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How to pay taxes in Azerbaijan?

Azerbaijan tax system ranks among the best in the world. Tax rates and tax payment methods in Azerbaijan are relatively simple and clear. Companies and individual entrepreneurs with tax identification number shall either obtain online tax login and password by signing an agreement with the tax authority or obtain ASAN signature (E-signature activated via mobile phone number).

If the question “How to pay tax in Azerbaijan ?” is understood as a technical one. The answer would be that in order to pay taxes in Azerbaijan it is important to login to e-taxes.gov.az system for proper tax filing and then by obtaining relevant treasury codes, again via online banking methods (usually accessible via ASAN imza or other online login setup of banks) by identifying the relevant code of the tax all taxes are paid via bank transfer. In addition to this, it is also possible to pay taxes at any bank in Azerbaijan. It must be noted that in that case, tax payment receipts must be kept. It is suggested to pay taxes online via online banking systems.

If the question “How to pay tax in Azerbaijan ?” covers the process of paying tax as an employee or foreign company, it must be noted that in such cases the employer (regarding employment income tax) or client (in case of income obtained from Azerbaijani sources, such as while providing services in Azerbaijan, etc) shall deduct relevant such taxes and pay on behalf of the person in question.

For further questions about tax rates, paying taxes and other compulsory payments, insurances in Azerbaijan, please contact us. Our team of tax accountants would be honored to provide you support and services in taxation and accounting in Azerbaijan. 

Contract Types in Azerbaijan

The contract is a bilateral transaction. A contract is a form of agreement with at least two parties involved. Contract types in Azerbaijan can be divided into two types: as civil contracts and employment contracts. Other criteria may also be classified as contracts, for example, gratuitous contract (non-paid) and non-gratuitous (paid) contracts; Real contracts (concluded while transferring the object in question) and consensual contracts (concluded by undertaking an obligation).

Depending on the type of contract, it may be concluded orally, in written form or by approval of notary. Agreements related to the real estate shall be approved by a notary. 

Commercial contract and Civil contract types (forms)

The types of civil contracts, that is, the types of commercial contracts, are mainly contracts for the supply of goods, works and services. An example is the sale and purchase contract for the goods. Contracts for work are usually considered as contractor contracts: construction contracts, repair contracts, and other contracts that result in the final product. Service contracts may include a variety of consulting services, technical support contracts, rental services, financial services.

It is illegal to sign a service contract with the company if there is actual employment relationship between the company and the individual. Signs of labor relations are the signs of obedience to work arrangements, wages, leave and other rights and relations provided for in the Labor Code.

Contract forms in Azerbaijan

Depending on the type of contract, the contract form should be selected. Contract forms under Azerbaijani laws are usually not legally defined and approved. In the free market economy, the contractual terms must be determined by the parties themselves, since the principle of voluntariness of contracting parties is based. In this case, the necessary conditions specified in the law for the specific type of contract must be observed. Contract provisions that are contrary to the necessary conditions in the law will be considered invalid.

Non-lawyers should also be advised in the form of contract forms, depending on the type of contract. For example, the opinion of a construction and engineering specialist when preparing a construction contract can be helpful in terms of more detailed information about construction progress, technical processes, and risks. In any case, based on these opinions, regardless of the type of contract, the contract must be entered into by the lawyer.

What is the rate of withholding tax in Azerbaijan? How are withholding taxes deducted? Is it possible to obtain a refund for the withholding taxes in Azerbaijan? - these are the most asked questions about withholding taxes in Azerbaijan. 

As a general rule, where a non-resident obtains income (profit) from Azerbaijan sources due to services, it shall be subject to 10% withholding tax. The payer (the buyer of services) shall withhold 10% of the gross amount and pay to the government. In majority of cases, VAT would be applicable in addition to withholding tax. If avoidance of a double taxation treaty exists between the country of the non-resident and Azerbaijan, then it is possible to obtain a refund of such withholding taxes paid in Azerbaijan or obtain tax credit in the country of registration (nationality). Under the relevant double taxation treaty (DTA), it may be possible to provide a specific DTA form and not deduct withholding tax via approval of tax auhtority - in which case, non-resident would pay its profit in the country of registration. Under certain cases, where the relevant DTA allows, it is possible to submit a specific form and not pay withholding tax in Azerbaijan in accordance with local procedures. 

Withholding taxes for royalties are imposed at 14% rate and deducted at the source. Another form of withholding tax - dividend tax rate is 10%. Under relevant avoidance of double taxation treaties, withholding tax rates might be lowered as a general rule or under specific cases. 

For questions about withholding taxes or double taxation issues, as well as consultancy and refund of withholding taxes in Azerbaijan, please contact us. 

Can foreigners buy property in Azerbaijan?

One of the recent questions regarding buying property is whether foreigners can buy a property in Azerbaijan. Under Azerbaijani law, the property is divided into two categories: movable property (personal property) and immovable property (real property – real estate).

Any foreigner has equal rights regarding buying personal property in Azerbaijan as local citizens. A foreigner can buy real estate (immovable property) in Azerbaijan, with the exception of land. In other words, if you a foreign citizen or stateless person, you can buy a house, villa, apartment, commercial property and other property, but not land. Therefore, if you are not planning to buy land as a foreigner, you enjoy similar rights as local citizens.

Buying property in Azerbaijan usually covers the following processes:

   1.Finding a proper property, physical inspection and agreement on price and terms;

   2. Signing of a purchase agreement before notary (Note, it is possible to be represented via notary approved power of attorney, therefore, it is not necessary to be personally and physically in Azerbaijan);

   3. Together with notary deal stage, application to state registry over the property is conducted.

   4. Obtaining Title to the property.

Newly constructed property in Azerbaijan usually does not have property documents (title document) on is based on an internal agreement with the developer and the buyer (investor). This leads to further legal risks, which required legal support for the analysis of the agreement and checking liens/charges or possible frauds during the transactions. The possible problem stems from the fact that property without title document is not registered and therefore, can not be found in the state registry of immovable property. Any operation, transaction, charge or rights of third parties are also not recorded and registered due to the same reason. Therefore, this requires special attention.

Buying land could be possible indirectly, via registering a company. Again, this brings about additional concerns, such as property taxes (which are higher in companies), and legal risks and risks over property that must be analyzed and properly planned in a given situation.

Depending on the situation, property transactions have taxes and associated costs. But if properly planned and optimized, it is possible to reduce such taxes and costs.

A foreigner can freely dispose or sell the property and transfer the proceeds as any local person. Azerbaijani legislation does not discriminate regarding such rights between foreigner or a local person.

For details or questions, please contact us.