Payroll Taxes in Azerbaijan 

Payroll taxes in Azerbaijan are mainly income tax of the employees, which is deducted by the employer and paid on behalf of the employees.

Payroll taxes in Azerbaijan have been eliminated to a great degree since 1 January 2019. Currently, in private non-oil-industry, the payroll tax is charged with 0% rate for the monthly salary up to 8 000 AZN.

The payroll tax for the monthly salary exceeding 8 000 AZN is fixed at 14%.

In the oil and gas industry, the payroll taxes in Azerbaijan are 14% for the income (salary) up to 2500 AZN per month, and 25% for the salary exceeding 2500 AZN.

In addition to 25% social insurance payment, unemployment insurance payment must be made as follows: 0.5% from the employee’s salary and 0.5% by the employer from its funds.

Starting from 1 January 2020, mandatory medical insurance shall be paid in the amount of 2% (1% by employerç 1% by employee) of the salary up to 8 000 AZN, and 0.5 for the amount exceeding this threshold in private non oil- gas industry. In the public service and oil-gas industry, the rate is 2%.

The Payroll taxes in Azerbaijan may be summarized as follows:

1. Income tax: 0% (income up to 8000 AZN in private non-oil-gas industry; 14% (income exceeding 8000 AZN in private non- oil-gas industry); 14%-25%  (public service and oil-gas industry);
2. Mandatory Social Insurance Contribution: 25%
3. Mandatory Unemployment insurance: 1%
4. Mandatory Medical insurance: 2% - 1% by employee and 1% by employer (private non-oil-gas industry income up to 8000 AZN, 0.5% for the additional income) and 2% (public service or oil-gas industry income up to 8000 AZN, 0.% for the additional income)

The implementation of mandatory medical insurance payments shall be performed throughout the year in accordance with the time-table to be established.

Under the Payroll taxation system in Azerbaijan, in addition to income tax (payroll tax), 25% mandatory social insurance contribution shall be paid. For the salary up to 200 AZN, 3% mandatory social contribution shall be deducted from the employee’s salary, and 22% shall be paid by the employer (from its own funds). Where the salary is more than 200 manats per month, 10% shall be deducted by the employee and 15% shall be paid additionally by the employer.

Unlike income tax, social insurance payment for the foreigners working under product sharing agreements in the oil-gas industry is exempted. In other words, such foreign employees would be subject to income tax only, not any social contribution shall be imposed. 

Please contact us for questions or requests for consultancy about payroll taxes in Azerbaijan.