Azerbaijan may introduce a unified tax on salary, Taxes Minister Mikayil Jabbarov said.
This issue is being discussed as part of amendments to Azerbaijan’s Tax Code, he added.
“This issue is very important for all taxpayers,” Jabbarov said. “This step is aimed at reducing the tax burden and facilitating the taxation of salaries. The unified tax will be applied to salary and its rate will be substantially lower than that in the current legislation.”
The minister noted that this step would also have an impact on the fight against informal employment.
“This reform helps to reduce the level of informal employment, and stimulates the declaration of real salaries,” Jabbarov said.
Presently, the maximum income tax rate in Azerbaijan is 25%, and the maximum limit of monthly income taxed at a rate of 14% is 2,500 manats. At the same time, the annual income of individuals (not engaged in entrepreneurial activity) taxed at a rate of 14% is 30,000 manats.
If the monthly salary exceeds 2,500 manats, the income tax is calculated as follows: 350 manats (14% tax on 2,500 manats) plus 25% tax levied on the amount exceeding 2,500 manats. The annual income exceeding 30,000 manats is taxed as follows: 4,200 manats (14% tax on 30,000 manats) plus 25% tax levied on the amount exceeding 30,000 manats.
This is while a 20% tax is levied on taxable income of individuals engaged in entrepreneurial activity without the creation of a legal entity. (Trend/Business World Magazine)