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New phased income tax incentives in the private sector starting from 2026
New phased income tax incentives in the private sector starting from 2026
The 7-year income tax incentives for individuals working in the private sector ended at the end of 2025.
Amendments to the Tax Code related to this came into effect on January 1, 2026. From this date, new phased incentives for income tax for individuals in the private sector outside the oil and gas industry are being implemented. The goal is to preserve the results of reforms and continue supporting the “formalization” of labor income. Therefore, by applying a lower tax burden to lower incomes, salaries in the private sector outside the oil and gas sector will be gradually and progressively taxed.
Depending on monthly income: incomes up to 2,500 manats will be taxed at 3% in 2026, 5% in 2027, and 7% in subsequent years; incomes between 2,500–8,000 manats at 10%, and incomes above 8,000 manats at 14%. In this case, if an employee’s monthly income is up to 2,500 manats, the 200-manat portion of the income will remain exempt from income tax.
Expert Nusrat Khalilov explains how personal income tax will be calculated from 2026.
According to current legislation, the following mandatory payments are deducted from salaries:
1. Personal income tax — funds paid to the state budget based on the individual’s income according to established rules and rates.
2. Mandatory state social insurance contributions — payments to the insurer that form the individual’s pension capital and grant the right to use prescribed benefits.
3. Unemployment insurance contributions — a form of compensation for lost wages in prescribed situations.
4. Mandatory health insurance contributions — payments that provide access to included health services, primary healthcare, and emergency and urgent medical assistance.
The 7-year income tax incentives for individuals working in the private sector ended at the end of 2025.
Amendments to the Tax Code related to this came into effect on January 1, 2026. From this date, new phased incentives for income tax for individuals in the private sector outside the oil and gas industry are being implemented. The goal is to preserve the results of reforms and continue supporting the “formalization” of labor income. Therefore, by applying a lower tax burden to lower incomes, salaries in the private sector outside the oil and gas sector will be gradually and progressively taxed.
Depending on monthly income: incomes up to 2,500 manats will be taxed at 3% in 2026, 5% in 2027, and 7% in subsequent years; incomes between 2,500–8,000 manats at 10%, and incomes above 8,000 manats at 14%. In this case, if an employee’s monthly income is up to 2,500 manats, the 200-manat portion of the income will remain exempt from income tax.
Expert Nusrat Khalilov explains how personal income tax will be calculated from 2026.
According to current legislation, the following mandatory payments are deducted from salaries:
1. Personal income tax — funds paid to the state budget based on the individual’s income according to established rules and rates.
2. Mandatory state social insurance contributions — payments to the insurer that form the individual’s pension capital and grant the right to use prescribed benefits.
3. Unemployment insurance contributions — a form of compensation for lost wages in prescribed situations.
4. Mandatory health insurance contributions — payments that provide access to included health services, primary healthcare, and emergency and urgent medical assistance.