Coun­try’s po­si­tion in Pay­ing Taxes 2019 rat­ing rises

Azer News - - Front Page - By Le­man Mam­madova

Azer­bai­jan ranked 28th in the Pay­ing Taxes 2019 tax rat­ing, Trend re­ports cit­ing the re­search con­ducted by spe­cial­ists of PwC, in co­op­er­a­tion with the World Bank.

Ac­cord­ing to the anal­y­sis, the to­tal tax rate of Azer­bai­jan is 40.8 per­cent; this is the share of taxes and con­tri­bu­tions in the com­pany's prof­its.

Azer­bai­jan is ahead of most of its neigh­bors.

Thus, Rus­sia is on the 53rd place, Kaza­khstan is on the 56th place, Uzbek­istan - on the 64th, Ar­me­nia - on the 82nd, Ta­jik­istan - on the 136th, Kyr­gyzs­tan - on the 150th.

The study takes into ac­count a num­ber of in­di­ca­tors in the tax sphere - the num­ber of pay­ments per year, the time re­quired to com­ply with tax laws, the ap­pli­ca­tion of the VAT sys­tem.

Last year Azer­bai­jan ranked 35th.

Azer­bai­jan's tax leg­is­la­tion in un­der­go­ing ma­jor changes. Start­ing from Jan­uary 1, 2019, new amend­ments to the Tax Code will come into force in Azer­bai­jan.

Amend­ments cover five direc­tions: en­sur­ing trans­parency of tax­a­tion, ex­pan­sion of the tax­a­tion base, mod­ern­iza­tion of tax ad­min­is­tra­tion, sup­port­ing en­trepreneur­ship de­vel­op­ment which is im­por­tant for both eco­nomic de­vel­op­ment and tax­pay­ers' rights, the ap­pli­ca­tion of tax in­cen­tives to in­crease eco­nomic ef­fi­ciency.

New amend­ments mainly aimed at en­trepreneur­ship de­vel­op­ment in Azer­bai­jan, and en­vis­age not to in­crease the bur­den of the tax­a­tion base, but to in­crease the tax­a­tion of those op­er­at­ing in the "shadow".

Ac­cord­ing to the amend­ments to tax leg­is­la­tion, star­tups in Azer­bai­jan will be ex­empt from profit tax and in­come tax for three years start­ing from Jan­uary 1, 2019. The amend­ments af­fect star­tups op­er­at­ing in the mi­cro and small busi­ness seg­ment and pos­sess­ing a spe­cial cer­tifi­cate that con­firms their in­no­va­tive ac­tiv­i­ties.

Star­tups reg­is­tered as le­gal en­ti­ties will be ex­empt from profit tax (now the rate on this tax is 20 per­cent), and in­di­vid­ual en­trepreneurs will be ex­empt from in­come tax.

In ad­di­tion, em­ploy­ees in Azer­bai­jan’s pri­vate sec­tor who are not in­volved in the oil and gas sec­tor will be ex­empt from in­come tax for a pe­riod of seven years, ac­cord­ing to the amend­ments. This ap­plies to salaries worth up to 8,000 man­ats ($ 4 707). If the salary ex­ceeds 8,000 man­ats ($ 4 707), the in­come tax rate will be 14 per­cent.

Presently, the in­come tax rate is 14 per­cent from in­come of up to 2,500 man­ats ($ 1 471) per month. Above this amount, the tax rate is 25 per­cent plus 350 man­ats ($ 205).

If an em­ployee has two or more jobs, the in­come tax from each job will be cal­cu­lated sep­a­rately.

More­over, mi­crobusi­ness en­ti­ties in Azer­bai­jan will pay profit tax and in­come tax af­ter de­duct­ing ben­e­fits. 75 per­cent of monthly in­come and prof­its of mi­crobusi­ness en­ti­ties will be ex­empt from the pay­ment of the profit tax and in­come tax.

In ad­di­tion, mi­cro-en­trepreneurs (star­tups) who re­ceived a spe­cial doc­u­ment con­firm­ing their in­no­va­tive ac­tiv­i­ties will be ex­empt from profit tax and in­come tax for a pe­riod of three years.

In Azer­bai­jan, mi­crobusi­ness en­ti­ties are com­pa­nies with an an­nual in­come of up to 200,000 man­ats ($ 1 471) and a staff of up to ten peo­ple.

The draft amend­ments to the Tax Code also en­vis­age the ex­pan­sion of the list of in­di­vid­u­als en­gaged in en­trepreneur­ship - fixed tax­pay­ers in­di­vid­u­ally, in­clud­ing hair­dressers, tai­lors and wait­ers.

This is one of the priv­i­leges for small busi­nesses. In ad­di­tion, they will also be re­leased from sub­mit­ting a quar­terly dec­la­ra­tion to the tax au­thor­ity.

It should be noted that the num­ber of mo­bile tax in­spec­tions in Azer­bai­jan in 2018 has dropped three times com­pared to last year. A mora­to­rium on busi­ness in­spec­tions is in ef­fect in Azer­bai­jan un­til Jan­uary 2021, but they do not ap­ply to tax au­dits of com­pa­nies with an­nual turnover ex­ceed­ing 120,000 man­ats ($ 70 609).

In 2018, the gov­ern­ment pre­dicts in­come tax rev­enues of the state bud­get at 1.196 bil­lion man­ats, which is about 15.1 per­cent of all tax rev­enues.

The new changes, ac­cord­ing to gov­ern­ment es­ti­mates, may lead to a cer­tain re­duc­tion in in­come tax rev­enues.

Thus, in the draft state bud­get for 2019, rev­enues of this type are ex­pected at 880 mil­lion man­ats.

Nev­er­the­less, the gov­ern­ment be­lieves that in fu­ture bud­get rev­enues from in­come tax will in­crease thanks to a re­duc­tion in the share of the "shadow econ­omy", trans­parency in is­suance of salaries, stim­u­la­tion of the eco­nomic ac­tiv­ity and mod­ern­iza­tion of tax ad­min­is­tra­tion.

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