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Tax withholding from rental payments and reporting obligations
Tax withholding from rental payments and reporting obligations
According to Article 150.1.6 of the Tax Code, legal entities, entrepreneurs, and individuals earning income from non-entrepreneurial activities who make payments under Articles 124, 125, or 126 are obliged to withhold tax at the source of payment. The person required to withhold tax on rental payments must transfer the tax to the budget no later than the 20th day of the month following the quarter in which the income was paid and submit a tax declaration at the source of payment to the tax authority.
We inform that, for legal entities, income from rent is considered entrepreneurial income. A legal entity leasing an object must calculate profit tax at a rate of 20% on the rental income received, after deducting expenses related to obtaining that income, submit the “Profit Tax Declaration” to the tax authority no later than March 31 of the year following the reporting year, and pay the calculated profit tax to the state budget within the same period.
According to Article 124.3 of the Tax Code, amounts paid to resident enterprises or permanent establishments of non-residents in the territory of the Republic of Azerbaijan are not subject to taxation under this article. However, a resident enterprise or a permanent establishment of a non-resident that receives income from the lease of movable and immovable property must pay profit tax at a rate of 20% on such income and declare it in its annual profit tax return.
If the lessor is a legal entity and the lessee is an individual entrepreneur, tax is not withheld at the source since the lessor is a legal entity; the lessor pays profit tax and declares it in the annual profit tax return. If both the lessor and the lessee are legal entities, tax is also not withheld at the source. In this case, the legal entity pays profit tax and declares it in the annual profit tax return.
According to Article 150.1.6 of the Tax Code, legal entities, entrepreneurs, and individuals earning income from non-entrepreneurial activities who make payments under Articles 124, 125, or 126 are obliged to withhold tax at the source of payment. The person required to withhold tax on rental payments must transfer the tax to the budget no later than the 20th day of the month following the quarter in which the income was paid and submit a tax declaration at the source of payment to the tax authority.
We inform that, for legal entities, income from rent is considered entrepreneurial income. A legal entity leasing an object must calculate profit tax at a rate of 20% on the rental income received, after deducting expenses related to obtaining that income, submit the “Profit Tax Declaration” to the tax authority no later than March 31 of the year following the reporting year, and pay the calculated profit tax to the state budget within the same period.
According to Article 124.3 of the Tax Code, amounts paid to resident enterprises or permanent establishments of non-residents in the territory of the Republic of Azerbaijan are not subject to taxation under this article. However, a resident enterprise or a permanent establishment of a non-resident that receives income from the lease of movable and immovable property must pay profit tax at a rate of 20% on such income and declare it in its annual profit tax return.
If the lessor is a legal entity and the lessee is an individual entrepreneur, tax is not withheld at the source since the lessor is a legal entity; the lessor pays profit tax and declares it in the annual profit tax return. If both the lessor and the lessee are legal entities, tax is also not withheld at the source. In this case, the legal entity pays profit tax and declares it in the annual profit tax return.