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The tax rate on dividends received from abroad has been reduced
The tax rate on dividends received from abroad has been reduced
“There is an approach in economics that suggests tax revenues can be increased by lowering tax rates. In our practice, during audits, we observed that when taxpayers declared dividends, large amounts had remained in their net profits for many years. In reality, these funds were used in one way or another, including being withdrawn in cash and through other methods, but were not subject to taxation. After the tax rate on dividends was reduced from 10% to 5%, resident enterprises began to declare dividends in very large amounts.”
This opinion was voiced by tax expert Anar Bayramov. According to him, the reduction of the tax rate stimulated an increase in tax revenues. Starting from this year, non-residents will also be able to benefit from this incentive.
“Dividends paid by taxpayers who are not VAT payers are generally exempt from tax. However, previously no incentives were provided for dividends earned by individuals who held shares in non-resident enterprises, that is, foreign companies. If an individual had an ownership stake in a non-resident enterprise outside the country, the dividend paid to them was taxed at a rate of 14 percent. Practice shows that, except for cases subject to strict control, in many instances individuals with ownership stakes abroad did not bring these amounts into Azerbaijan. For this reason, starting from this year, dividends earned abroad by such individuals will also be taxed at a rate of 5%,” A. Bayramov emphasized.
According to the expert, entrepreneurs or individuals holding shares in foreign companies will be interested in declaring their dividends: “By bringing foreign currency into the country and paying tax at a rate of 5%, they will make their income transparent and be able to use it freely. I believe this is one of the progressive changes.”
“There is an approach in economics that suggests tax revenues can be increased by lowering tax rates. In our practice, during audits, we observed that when taxpayers declared dividends, large amounts had remained in their net profits for many years. In reality, these funds were used in one way or another, including being withdrawn in cash and through other methods, but were not subject to taxation. After the tax rate on dividends was reduced from 10% to 5%, resident enterprises began to declare dividends in very large amounts.”
This opinion was voiced by tax expert Anar Bayramov. According to him, the reduction of the tax rate stimulated an increase in tax revenues. Starting from this year, non-residents will also be able to benefit from this incentive.
“Dividends paid by taxpayers who are not VAT payers are generally exempt from tax. However, previously no incentives were provided for dividends earned by individuals who held shares in non-resident enterprises, that is, foreign companies. If an individual had an ownership stake in a non-resident enterprise outside the country, the dividend paid to them was taxed at a rate of 14 percent. Practice shows that, except for cases subject to strict control, in many instances individuals with ownership stakes abroad did not bring these amounts into Azerbaijan. For this reason, starting from this year, dividends earned abroad by such individuals will also be taxed at a rate of 5%,” A. Bayramov emphasized.
According to the expert, entrepreneurs or individuals holding shares in foreign companies will be interested in declaring their dividends: “By bringing foreign currency into the country and paying tax at a rate of 5%, they will make their income transparent and be able to use it freely. I believe this is one of the progressive changes.”