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How are the incomes of an employee working in the private sector taxed?
How are the incomes of an employee working in the private sector taxed?
How is a tax benefit applied if the total calculated monthly income of an employee working in the non-oil sector exceeds 2,500 manats? For example, the total calculated income of a dismissed employee is 2,900 manats (compensation for unused leave – 1,400 manats, salary – 1,500 manats). Since the employee is an internally displaced person, they are entitled to an additional tax relief of 100 manats. In this case, how is income tax calculated?
According to the State Tax Service under the Ministry of Economy, wages and any payments or benefits received by an individual from employment, including compensation for unused leave, are considered employment income.
From January 1, 2026, to January 1, 2027, the following tax rates apply to individuals working in the non-oil and non-public sector:
up to 2,500 manats – 3%
from 2,500 to 8,000 manats – 75 manats + 10% of the amount exceeding 2,500 manats
above 8,000 manats – 625 manats + 14% of the amount exceeding 8,000 manats
According to Article 102.1.6 of the Tax Code, if the monthly income from the main place of employment does not exceed 2,500 manats, 200 manats of that income is exempt from income tax.
Additionally, under Article 102.4.5, the taxable monthly income of internally displaced persons is reduced by 100 manats. This benefit does not apply to individuals who have acquired permanent housing under housing legislation or civil law agreements.
It was also noted that when compensation for unused leave from previous years is paid, compensation for full working years is taxed separately, without being added to the salary of the payment month. In this case, the tax benefits provided under Article 102 of the Tax Code are deducted from each year’s separately calculated compensation amounts.
Basis: Articles 101 and 102 of the Tax Code
How is a tax benefit applied if the total calculated monthly income of an employee working in the non-oil sector exceeds 2,500 manats? For example, the total calculated income of a dismissed employee is 2,900 manats (compensation for unused leave – 1,400 manats, salary – 1,500 manats). Since the employee is an internally displaced person, they are entitled to an additional tax relief of 100 manats. In this case, how is income tax calculated?
According to the State Tax Service under the Ministry of Economy, wages and any payments or benefits received by an individual from employment, including compensation for unused leave, are considered employment income.
From January 1, 2026, to January 1, 2027, the following tax rates apply to individuals working in the non-oil and non-public sector:
up to 2,500 manats – 3%
from 2,500 to 8,000 manats – 75 manats + 10% of the amount exceeding 2,500 manats
above 8,000 manats – 625 manats + 14% of the amount exceeding 8,000 manats
According to Article 102.1.6 of the Tax Code, if the monthly income from the main place of employment does not exceed 2,500 manats, 200 manats of that income is exempt from income tax.
Additionally, under Article 102.4.5, the taxable monthly income of internally displaced persons is reduced by 100 manats. This benefit does not apply to individuals who have acquired permanent housing under housing legislation or civil law agreements.
It was also noted that when compensation for unused leave from previous years is paid, compensation for full working years is taxed separately, without being added to the salary of the payment month. In this case, the tax benefits provided under Article 102 of the Tax Code are deducted from each year’s separately calculated compensation amounts.
Basis: Articles 101 and 102 of the Tax Code