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In what case is a concession/benefit applied to a micro-entrepreneurship entity?
In what case is a concession/benefit applied to a micro-entrepreneurship entity?
On 16.10.2025, employment contracts were concluded with three employees. Two of them were hired on a full-time basis, and the third on a part-time basis. In this case, can the enterprise obtain the profit tax concession by having at least 3 employees as required by law?
The State Tax Service under the Ministry of Economy has stated that, according to the Presidential Decree on the application of the Law dated 5 December 2023 “On Amendments to the Tax Code of the Republic of Azerbaijan” and regulation of a number of related issues, these amendments came into force on 1 January 2024.
According to Article 106.1.20 of the Tax Code, a tax concession is applied to 75% of the income derived from business activity by legal entities classified as micro-entrepreneurship subjects, whose average monthly number of hired employees in the relevant year is not less than 3 and who have no debt on mandatory state social insurance contributions. The average monthly number of employees is calculated by summing the number of hired employees for the calendar year and dividing it by 12.
If the taxpayer does not meet the conditions set out in this Article for applying the tax concession and moves from micro-entrepreneurship to another entrepreneurship category in the following reporting year, a tax benefit equal to 75% of the income tax calculated and paid for the previous 3 calendar years (during which it was a micro-entrepreneur) is determined, and the taxpayer is exempt from profit tax obligations for the periods in which it belongs to another category. If non-commodity (paper) transactions are carried out, the concession does not apply to income arising from such transactions.
In response to the inquiry, it has been clarified that for the purpose of applying this concession, the legislation does not impose any restriction regarding whether employees are full-time or part-time.
On 16.10.2025, employment contracts were concluded with three employees. Two of them were hired on a full-time basis, and the third on a part-time basis. In this case, can the enterprise obtain the profit tax concession by having at least 3 employees as required by law?
The State Tax Service under the Ministry of Economy has stated that, according to the Presidential Decree on the application of the Law dated 5 December 2023 “On Amendments to the Tax Code of the Republic of Azerbaijan” and regulation of a number of related issues, these amendments came into force on 1 January 2024.
According to Article 106.1.20 of the Tax Code, a tax concession is applied to 75% of the income derived from business activity by legal entities classified as micro-entrepreneurship subjects, whose average monthly number of hired employees in the relevant year is not less than 3 and who have no debt on mandatory state social insurance contributions. The average monthly number of employees is calculated by summing the number of hired employees for the calendar year and dividing it by 12.
If the taxpayer does not meet the conditions set out in this Article for applying the tax concession and moves from micro-entrepreneurship to another entrepreneurship category in the following reporting year, a tax benefit equal to 75% of the income tax calculated and paid for the previous 3 calendar years (during which it was a micro-entrepreneur) is determined, and the taxpayer is exempt from profit tax obligations for the periods in which it belongs to another category. If non-commodity (paper) transactions are carried out, the concession does not apply to income arising from such transactions.
In response to the inquiry, it has been clarified that for the purpose of applying this concession, the legislation does not impose any restriction regarding whether employees are full-time or part-time.