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The social insurance burden on individual entrepreneurs with low monthly incomes will be reduced
The social insurance burden on individual entrepreneurs with low monthly incomes will be reduced
Change for individual entrepreneurs: Starting from January 1, they will pay a minimum of 60 AZN and a maximum of 400 AZN.
As is known, the period for calculating social insurance contributions of individual entrepreneurs under the current rates ends on January 1, 2026. Therefore, amendments to the Law “On Social Insurance” are being proposed.
According to the current law, individual entrepreneurs pay social insurance contributions equal to 50% of the minimum monthly wage in the construction sector, and 25% in other sectors (such as trade, catering, translation, accounting, and other service fields). Regional coefficients also apply (100% in Baku, 90% in Sumgayit and Ganja, 80% in other cities, 60% in district centers and settlements, and 50% in rural areas).
If no changes are made to the legislation next year, the social insurance burden on individual entrepreneurs would increase depending on the sector in which they operate. However, under the proposed amendments to the Law “On Social Insurance,” individual entrepreneurs will pay social insurance contributions at a rate of 2% of their turnover starting next year. In this case, the minimum contribution will be 15% of the minimum wage (60 AZN), and the maximum amount will be equal to the minimum wage (400 AZN).
Let’s explain the change with examples.
If a micro-entrepreneur operating in the trade sector in Baku has a monthly income of 5,000 AZN, their current monthly social insurance payment is 100 AZN. If the law is not amended, this amount would double to 200 AZN. However, under the proposed model, the social insurance contribution calculated at 2% of income (100 AZN) will remain the same as the current burden. For another micro-entrepreneur in the same field with a monthly income of 3,500 AZN, the contribution will decrease from 100 AZN to 70 AZN.
For a micro-entrepreneur working in the service sector in Baku with a monthly income of 3,000 AZN, the social insurance payment will decrease from 100 AZN to 60 AZN. In the regions, for micro-entrepreneurs in the trade sector with a monthly income of 1,500 AZN, the contribution—which would otherwise increase more than threefold—will be limited to 60 AZN.
As seen, instead of fixed standard amounts based on the minimum wage, the proposed amendments are expected to reduce the social insurance burden for individual entrepreneurs with lower monthly incomes.
It should be noted that 80% of operating individual entrepreneurs classified as micro-businesses have annual incomes of up to 60,000 AZN.
At the same time, the social insurance contributions paid by an individual entrepreneur for themselves are not considered a tax under any circumstances; they are accumulated into the individual’s pension capital and used to provide them with a pension in the future.
Change for individual entrepreneurs: Starting from January 1, they will pay a minimum of 60 AZN and a maximum of 400 AZN.
As is known, the period for calculating social insurance contributions of individual entrepreneurs under the current rates ends on January 1, 2026. Therefore, amendments to the Law “On Social Insurance” are being proposed.
According to the current law, individual entrepreneurs pay social insurance contributions equal to 50% of the minimum monthly wage in the construction sector, and 25% in other sectors (such as trade, catering, translation, accounting, and other service fields). Regional coefficients also apply (100% in Baku, 90% in Sumgayit and Ganja, 80% in other cities, 60% in district centers and settlements, and 50% in rural areas).
If no changes are made to the legislation next year, the social insurance burden on individual entrepreneurs would increase depending on the sector in which they operate. However, under the proposed amendments to the Law “On Social Insurance,” individual entrepreneurs will pay social insurance contributions at a rate of 2% of their turnover starting next year. In this case, the minimum contribution will be 15% of the minimum wage (60 AZN), and the maximum amount will be equal to the minimum wage (400 AZN).
Let’s explain the change with examples.
If a micro-entrepreneur operating in the trade sector in Baku has a monthly income of 5,000 AZN, their current monthly social insurance payment is 100 AZN. If the law is not amended, this amount would double to 200 AZN. However, under the proposed model, the social insurance contribution calculated at 2% of income (100 AZN) will remain the same as the current burden. For another micro-entrepreneur in the same field with a monthly income of 3,500 AZN, the contribution will decrease from 100 AZN to 70 AZN.
For a micro-entrepreneur working in the service sector in Baku with a monthly income of 3,000 AZN, the social insurance payment will decrease from 100 AZN to 60 AZN. In the regions, for micro-entrepreneurs in the trade sector with a monthly income of 1,500 AZN, the contribution—which would otherwise increase more than threefold—will be limited to 60 AZN.
As seen, instead of fixed standard amounts based on the minimum wage, the proposed amendments are expected to reduce the social insurance burden for individual entrepreneurs with lower monthly incomes.
It should be noted that 80% of operating individual entrepreneurs classified as micro-businesses have annual incomes of up to 60,000 AZN.
At the same time, the social insurance contributions paid by an individual entrepreneur for themselves are not considered a tax under any circumstances; they are accumulated into the individual’s pension capital and used to provide them with a pension in the future.