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In what case is a tax exemption applied to a sole proprietor with 3 employees?
In what case is a tax exemption applied to a sole proprietor with 3 employees?
I provide training services as a sole proprietor. My annual turnover is approximately 20,000–30,000 AZN. Currently, I pay income tax at a rate of 20% of my earnings. I would like clarification regarding the application of the 75% tax exemption provided under Article 102.1.30 of the Tax Code: If I employ 3 workers for only 8 months during the calendar year, will I qualify for this exemption? Does the fact that employees work part-time affect eligibility? Can an exemption entitlement earned in the current year be applied retrospectively to previous years?
According to the State Tax Service under the Ministry of Economy, in this case the taxpayer does not qualify for the tax exemption provided under Article 102.1.30 of the Tax Code. The article requires that the average monthly number of employees over all 12 calendar months be at least 3 in order to benefit from the 75% tax exemption. Furthermore, there is no restriction regarding whether employees work full-time or part-time for the purposes of this exemption.
It was also noted that individuals engaged in the activities listed under Article 102.1.30-1 of the Tax Code are entitled to a 75% exemption from income tax on annual income up to 45,000 AZN (before deducting expenses) derived from those activities. To determine whether your activity falls within the scope of this provision, you may contact your local tax authority or a taxpayer service center.
In addition, tax exemptions apply only to the reporting period (calendar year) during which the relevant conditions are met. If a taxpayer does not satisfy the required conditions and subsequently moves from micro-entrepreneur status to another business category, a tax benefit equal to 75% of the income tax calculated and paid during the previous three calendar years as a micro-entrepreneur may be credited against future income tax liabilities.
If the taxpayer carries out non-genuine (commodity-less) transactions, the tax exemption provided under this article does not apply to income arising from such transactions.
Legal basis: Article 102 of the Tax Code.
I provide training services as a sole proprietor. My annual turnover is approximately 20,000–30,000 AZN. Currently, I pay income tax at a rate of 20% of my earnings. I would like clarification regarding the application of the 75% tax exemption provided under Article 102.1.30 of the Tax Code: If I employ 3 workers for only 8 months during the calendar year, will I qualify for this exemption? Does the fact that employees work part-time affect eligibility? Can an exemption entitlement earned in the current year be applied retrospectively to previous years?
According to the State Tax Service under the Ministry of Economy, in this case the taxpayer does not qualify for the tax exemption provided under Article 102.1.30 of the Tax Code. The article requires that the average monthly number of employees over all 12 calendar months be at least 3 in order to benefit from the 75% tax exemption. Furthermore, there is no restriction regarding whether employees work full-time or part-time for the purposes of this exemption.
It was also noted that individuals engaged in the activities listed under Article 102.1.30-1 of the Tax Code are entitled to a 75% exemption from income tax on annual income up to 45,000 AZN (before deducting expenses) derived from those activities. To determine whether your activity falls within the scope of this provision, you may contact your local tax authority or a taxpayer service center.
In addition, tax exemptions apply only to the reporting period (calendar year) during which the relevant conditions are met. If a taxpayer does not satisfy the required conditions and subsequently moves from micro-entrepreneur status to another business category, a tax benefit equal to 75% of the income tax calculated and paid during the previous three calendar years as a micro-entrepreneur may be credited against future income tax liabilities.
If the taxpayer carries out non-genuine (commodity-less) transactions, the tax exemption provided under this article does not apply to income arising from such transactions.
Legal basis: Article 102 of the Tax Code.