Support of small and medium enterprises is one of the main priorities of the policy of the Republic of Azerbaijan. Changes to tax legislation since 1 January 2019 contain provisions that promote the incentive of small and medium-sized businesses.
Small and Medium Business cluster companies have been exempted from income, property and land taxes, as well as VAT on import of equipment, technological appliances and hardware for the duration of 7 years from the reporting year, in which they were registered in SME registry.
Profit from innovative activities of micro and small entrepreneurs has been exempted from profit tax for 3 years upon receipt of startup certificate.
Privileges for micro entrepreneurships include exemption of 75% of income from tax.
Small entrepreneurs who are classified as simplified taxpayers will be taxed at the rate of 2 percent.
The scope of individual entrepreneurs and businesses eligible for simplified tax regime has been significantly narrowed. Purpose is to present misuse of tax benefits originally meant for small entrepreneurs by the persons who are not eligible for those benefits.
According to new procedure, tax authorities will not withdraw funds from taxpayers’ bank or VAT deposit accounts once administrative complaint has been filed by the taxpayer. Withdrawal can be enforced only after duly issued ruling over certain administrative complaint.
A number of financial sanctions imposed in connection with the violation of tax legislation have been increased and new financial sanctions have been introduced. Now, employers who benefit from the services of employees without concluding labor contracts will face sanctions up to 6000 AZN subject to recurrence of violation. Sale of goods without proper fiscal documentation (e-invoice or e- bill of parcels) will also result in sanctions in respect of seller of amounting up to 40% of the total cost of sale subject to recurrence of violation.
Physical and legal persons involved in the production (including industrial production) of agricultural goods have been exempted from income (corporate) tax, VAT, property tax and simplified tax related with such activity until 1 January, 2024.
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Fixed monthly taxes have been set up for individual entrepreneurs engaged in the service sector (barbers, photographers, tailors, waiters etc.). This fixed monthly fee varies across different categories and geographical location of operation.
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