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What will change in the tax code?
What will change in the tax code?
As reported, a number of significant innovations are expected in the Tax Code in 2026. These include changes to tax rates and the tax base, new approaches, administrative oversight, and other related matters.
Starting from 2026, major amendments are planned to be introduced into the Tax Code in the following areas: tax control and its forms; rules for registration and deregistration; submission of electronic invoices; personal income tax and corporate profit tax; depreciation deductions; value-added tax, excise taxes, property, land, road, and mining taxes; simplified tax; requirements for obtaining a “Distinction Mark,” and other related directions.
— The amendments also envisage introducing the concept of “horizontal monitoring” into the Tax Code.
The purpose of horizontal monitoring is to ensure a more modern and effective mechanism for supervising the accurate calculation, timely and full payment of taxes. For taxpayers admitted to horizontal monitoring, field tax audits will not be conducted for the monitoring periods — except for desk audits and certain exceptional cases. Separate articles will define the rules for conducting monitoring, its scope, the covered taxpayers, their obligations, grounds for exclusion from monitoring, and financial sanctions.
— According to the changes in the deadlines for submitting electronic invoices,
unlike other types of work and services, electronic invoices for international transportation services must be submitted before the start of the transportation services, and for services provided on a regular and permanent basis — at the start of service provision for each calendar month.
Electronic invoices for advance payments must be submitted not on the day the advance is received, but before the moment of receiving it. In addition to goods purchased within the territory of the Republic of Azerbaijan by foreigners and stateless persons that are not intended for production or commercial purposes, a unified electronic invoice form for the refund of paid value-added tax is approved by the relevant authority for medical services provided to foreigners and stateless persons by medical institutions and physical persons engaged in private medical practice.
— According to the planned amendments regarding personal income tax,
starting from January 1, 2026, income tax will be applied to the wages of individuals working in enterprises that do not operate in the oil and gas sector and belong to the non-state sector, and the tax rates will be increased gradually. Until January 1, 2027, the tax rates are set as follows:
for income up to 2,500 manats — 3%;
for income from 2,500 to 8,000 manats — 75 manats + 10% of the amount exceeding 2,500 manats;
for income above 8,000 manats — 625 manats + 14% of the amount exceeding 8,000 manats.
Starting from January 1, 2027, the tax rates will be:
5%; 125 manats + 10% of the amount between 2,500 and 8,000 manats; and 675 manats + 14% of the amount exceeding 8,000 manats.
From January 1, 2028, the tax rates for these individuals are planned to be:
7%; 175 manats + 10% of the amount between 2,500 and 8,000 manats; and 725 manats + 14% of the amount exceeding 8,000 manats.
— A change is envisaged in the definition of the object of taxation for profit tax.
Except for the funds allocated under the state investment program to state-owned enterprises for investment projects meeting the criteria defined by the relevant authority, the amount of depreciation calculated in accordance with Article 114 of this Code on fixed assets and intangible assets acquired or installed at the expense of other funds allocated from the state budget and attributed to assets (excluding depreciation calculated on repair costs carried out at the taxpayer’s own expense and added to the value of fixed assets) shall be considered the object of taxation.
— Rules for calculating and deducting depreciation allowances for taxpayers admitted to horizontal monitoring are also introduced.
Depreciation allowances for taxpayers included in horizontal monitoring shall be calculated using the straight-line method or the declining balance method, while other taxpayers shall use only the declining balance method (excluding depreciation of intangible assets). The list of assets for which the declining balance or straight-line methods should be applied in calculating annual depreciation rates has been defined, with several additions and amendments made.
— Fish products of foreign origin will be excluded from agricultural products subject to the trade markup used as the taxable base for VAT during wholesale and retail sales for a period of 5 years starting from January 1, 2022.
— The rate of the simplified tax has been amended, and for taxable operations formed based on non-cash payments made via POS terminals for services rendered to the population, a 6% rate is set for a period of 3 years starting from January 1, 2026. Non-cash payments must be made through POS terminals integrated into the unified operating system of cash registers.
— When determining the volume of taxable operations for the purposes of simplified tax and VAT, the turnover formed through non-cash payments via POS terminals for retail trade and services provided to persons not registered with the tax authority is taken into account with a coefficient of 0.5.
