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What tax incentives are applied in the field of culture?
What tax incentives are applied in the field of culture?
The topic is commented on by expert Nihad Javadov. Starting from July 1, new tax incentives have been introduced to support the development of theater, cinema, museum, and symphonic orchestra activities. These new incentives may lead to a reduction in the cost of cultural services and, consequently, a decrease in prices. In addition, the purpose of the amendments is to attract more investment into this field and to stimulate the growth of cultural services.
One of the innovations is the introduction of the “VAT cashback” mechanism for cultural services. According to the amendments made to the Tax Code, 50% of the VAT paid in a non-cash form for services in this field will be refunded to individuals. Enterprises and producers are exempt from 90% of profit and income tax for a period of 5 years. Previously, this exemption was 75%.
Example 1: “XXX” LLC operates in the film sector. In July 2025, a total of 80,000 manats is spent on the production of a new movie. In September, the movie released in cinemas generates revenues of 230,000 manats. If before July 1, 2025, the company paid 7,500 manats profit tax under a 75% exemption, from that date onwards the amount will be 3,000 manats:
(230,000 – 80,000) × 20% = 30,000 manats;
30,000 – (30,000 × 75%) = 7,500 manats;
30,000 – (30,000 × 90%) = 3,000 manats.
From January 1, 2025, 75% of the income (before deducting expenses) of individuals with a turnover of up to 45,000 manats from certain activities has been exempted from income tax. Cultural activities are also included in this category. In addition, the land on which cultural facilities are located is exempt from land tax, and royalty income derived from copyright is exempt from a 14% tax rate for a period of 5 years.
Example 2: An individual entrepreneur operates in the field of composition at a recording studio and sells the copyright of a musical work to “XXX” LLC for 10,000 manats for publishing on the “YouTube” platform. In this case, the income is considered royalty income of the entrepreneur. However, according to the amendments to the Tax Code, the 14% withholding tax does not apply.
It should also be noted that the number of entities benefiting from these incentives has increased – from 2 to 6. The list now includes theaters, museums, symphonic orchestras, and film producers. From an analytical perspective, such large-scale tax incentives boost economic activity in the non-oil sector, contribute to the creation of new jobs, and strengthen the social status of the creative class. This approach leads to an increase in the official turnover and economic weight of the sector, fosters a competitive and innovative environment for creative initiatives, and further strengthens the institutional framework for promoting Azerbaijan’s cultural potential on international platforms.
The topic is commented on by expert Nihad Javadov. Starting from July 1, new tax incentives have been introduced to support the development of theater, cinema, museum, and symphonic orchestra activities. These new incentives may lead to a reduction in the cost of cultural services and, consequently, a decrease in prices. In addition, the purpose of the amendments is to attract more investment into this field and to stimulate the growth of cultural services.
One of the innovations is the introduction of the “VAT cashback” mechanism for cultural services. According to the amendments made to the Tax Code, 50% of the VAT paid in a non-cash form for services in this field will be refunded to individuals. Enterprises and producers are exempt from 90% of profit and income tax for a period of 5 years. Previously, this exemption was 75%.
Example 1: “XXX” LLC operates in the film sector. In July 2025, a total of 80,000 manats is spent on the production of a new movie. In September, the movie released in cinemas generates revenues of 230,000 manats. If before July 1, 2025, the company paid 7,500 manats profit tax under a 75% exemption, from that date onwards the amount will be 3,000 manats:
(230,000 – 80,000) × 20% = 30,000 manats;
30,000 – (30,000 × 75%) = 7,500 manats;
30,000 – (30,000 × 90%) = 3,000 manats.
From January 1, 2025, 75% of the income (before deducting expenses) of individuals with a turnover of up to 45,000 manats from certain activities has been exempted from income tax. Cultural activities are also included in this category. In addition, the land on which cultural facilities are located is exempt from land tax, and royalty income derived from copyright is exempt from a 14% tax rate for a period of 5 years.
Example 2: An individual entrepreneur operates in the field of composition at a recording studio and sells the copyright of a musical work to “XXX” LLC for 10,000 manats for publishing on the “YouTube” platform. In this case, the income is considered royalty income of the entrepreneur. However, according to the amendments to the Tax Code, the 14% withholding tax does not apply.
It should also be noted that the number of entities benefiting from these incentives has increased – from 2 to 6. The list now includes theaters, museums, symphonic orchestras, and film producers. From an analytical perspective, such large-scale tax incentives boost economic activity in the non-oil sector, contribute to the creation of new jobs, and strengthen the social status of the creative class. This approach leads to an increase in the official turnover and economic weight of the sector, fosters a competitive and innovative environment for creative initiatives, and further strengthens the institutional framework for promoting Azerbaijan’s cultural potential on international platforms.