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Taxation of Income Derived from Entrepreneurial Activities and Available Tax Incentives
Taxation of Income Derived from Entrepreneurial Activities and Available Tax Incentives
The activity in question is considered entrepreneurial activity, and before commencing such activity, the individual must register with the tax authorities as a taxpayer. Under the tax legislation, the taxable income of individuals conducting entrepreneurial activities without establishing a legal entity is subject to income tax at a rate of 20 percent.
At the same time, a number of tax incentives are available for micro-entrepreneurship entities. In particular, a tax relief applies to 75 percent of the income derived from entrepreneurial activities by individual entrepreneurs whose average monthly number of employees during the relevant year is not less than three and who have no outstanding liabilities for mandatory state social insurance contributions. The average monthly number of employees is calculated by dividing the total number of employees during the calendar year by twelve.
Furthermore, amendments effective from 1 January 2025 provide that 75 percent of the income earned by individuals from the activities specified in Article 102.1.30-1 of the Tax Code is exempt from income tax, provided that the annual income derived from such activities does not exceed 45,000 manats. In this case, expenses are not taken into account, and the tax relief is applied directly to the gross income earned.
Where the activity relates to advertising services, digital services, or the export of services as defined by law, entrepreneurs may benefit from the aforementioned 75 percent tax incentive. However, where a taxpayer carries out non-genuine (non-commodity) transactions, the tax relief provided under this provision does not apply to income generated from such transactions.
In addition, if an entrepreneur is engaged in multiple business activities simultaneously, the tax incentive may only be applied where the income generated from the eligible activities constitutes at least 50 percent of the entrepreneur’s total annual income. Otherwise, the taxpayer is not entitled to benefit from the tax relief established by law.
With regard to social insurance obligations, the Law on Social Insurance requires individuals engaged in entrepreneurial activities to pay mandatory state social insurance contributions in the amount of 2 percent of their income, calculated without deducting expenses. At the same time, the contribution amount may not be less than 15 percent and may not exceed 100 percent of the minimum monthly wage. These rules ensure the proper fulfilment of entrepreneurs’ tax and social insurance obligations.
The activity in question is considered entrepreneurial activity, and before commencing such activity, the individual must register with the tax authorities as a taxpayer. Under the tax legislation, the taxable income of individuals conducting entrepreneurial activities without establishing a legal entity is subject to income tax at a rate of 20 percent.
At the same time, a number of tax incentives are available for micro-entrepreneurship entities. In particular, a tax relief applies to 75 percent of the income derived from entrepreneurial activities by individual entrepreneurs whose average monthly number of employees during the relevant year is not less than three and who have no outstanding liabilities for mandatory state social insurance contributions. The average monthly number of employees is calculated by dividing the total number of employees during the calendar year by twelve.
Furthermore, amendments effective from 1 January 2025 provide that 75 percent of the income earned by individuals from the activities specified in Article 102.1.30-1 of the Tax Code is exempt from income tax, provided that the annual income derived from such activities does not exceed 45,000 manats. In this case, expenses are not taken into account, and the tax relief is applied directly to the gross income earned.
Where the activity relates to advertising services, digital services, or the export of services as defined by law, entrepreneurs may benefit from the aforementioned 75 percent tax incentive. However, where a taxpayer carries out non-genuine (non-commodity) transactions, the tax relief provided under this provision does not apply to income generated from such transactions.
In addition, if an entrepreneur is engaged in multiple business activities simultaneously, the tax incentive may only be applied where the income generated from the eligible activities constitutes at least 50 percent of the entrepreneur’s total annual income. Otherwise, the taxpayer is not entitled to benefit from the tax relief established by law.
With regard to social insurance obligations, the Law on Social Insurance requires individuals engaged in entrepreneurial activities to pay mandatory state social insurance contributions in the amount of 2 percent of their income, calculated without deducting expenses. At the same time, the contribution amount may not be less than 15 percent and may not exceed 100 percent of the minimum monthly wage. These rules ensure the proper fulfilment of entrepreneurs’ tax and social insurance obligations.