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How are tax registration and tax obligations determined for income earned from abroad?
How are tax registration and tax obligations determined for income earned from abroad?
We hereby inform you that, pursuant to Article 97.1 of the Tax Code, the income of a resident taxpayer consists of income earned both within and outside the Republic of Azerbaijan.
The activity referred to in your inquiry is considered entrepreneurial activity. In accordance with Article 33.4 of the Tax Code, an individual carrying out entrepreneurial activity without establishing a legal entity must register with the tax authorities (obtain a TIN) before commencing such activity by submitting an application for tax registration and must pay taxes to the state budget on the income earned.
Tax registration may be completed by submitting the “Application for Registration of an Individual” to the tax authority. Registration is free of charge and is carried out through ASAN Service Centers or, in areas where such centers are unavailable, through taxpayer service centers.
Tax obligations depend on the taxation regime selected during registration and the applicable taxable objects and may include simplified tax, personal income tax, and VAT.
If the individual chooses the simplified taxation regime, a simplified tax at the rate of 2% is calculated and paid to the state budget on income derived from trading activities (gross revenue), without deducting expenses.
At the same time, the right to remain a simplified taxpayer is retained provided that, during a quarter, the volume of transactions that must be documented with electronic invoices (including the value of services rendered and work performed for non-resident legal entities and non-resident individual entrepreneurs based on invoices) does not exceed 30% of the total volume of service and work-related transactions (excluding non-operating income).
Where the activity is conducted under the personal income tax regime, income tax at a rate of 20% is calculated and paid on the amount remaining after deducting expenses directly related to generating that income.
Furthermore, pursuant to Article 102.1.30 of the Tax Code, a 75% tax concession applies to the income earned from entrepreneurial activities by individual entrepreneurs classified as micro-business entities, provided that their average monthly number of employees during the relevant year is not less than three and they have no outstanding mandatory state social insurance liabilities. The average monthly number of employees is determined by dividing the total number of employees during the calendar year by twelve.
In addition, effective from January 1, 2025, under Article 102.1.30-1 of the Tax Code, 75% of the income earned from the activities specified in that article by individuals is exempt from personal income tax where such annual income, before deduction of expenses, does not exceed AZN 45,000.
We also note that the determination of tax liabilities arising from any transaction depends directly on the primary supporting documents, the nature of the transaction, and the taxpayer’s activities. Therefore, for a detailed tax assessment, it is recommended to contact the tax authority where the taxpayer is registered and provide a full description of the transactions, supporting documentation, and detailed information regarding the taxpayer’s activities.
Legal basis: Articles 33.4, 102.1.30, 102.1.30-1 and 220 of the Tax Code.
We hereby inform you that, pursuant to Article 97.1 of the Tax Code, the income of a resident taxpayer consists of income earned both within and outside the Republic of Azerbaijan.
The activity referred to in your inquiry is considered entrepreneurial activity. In accordance with Article 33.4 of the Tax Code, an individual carrying out entrepreneurial activity without establishing a legal entity must register with the tax authorities (obtain a TIN) before commencing such activity by submitting an application for tax registration and must pay taxes to the state budget on the income earned.
Tax registration may be completed by submitting the “Application for Registration of an Individual” to the tax authority. Registration is free of charge and is carried out through ASAN Service Centers or, in areas where such centers are unavailable, through taxpayer service centers.
Tax obligations depend on the taxation regime selected during registration and the applicable taxable objects and may include simplified tax, personal income tax, and VAT.
If the individual chooses the simplified taxation regime, a simplified tax at the rate of 2% is calculated and paid to the state budget on income derived from trading activities (gross revenue), without deducting expenses.
At the same time, the right to remain a simplified taxpayer is retained provided that, during a quarter, the volume of transactions that must be documented with electronic invoices (including the value of services rendered and work performed for non-resident legal entities and non-resident individual entrepreneurs based on invoices) does not exceed 30% of the total volume of service and work-related transactions (excluding non-operating income).
Where the activity is conducted under the personal income tax regime, income tax at a rate of 20% is calculated and paid on the amount remaining after deducting expenses directly related to generating that income.
Furthermore, pursuant to Article 102.1.30 of the Tax Code, a 75% tax concession applies to the income earned from entrepreneurial activities by individual entrepreneurs classified as micro-business entities, provided that their average monthly number of employees during the relevant year is not less than three and they have no outstanding mandatory state social insurance liabilities. The average monthly number of employees is determined by dividing the total number of employees during the calendar year by twelve.
In addition, effective from January 1, 2025, under Article 102.1.30-1 of the Tax Code, 75% of the income earned from the activities specified in that article by individuals is exempt from personal income tax where such annual income, before deduction of expenses, does not exceed AZN 45,000.
We also note that the determination of tax liabilities arising from any transaction depends directly on the primary supporting documents, the nature of the transaction, and the taxpayer’s activities. Therefore, for a detailed tax assessment, it is recommended to contact the tax authority where the taxpayer is registered and provide a full description of the transactions, supporting documentation, and detailed information regarding the taxpayer’s activities.
Legal basis: Articles 33.4, 102.1.30, 102.1.30-1 and 220 of the Tax Code.