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Rules for Applying 75% Income Tax Exemption for Micro-Entrepreneurs
Rules for Applying 75% Income Tax Exemption for Micro-Entrepreneurs
We inform you that according to the Decree of the President of the Republic of Azerbaijan “On 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 a number of related issues,” these amendments entered into force on January 1, 2024.
Pursuant to Article 106.1.20 of the Tax Code, 75% of the income derived from entrepreneurial activities of legal entities classified as micro-entrepreneurship subjects, provided that their average monthly number of employees during the respective year is not less than three and they have no outstanding mandatory state social insurance contributions, is exempt from profit tax.
The average monthly number of employees for the respective year is determined by dividing the total number of employees during the calendar year by 12.
If the taxpayer does not meet the conditions set forth in this article and in the following reporting year transfers from the category of micro-entrepreneurship to another category, then 75% of the profit tax calculated and paid for the previous three calendar years during which the legal entity qualified as a micro-entrepreneur is credited against its profit tax liability for the periods when it belongs to another entrepreneurship category.
In cases where non-commodity transactions are carried out by the taxpayer, the tax benefit provided under this article shall not apply to income derived from such transactions.
In response to your inquiry, we inform you that 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.
We inform you that according to the Decree of the President of the Republic of Azerbaijan “On 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 a number of related issues,” these amendments entered into force on January 1, 2024.
Pursuant to Article 106.1.20 of the Tax Code, 75% of the income derived from entrepreneurial activities of legal entities classified as micro-entrepreneurship subjects, provided that their average monthly number of employees during the respective year is not less than three and they have no outstanding mandatory state social insurance contributions, is exempt from profit tax.
The average monthly number of employees for the respective year is determined by dividing the total number of employees during the calendar year by 12.
If the taxpayer does not meet the conditions set forth in this article and in the following reporting year transfers from the category of micro-entrepreneurship to another category, then 75% of the profit tax calculated and paid for the previous three calendar years during which the legal entity qualified as a micro-entrepreneur is credited against its profit tax liability for the periods when it belongs to another entrepreneurship category.
In cases where non-commodity transactions are carried out by the taxpayer, the tax benefit provided under this article shall not apply to income derived from such transactions.
In response to your inquiry, we inform you that 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.