The average monthly number of employees for the relevant year is determined by summing the number of employees during the calendar year and dividing by 12.
If a taxpayer does not meet the conditions specified in this article and in the following reporting year moves from the micro-entrepreneurship category to another entrepreneurship category, then, based on the results of the previous three calendar years during which the legal entity was a micro-entrepreneur, a tax exemption equal to 75 percent of the income tax calculated and paid is applied, and this amount is deducted from the profit tax liability for the periods during which the entity is classified under another entrepreneurship category. In cases where the taxpayer conducts non-goods transactions, the tax exemption specified in this article does not apply to income derived from such transactions.
In response to the inquiry, it is reported that if the taxpayer ceases activity, for the purposes of applying Articles 102.1.30 and 106.1.20 of the Tax Code, the average monthly number of employees is determined in accordance with the actual period of activity. Since you did not have employees in March, the average monthly number of employees will be less than three, and therefore you will not be entitled to use the exemption.