Covid-19 Tax Reliefs Approved in Azerbaijan

Amendments to the to the Tax Code and the Law on Social Insurance related to the spread of the coronavirus pandemic are approved by the Parliament.

Due to the spread of the coronavirus pandemic (COVID-19) in the Republic of Azerbaijan and the application of special quarantine regime, it was decided to apply a temporary tax regime for a period of 1 year from January 1, 2020, and amendments were made to the Tax Code and the Law on Social Insurance accordingly.

According to the decision, the exemptions and privileges granted under the temporary tax regime were applied to taxpayers affected by the changes. The list of those affected taxpayers is as following:

Domestic passenger transport by road (including taxis);
Activities of hotels and other hotel-type facilities as accommodation facilities;
Tour operator and tour agent activities;
Transportation and (or) delivery of goods on order, including meal, food and non-food items from sellers to buyers;
Public catering activities;
Organization of exhibitions, stage, recreation and entertainment (game), cinema, theater, museum and concert halls;
Activities of sports and health facilities;
Activities of training (education) and professional development courses, out-of-school educational institutions, psychological centers;
Other areas of activity that are fully or partially restricted by the Cabinet of Ministers in order to ensure the health and safety of the population in connection with the spread of the coronavirus pandemic.

The tax reliefs and exemptions applied to the affected taxpayers under the Tax Code for a period of 1 year are as following:

Exemption from current tax payments and issuance of relevant certificates related to the Income and Property tax;
The simplified tax rate for micro entrepreneurs is reduced from 2% to 1%;
By September 1, the micro entrepreneurs submit the tax declarations of Income and Property tax for 2019, Simplified tax for the 1^st and 2^nd quarter of 2020 and pay the calculated tax payments;
The taxpayers who are not micro entrepreneurs pay the calculated tax payments regarding the declaration of the Income and Property tax for 2019 no later than September 1;
Full exemption from property and land taxes for 2020;
When exemptions are applied, taxes paid for the current year, including taxes paid for subsequent periods, are recalculated and the amounts already paid are attributed to payments for the following months.
75% of the profit (income) for 2020, regardless of the criteria of entrepreneurship;
50 percent discount on the amount of simplified tax to taxpayers engaged in domestic passenger transportation (including taxis) by motor vehicles who are considered as a simplified taxpayer;
50 percent of the simplified tax exemption is applied and the amount is reduced from 8% to 4% for taxpayers engaged in catering activities;
In order to ensure the health and needs of the population with the necessary food products during the temporary tax regime, the import of products (goods), the list of which is approved by the authority determined by the relevant executive authority, is exempt from VAT;
Aircrafts used by air transport carriers for passenger transportation during the temporary tax regime are exempt from property tax;
The tax rate on the withholding tax for the lease of real estate leased from individuals affected by the pandemic is reduced by 50 percent, from 14 percent to 7 percent;
Interests calculated on unpaid taxes, SSPF and unemployment insurance amounts is postponed from April 1, 2020 to January 1, 2021;
spoilage of food and prepared food products purchased for catering activities is not considered a taxable transaction until January 1, 2021;
The right of persons engaged in catering and VAT payers to choose the simplified tax method for 2020 is extended until September 1, 2020;
Expenses incurred by the taxpayer for the necessary preventive, including disinfection measures carried out by the taxpayer in order to protect the life and health of the population within a certain 1 year and documented by the relevant documents are deducted from the income without restrictions.

According to the amendments to the Law on Social Insurance:

Concessions granted from April 1, 2020 to January 1, 2021:

Mandatory state social insurance fee in the field of construction and trade is calculated at 25 percent of the minimum monthly salary;
In other areas, mandatory state social insurance fee will be calculated at 15 percent of the minimum monthly wage;
The coefficients applied in the regions are kept in the calculation of mandatory state social insurance;

From January 1, 2021 to January 1, 2026, mandatory state social insurance fees will be calculated as following:

Mandatory state social insurance fee in the field of construction and trade is calculated at 50 percent of the minimum monthly salary;
In other areas, mandatory state social insurance fee will be calculated at 25 percent of the minimum monthly wage;
The coefficients applied in the regions are kept in the calculation of mandatory state social insurance;

The following amendments below are valid until January 1, 2026:

For individuals engaged in hosting, music, dancing, comedy and other similar activities at weddings, parties and other events - mandatory state social insurance fee is determined as 5 percentage of minimum monthly salary
For activities in the field of photography, audio-video services (excluding photo studios) -mandatory state social insurance fee is determined as 5 percentage of minimum monthly salary
For shoemakers, cobblers, individuals engaged in hairdressing, individuals engaged in tailoring, services on repair of watches, televisions, refrigerators and other household appliances - mandatory state social insurance fee is determined as 3 percentage of minimum monthly salary
Housekeepers in private houses and apartments, care for patients, the elderly and children, nanny, personal driver, household cleaning, gardener, cook, security guard and catering individuals (waiters) - mandatory state social insurance fee is determined as 3 percentage of minimum monthly salary.
For attorneys, independent auditors and accountants – the mandatory state social insurance fee is determined as 10% of the income after deduction of costs.
Mandatory state social insurance fee in the agriculture sector is determined:
in the amount of 2 percent of the minimum monthly salary for each family member of individuals using agricultural lands up to 5 hectares owned by them;
in the amount of 6 percent of the minimum monthly salary for each family member of individuals using agricultural lands from 5 to 10 hectares owned by them;
in the amount of 10 percent of the minimum monthly salary for each family member of individuals using agricultural lands more that 10 hectares owned by them.
Social insurance reports submitted by landowners are replaced by fixed receipts.

The following types of income have been added to the types of income that do not include the calculation of the mandatory state social insurance fee:

Reimbursement of actual travel expenses, as well as daily payments or other business expenses (expenses for transportation of guests to and from the meeting place, organization of banquets for guests in public catering facilities, as well as expenses for purchase of ready meals for these events and fees of interpreters involved in the meetings) to members of the floating crew instead of travel expenses in maritime transport determined by the authority which is appointed by the relevant executive authority;
income received by the insurer as a result of incurring social expenses of employees, as well as funds paid to third parties;
Income not related to employment and entrepreneurial activity, except for copyright royalties.

Please contact us for any COVID-19 related tax and social insurance constribution measures in Azerbaijan.

Jul 09, 2020, Written by Caspian Legal Center

Covid-19 Tax Reliefs Approved in Azerbaijan