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Which party is responsible for paying the tax on rental income?
I intend to lease out a non-residential property (with a registered title deed) that I own. Both the tenant and I have a Tax Identification Number (TIN/VÖEN), although my TIN is currently inactive. I pay the annual property tax to the municipality. If we conclude a lease agreement and the tenant undertakes to pay all expenses and charges related to the property, will I still have any tax payment obligations?
According to the State Tax Service under the Ministry of Economy, pursuant to Article 124.1 of the Tax Code, if income from the lease of movable or immovable property is derived from a source in Azerbaijan in accordance with Article 13.2.16 of the Tax Code, tax must be withheld at source at a rate of 14%.
Under Article 150.1.6 of the Tax Code, legal entities, entrepreneurs, and individuals receiving income from non-business activities who make payments specified in Articles 124, 125, or 126 are required to withhold tax at source. The person responsible for withholding tax on rental payments must remit the tax to the state budget no later than the 20th day of the month following the quarter in which the income was paid and submit the corresponding withholding tax return to the tax authority.
In the situation described, where rental income is paid to a resident individual by persons registered as taxpayers, the 14% withholding tax obligation is fulfilled by the tenant at the source of payment. In this case, the landlord has no obligation to make any additional tax payments or submit tax reports.
According to Article 58.1 of the Tax Code, if the amount of tax (including withholding tax) declared is lower than the amount that should have been declared, or if tax payable to the state budget is concealed by failing to submit a tax return, the taxpayer is subject to a financial penalty equal to 50% of the understated or evaded tax amount (except in cases specified in Article 58.1-1 and excluding additional tax assessed through a desk tax audit).
If the assessed tax is not paid within the period established by the Tax Code, interest of 0.1% per day is charged on the outstanding tax amount for each day of delay. Such interest is applied for the entire overdue period, but for no more than one year.
Legal basis: Articles 124 and 150.1.6 of the Tax Code.
I intend to lease out a non-residential property (with a registered title deed) that I own. Both the tenant and I have a Tax Identification Number (TIN/VÖEN), although my TIN is currently inactive. I pay the annual property tax to the municipality. If we conclude a lease agreement and the tenant undertakes to pay all expenses and charges related to the property, will I still have any tax payment obligations?
According to the State Tax Service under the Ministry of Economy, pursuant to Article 124.1 of the Tax Code, if income from the lease of movable or immovable property is derived from a source in Azerbaijan in accordance with Article 13.2.16 of the Tax Code, tax must be withheld at source at a rate of 14%.
Under Article 150.1.6 of the Tax Code, legal entities, entrepreneurs, and individuals receiving income from non-business activities who make payments specified in Articles 124, 125, or 126 are required to withhold tax at source. The person responsible for withholding tax on rental payments must remit the tax to the state budget no later than the 20th day of the month following the quarter in which the income was paid and submit the corresponding withholding tax return to the tax authority.
In the situation described, where rental income is paid to a resident individual by persons registered as taxpayers, the 14% withholding tax obligation is fulfilled by the tenant at the source of payment. In this case, the landlord has no obligation to make any additional tax payments or submit tax reports.
According to Article 58.1 of the Tax Code, if the amount of tax (including withholding tax) declared is lower than the amount that should have been declared, or if tax payable to the state budget is concealed by failing to submit a tax return, the taxpayer is subject to a financial penalty equal to 50% of the understated or evaded tax amount (except in cases specified in Article 58.1-1 and excluding additional tax assessed through a desk tax audit).
If the assessed tax is not paid within the period established by the Tax Code, interest of 0.1% per day is charged on the outstanding tax amount for each day of delay. Such interest is applied for the entire overdue period, but for no more than one year.
Legal basis: Articles 124 and 150.1.6 of the Tax Code.