As reported, a number of significant innovations are expected in the Tax Code in 2026. These include changes to tax rates and the tax base, new approaches, administrative oversight, and other related matters.
Starting from 2026, major amendments are planned to be introduced into the Tax Code in the following areas: tax control and its forms; rules for registration and deregistration; submission of electronic invoices; personal income tax and corporate profit tax; depreciation deductions; value-added tax, excise taxes, property, land, road, and mining taxes; simplified tax; requirements for obtaining a “Distinction Mark,” and other related directions.
— The amendments also envisage introducing the concept of “horizontal monitoring” into the Tax Code.
The purpose of horizontal monitoring is to ensure a more modern and effective mechanism for supervising the accurate calculation, timely and full payment of taxes. For taxpayers admitted to horizontal monitoring, field tax audits will not be conducted for the monitoring periods — except for desk audits and certain exceptional cases. Separate articles will define the rules for conducting monitoring, its scope, the covered taxpayers, their obligations, grounds for exclusion from monitoring, and financial sanctions.
— According to the changes in the deadlines for submitting electronic invoices,
unlike other types of work and services, electronic invoices for international transportation services must be submitted before the start of the transportation services, and for services provided on a regular and permanent basis — at the start of service provision for each calendar month.
Electronic invoices for advance payments must be submitted not on the day the advance is received, but before the moment of receiving it. In addition to goods purchased within the territory of the Republic of Azerbaijan by foreigners and stateless persons that are not intended for production or commercial purposes, a unified electronic invoice form for the refund of paid value-added tax is approved by the relevant authority for medical services provided to foreigners and stateless persons by medical institutions and physical persons engaged in private medical practice.
— According to the planned amendments regarding personal income tax,
starting from January 1, 2026, income tax will be applied to the wages of individuals working in enterprises that do not operate in the oil and gas sector and belong to the non-state sector, and the tax rates will be increased gradually. Until January 1, 2027, the tax rates are set as follows:
for income up to 2,500 manats — 3%;
for income from 2,500 to 8,000 manats — 75 manats + 10% of the amount exceeding 2,500 manats;
for income above 8,000 manats — 625 manats + 14% of the amount exceeding 8,000 manats.
Starting from January 1, 2027, the tax rates will be:
5%; 125 manats + 10% of the amount between 2,500 and 8,000 manats; and 675 manats + 14% of the amount exceeding 8,000 manats.
From January 1, 2028, the tax rates for these individuals are planned to be:
7%; 175 manats + 10% of the amount between 2,500 and 8,000 manats; and 725 manats + 14% of the amount exceeding 8,000 manats.
— A change is envisaged in the definition of the object of taxation for profit tax.
Except for the funds allocated under the state investment program to state-owned enterprises for investment projects meeting the criteria defined by the relevant authority, the amount of depreciation calculated in accordance with Article 114 of this Code on fixed assets and intangible assets acquired or installed at the expense of other funds allocated from the state budget and attributed to assets (excluding depreciation calculated on repair costs carried out at the taxpayer’s own expense and added to the value of fixed assets) shall be considered the object of taxation.
— Rules for calculating and deducting depreciation allowances for taxpayers admitted to horizontal monitoring are also introduced.
Depreciation allowances for taxpayers included in horizontal monitoring shall be calculated using the straight-line method or the declining balance method, while other taxpayers shall use only the declining balance method (excluding depreciation of intangible assets). The list of assets for which the declining balance or straight-line methods should be applied in calculating annual depreciation rates has been defined, with several additions and amendments made.
— Fish products of foreign origin will be excluded from agricultural products subject to the trade markup used as the taxable base for VAT during wholesale and retail sales for a period of 5 years starting from January 1, 2022.
— The rate of the simplified tax has been amended, and for taxable operations formed based on non-cash payments made via POS terminals for services rendered to the population, a 6% rate is set for a period of 3 years starting from January 1, 2026. Non-cash payments must be made through POS terminals integrated into the unified operating system of cash registers.
— When determining the volume of taxable operations for the purposes of simplified tax and VAT, the turnover formed through non-cash payments via POS terminals for retail trade and services provided to persons not registered with the tax authority is taken into account with a coefficient of 0.5.