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How is tax calculated on the amount paid for renting a truck from an individual?
How is tax calculated on the amount paid for renting a truck from an individual?
We would like to rent a truck from an individual who is not registered with the tax authorities (an ordinary citizen). We have agreed that the value of the lease agreement will be 3,000 manats, including withholding tax. Our question is: how much tax should be withheld at the source under this agreement, and what amount of rent should be paid to the lessor after the tax is withheld?
According to the State Tax Service under the Ministry of Economy, pursuant to Article 124.1 of the Tax Code, income in the form of rent for movable and immovable property is subject to withholding tax at the rate of 14 percent if it is obtained from sources in Azerbaijan in accordance with Article 13.2.16 of the Code.
Based on the above, when rent is paid to a resident individual by persons registered as taxpayers, the tax liability on rental income is fulfilled by the lessee through withholding tax at the source at a rate of 14 percent. If the person paying the rent is not registered as a taxpayer, the individual lessor himself or a tax agent appointed by him must pay the tax at a rate of 14 percent and register for tax purposes and submit a declaration in accordance with Articles 33 and 149 of the Tax Code.
According to Article 58.1 of the Tax Code, if the amount of tax (including withholding tax) reported in the tax return is reduced compared to the amount that should have been reported, or if the tax payable to the budget has been concealed by failing to submit a report, a financial sanction of 50 percent of the reduced or concealed tax amount shall be applied to the taxpayer (except for the case provided for in Article 58.1-1 of the Code), excluding additional tax assessed as a result of a desk tax audit.
If the calculated tax amounts are not paid within the deadlines established by the Tax Code, interest of 0.1 percent of the unpaid tax amount shall be charged for each day of delay after the due date. This interest applies to the entire overdue period but not for more than one year.
In response to the inquiry, it was stated that from the rental payment of 3,000 manats, withholding tax of 420 manats (3,000 × 14%) must be transferred to the state budget, while 2,580 manats (3,000 – 420) should be paid to the individual.
You can ознакомиться with the declaration forms and the rules for filling them out in the “Declarations” section on the website www.taxes.gov.az:
https://www.taxes.gov.az/az/page/beyanname
We would like to rent a truck from an individual who is not registered with the tax authorities (an ordinary citizen). We have agreed that the value of the lease agreement will be 3,000 manats, including withholding tax. Our question is: how much tax should be withheld at the source under this agreement, and what amount of rent should be paid to the lessor after the tax is withheld?
According to the State Tax Service under the Ministry of Economy, pursuant to Article 124.1 of the Tax Code, income in the form of rent for movable and immovable property is subject to withholding tax at the rate of 14 percent if it is obtained from sources in Azerbaijan in accordance with Article 13.2.16 of the Code.
Based on the above, when rent is paid to a resident individual by persons registered as taxpayers, the tax liability on rental income is fulfilled by the lessee through withholding tax at the source at a rate of 14 percent. If the person paying the rent is not registered as a taxpayer, the individual lessor himself or a tax agent appointed by him must pay the tax at a rate of 14 percent and register for tax purposes and submit a declaration in accordance with Articles 33 and 149 of the Tax Code.
According to Article 58.1 of the Tax Code, if the amount of tax (including withholding tax) reported in the tax return is reduced compared to the amount that should have been reported, or if the tax payable to the budget has been concealed by failing to submit a report, a financial sanction of 50 percent of the reduced or concealed tax amount shall be applied to the taxpayer (except for the case provided for in Article 58.1-1 of the Code), excluding additional tax assessed as a result of a desk tax audit.
If the calculated tax amounts are not paid within the deadlines established by the Tax Code, interest of 0.1 percent of the unpaid tax amount shall be charged for each day of delay after the due date. This interest applies to the entire overdue period but not for more than one year.
In response to the inquiry, it was stated that from the rental payment of 3,000 manats, withholding tax of 420 manats (3,000 × 14%) must be transferred to the state budget, while 2,580 manats (3,000 – 420) should be paid to the individual.
You can ознакомиться with the declaration forms and the rules for filling them out in the “Declarations” section on the website www.taxes.gov.az:
https://www.taxes.gov.az/az/page/beyanname