BAKU, Azerbaijan, November 19. The Azerbaijani
parliament has adopted the draft law on amendments to the Tax Code
included in the 2026 state budget package in the first reading,
Trend reports.
The draft law was discussed at today’s plenary session of the
parliament.
The draft amendments to the Tax Code consist of three blocks and
include 145 amendments across 45 main articles.
The main directions of the amendments to the Tax Code
are as follows:
1. Promoting the investment environment and
entrepreneurial activity, reducing the tax burden on business
entities
- Granting the same tax benefits to business entities operating
in the Nakhchivan Autonomous Republic as applied to the liberated
territories (profit (revenue), VAT on imports (application of the
benefit for the import of fixed assets, raw materials and materials
only to residents of industrial and technological parks, industrial
districts and persons receiving an investment promotion document),
property, land and simplified tax exemptions for 10 years from
January 1, 2026) - Exemption from VAT on the sale of cargo trucks produced in
Azerbaijan and on the import of their spare parts - Cancellation of VAT exemption for electric-motor vehicles; VAT
exemption until January 1, 2027 for importing and selling electric
buses without seats, handles, and installed monitors - From January 1, 2027, a seven-year VAT exemption on the sale of
locally produced passenger cars, provided full industrial assembly
(including painting & welding) is performed (Note:
existing incentives for producers in Nakhchivan remain until
January 1, 2030) - Extension of agricultural tax incentives to fisheries
- Granting concessions on VAT and simplified tax to the public
catering sector (from January 1, 2026, when calculating VAT to the
state budget by persons engaged in public catering activities, 50
percent of their turnover formed on the basis of non-cash payments
made through POS terminals will be deducted from their total
turnover subject to VAT, and non-cash turnover for those persons
paying simplified tax will be subject to simplified tax at a rate
of six percent) - Applying zero-percent VAT and excise on goods sold to duty-free
shops - Reduction of the tax rate on dividend income of individuals
from abroad from 14 percent to five percent - VAT exemption on import and sale of organomineral
fertilizers - VAT concessions for equipment imported by contractors for
public-private partnership (PPP) construction projects - Extension of tax benefits for media entities for three more
years - Extension of VAT exemption for equipment imported for the
Heydar Aliyev Oil Refinery modernization project for three more
years - Exemption from VAT for three years from 01.05.2026 for the
import of all types of goods by shipbuilding and ship repair
enterprises for that activity, based on a supporting document
2. Regulation of tax incomes and budget
revenues
Regulation of the fiscal burden on wage revenues in the non-oil
private sector:
– implementation of progressive revenue tax rates
(depending on the monthly revenue amount, seven percent – three
percent in 2026; five percent in 2027, 10 percent, and 14
percent);
– reduction in social insurance contributions for the salary
portion above 8,000 manat ($4,705)
from 25 percent to 21 percent (10 percent employee, 11 percent
employer);
– reduction in mandatory health insurance contributions for the
salary portion above
2,500 manat ($1,470) from four percent to one percent (0.5 percent
employee, 0.5 percent employer).
- Adding quadricycles and mobile devices to excisable goods:
– 20 manat ($11.76) excise per mobile device;
– Individuals may import 1 device per year duty-free for personal
use. - Eliminating the portion of excise currently transferred to the
Mandatory Health Insurance Fund and redirecting it fully to the
state budget; abolishing mandatory health insurance fees on fuel;
increasing the road tax rate. - Oil & gas sector: switching from percentage-based mining/excise
tax to fixed-amount tax based on production volume.
• Increasing excise rates on alcoholic beverages and tobacco
products (0.2 manat, or $0.12, increase per liter of drinking
alcohol, vodka, cognac, and energy drinks, 9.5 manat, or $5.59,
increase per 1,000 units of cigarillos and cigarettes, 0.1 manat,
or $0.06, increase per liter of non-fortified alcoholic drinks)
• Increasing uplift coefficients applied to excise amounts for
vehicles older than seven years at the time of import (petrol
passenger cars: from 1.2 to 1.5, diesel passenger cars from 1.5 to
2)
• Applying the property-tax benefit for taxpayers in education,
healthcare, culture, and sports at a reduced level – from 100
percent to 75 percent
• Attributing to the taxpayer’s income and
expenses the amount of depreciation calculated for fixed assets and
intangible assets purchased or installed at the expense of other
funds allocated from the state budget and attributed to assets,
with the exception of funds allocated to state enterprises within
the framework of the state investment program of the state budget
and attributed to assets, for investment projects that meet the
criteria determined by the Cabinet of Ministers:
– depreciation is calculated in full for fixed assets and
intangible assets purchased or installed using subsidies
(government assistance) allocated from the state budget or
extra-budgetary state funds, and this depreciation amount is
treated as income of the taxpayer;
– subsidies allocated from the state budget or extra-budgetary
state funds for purchasing or installing non-depreciable assets are
not treated as income or loss.
– VAT paid when purchasing goods (works, services) using subsidy
funds allocated for assets cannot be deducted (i.e., not
creditable).
- Expanding the voluntary disclosure system: taxpayers may
voluntarily declare obligations for periods older than three years,
regardless of field audit.
3. Improving tax control and combating the shadow
economy
- Reducing tax on the rental income of individuals from 14
percent to 10 percent - Raising VAT-registration threshold (increasing the 200,000
manat ($117,640) turnover limit two times for cashless payments in
retail trade and services provided to persons not registered with
the tax authority. Thus, by raising the VAT-registration threshold
to 400,000 manat ($235,280), the aim is to stimulate the formation
of cashless turnover. - Introducing a VAT cashback mechanism for barbershops, beauty
salons, and cosmetology centers - Increasing fines for unregistered entrepreneurial activity from
40 manat ($23.53) to 200 manat ($117.65) - Abolishing electronic audit; introducing “Horizontal
Monitoring”, giving taxpayers the option to choose either
declining-balance or straight-line depreciation - Recognizing legal and physical persons operating in liberated
territories as residents of those territories, even if registered
centrally, enabling them to receive benefits
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