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Azerbaijan: Tax developments in response to COVID-19

General Information

This page offers an overview of tax developments being reported globally by KPMG member firms in response to the Novel Coronavirus (COVID-19).

The content will be updated regularly. However, due to the fast-moving pace of change, it may not always reflect the most current developments in a given jurisdiction. Please refer to the date of accuracy and refer to the relevant links, under additional information, for original source information.

Date accurate as of: 4 May 2020

The COVID-19 Operational Headquarters has been created under the Cabinet of Ministers, and working groups under the leadership of the Minister of Economy, Minister of Finance, Minister of Labor and Social Protection of the Population and Chairman of Central Bank of Azerbaijan have been tasked with developing specific measures in order to reduce the negative impact of the pandemic on the country's business environment.

The package of proposals submitted to the Parliament of Azerbaijan envisages the application of several tax benefits and tax holidays to the industries directly affected by the pandemic, which are listed as follows:

  • Activities of hotels and other hotel-type facilities that are considered accommodation facilities;
  • Tour operator and travel agent activities;
  • Public Catering activities;
  • Domestic (inter-city and inter-district, intra-city and intra-district) passenger transport by road (including by taxi); 
  • Transportation and (or) delivery of goods on order, including food, food and non-food items from sellers to buyers;
  • 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 activities 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 above-mentioned sectors will be provided with the following benefits:

  • Taxpayers will be provided with exemption from property and land taxes for a period of 1 year from 1 January 2020;
  • Depending on the method of taxation chosen, taxpayers will be provided with several tax benefits for a period of 1 year from January 1, 2020.
  • For payers of corporate income tax (profit tax),  it is planned to provide tax benefits in the amount of 75% of the profits;
  • For taxpayers engaged in public catering and passenger transportation, which are payers of the simplified tax, It is planned to provide a 50% discount on the simplified tax amount;
  • Public catering  - 4% instead of current rate of 8%; 
  • Passenger transportation (except taxi) - for each seat* - 0,9 AZN  instead of current rate of   1,8 AZN;
  • Passenger transportation (taxi) - for each seat* 4,5 AZN instead of current rate of  9 AZN 
  • Coefficients are applied depending on the area of ​​activity.

Furthermore, the following measures  are  envisaged  in order to reduce the tax and administrative burden on taxpayers:

  • Reduction of the WHT rate on real estate lease from individuals from 14% to 7%; 
  • Exemption from current tax payments and issuance of certificates related to current tax payments for a period of 1 year; 
  • Extension of the deadline for payment of the taxes for 2019 until September 1, 2020; 
  • Extension of the deadline for payment of income and property taxes for 2019 by non-micro-taxpayers until September 1, 2020;
  • Postponement of calculation of interest on unpaid taxes, compulsory state social insurance and unemployment insurance premiums from April 1, 2020 to January 1, 2021;
  • Extension of the right to choose the simplified tax method for 2020 by persons engaged in public catering activities registered for VAT from April 20 to September 1;

Irrespective of the effects of the pandemic:

For micro entrepreneurs: 

  • 50% discount on simplified tax (tax rate is reduced from 2% to 1%); 
  • Provision of extension of deadlines for submission of simplified tax returns for the 1st and 2nd quarters of 2020 and reports on profit and property taxes as well as payment of accrued tax to the budget until September 1 of the current year.

For all entrepreneurs: 

  • Expenditures on necessary preventive measures, including disinfection, carried out by the taxpayer in order to prevent the epidemic and protect the life and health of the population shall be deductible without any restrictions; 
  • Temporary exemption from VAT of certain types of products necessary for food and medical needs of the population.  The import of medical equipment and medical accessories necessary for the fight against the pandemic, as well as certain types of food to meet the food needs of the population, including food for children, will be exempted from VAT temporarily.