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Taxes and incentives applied to private sector employees – EXAMPLES
Taxes and incentives applied to private sector employees – EXAMPLES
As is known, starting from January 1, 2026, personal income tax will be calculated on the salaries of employees working in the private sector. Labor law expert Kəmalə Yusifova has explained the conditions for calculating taxes and social contributions under the new rules.
In 2026 and the following years, monthly employment income of individuals working for non-state sector taxpayers that do not operate in the oil and gas industry will be taxed at the following rates:
From January 1, 2026 to January 1, 2027:
3% on monthly income up to 2,500 manats;
75 manats + 10% of the amount between 2,500 and 8,000 manats;
625 manats + 14% of the amount exceeding 8,000 manats.
From January 1, 2027 to January 1, 2028:
5% on monthly income up to 2,500 manats;
125 manats + 10% of the amount between 2,500 and 8,000 manats;
675 manats + 14% of the amount exceeding 8,000 manats.
From January 1, 2028 onward:
7% on monthly income up to 2,500 manats;
175 manats + 10% of the amount between 2,500 and 8,000 manats;
725 manats + 14% of the amount exceeding 8,000 manats.
According to Articles 102.1-1, 102.2, 102.3, 102.4 and 102.5 of the Tax Code, income tax exemptions and allowances apply to salaried employees:
The taxable monthly income of parents, widows (widowers), and children of persons granted martyr status is reduced by 800 manats.
The taxable monthly income of the following individuals is reduced by 400 manats:
• National Heroes of Azerbaijan;
• Persons with war-related disabilities;
• Widows (widowers) and children of deceased soldiers (excluding those granted martyr status);
• Persons awarded orders and medals for dedicated service in the rear during 1941–1945;
• Individuals officially recognized as war veterans;
• Persons who suffered illness due to the Chernobyl Nuclear Power Plant accident or other radiation accidents at civilian or military nuclear facilities.
A reduction of 200 manats applies to persons with 61–100% disability (excluding war-related disability), children with disabilities, and one of the parents (at their discretion), spouse, guardian, or custodian caring for and living with a severely disabled child or a person with 81–100% disability.
A reduction of 100 manats applies to:
• Parents of deceased soldiers (excluding martyr status cases), as well as parents and spouses of civil servants who died in the line of duty (provided the spouse has not remarried);
• Military personnel sent to Afghanistan or other combat zones and those called up for military training;
• Internally displaced persons and those equated to them.
Regardless of the degree of kinship, one of the spouses supporting at least three dependents, including full-time students under the age of 23, receives a 50-manat reduction in taxable monthly income.
Income Tax Calculation Examples for 2026
Assuming the portion subject to State Social Protection Fund (SSPF) contributions remains unchanged, deductions will be as follows:
Example 1: An employee working in the private sector earns 1,500 manats per month with no tax benefits.
Income tax: (1,500 – 200) × 3% = 39 manats
Mandatory state social insurance: 6 + (1,500 – 200) × 10% = 136 manats
Mandatory health insurance: 1,500 × 2% = 30 manats
Unemployment insurance: 1,500 × 0.5% = 7.5 manats
Net salary: 1,287.5 manats
Example 2: An employee earns 3,000 manats per month and has a war-related disability (400-manat deduction).
Income tax: 75 + (3,000 – 2,500 – 400) × 10% = 85 manats
Mandatory social insurance: 286 manats
Health insurance: 52.5 manats
Unemployment insurance: 15 manats
Net salary: 2,561.5 manats
Example 3: An employee earns 8,500 manats per month; main workplace; internally displaced person; war veteran; supports 3 children (400 + 50 manat deduction applied).
Income tax: 625 + (8,500 – 8,000 – 400 – 50) × 14% = 632 manats
Mandatory social insurance: 836 manats
Health insurance: 80 manats
Unemployment insurance: 42.5 manats
Net salary: 6,909.5 manats.
As is known, starting from January 1, 2026, personal income tax will be calculated on the salaries of employees working in the private sector. Labor law expert Kəmalə Yusifova has explained the conditions for calculating taxes and social contributions under the new rules.
In 2026 and the following years, monthly employment income of individuals working for non-state sector taxpayers that do not operate in the oil and gas industry will be taxed at the following rates:
From January 1, 2026 to January 1, 2027:
3% on monthly income up to 2,500 manats;
75 manats + 10% of the amount between 2,500 and 8,000 manats;
625 manats + 14% of the amount exceeding 8,000 manats.
From January 1, 2027 to January 1, 2028:
5% on monthly income up to 2,500 manats;
125 manats + 10% of the amount between 2,500 and 8,000 manats;
675 manats + 14% of the amount exceeding 8,000 manats.
From January 1, 2028 onward:
7% on monthly income up to 2,500 manats;
175 manats + 10% of the amount between 2,500 and 8,000 manats;
725 manats + 14% of the amount exceeding 8,000 manats.
According to Articles 102.1-1, 102.2, 102.3, 102.4 and 102.5 of the Tax Code, income tax exemptions and allowances apply to salaried employees:
The taxable monthly income of parents, widows (widowers), and children of persons granted martyr status is reduced by 800 manats.
The taxable monthly income of the following individuals is reduced by 400 manats:
• National Heroes of Azerbaijan;
• Persons with war-related disabilities;
• Widows (widowers) and children of deceased soldiers (excluding those granted martyr status);
• Persons awarded orders and medals for dedicated service in the rear during 1941–1945;
• Individuals officially recognized as war veterans;
• Persons who suffered illness due to the Chernobyl Nuclear Power Plant accident or other radiation accidents at civilian or military nuclear facilities.
A reduction of 200 manats applies to persons with 61–100% disability (excluding war-related disability), children with disabilities, and one of the parents (at their discretion), spouse, guardian, or custodian caring for and living with a severely disabled child or a person with 81–100% disability.
A reduction of 100 manats applies to:
• Parents of deceased soldiers (excluding martyr status cases), as well as parents and spouses of civil servants who died in the line of duty (provided the spouse has not remarried);
• Military personnel sent to Afghanistan or other combat zones and those called up for military training;
• Internally displaced persons and those equated to them.
Regardless of the degree of kinship, one of the spouses supporting at least three dependents, including full-time students under the age of 23, receives a 50-manat reduction in taxable monthly income.
Income Tax Calculation Examples for 2026
Assuming the portion subject to State Social Protection Fund (SSPF) contributions remains unchanged, deductions will be as follows:
Example 1: An employee working in the private sector earns 1,500 manats per month with no tax benefits.
Income tax: (1,500 – 200) × 3% = 39 manats
Mandatory state social insurance: 6 + (1,500 – 200) × 10% = 136 manats
Mandatory health insurance: 1,500 × 2% = 30 manats
Unemployment insurance: 1,500 × 0.5% = 7.5 manats
Net salary: 1,287.5 manats
Example 2: An employee earns 3,000 manats per month and has a war-related disability (400-manat deduction).
Income tax: 75 + (3,000 – 2,500 – 400) × 10% = 85 manats
Mandatory social insurance: 286 manats
Health insurance: 52.5 manats
Unemployment insurance: 15 manats
Net salary: 2,561.5 manats
Example 3: An employee earns 8,500 manats per month; main workplace; internally displaced person; war veteran; supports 3 children (400 + 50 manat deduction applied).
Income tax: 625 + (8,500 – 8,000 – 400 – 50) × 14% = 632 manats
Mandatory social insurance: 836 manats
Health insurance: 80 manats
Unemployment insurance: 42.5 manats
Net salary: 6,909.5 manats.