For seven years, income tax has been withheld from salaries in Azerbaijan in two methods.
First. If you work in the oil and gas sector or the public sector and your salary is up to 2500 manats, then every month, 14 percent of your salary, i.e., 350 manats, is withheld as income tax.
If your salary is more than 2500 manats, then 14 percent (350 manats) is withheld from the part of the salary up to 2500 manats, and 25 percent is withheld from the remaining part as income tax. For example, if your salary is 3500 manats, then your salary is divided into two parts for income tax withholding - 2500 manats and 1000 manats. From the 2500 manat part, 14 percent (350 manats) is withheld, and from the 1000 manat part, 25 percent (250 manats) is withheld as income tax. Thus, if your salary is 3500 manats, then 600 manats are withheld as income tax every month from you.
Second. If you work outside the oil and gas sector and the public sector, and your salary is up to 8000 manats, then no income tax is withheld from you.
However, if your salary is more than 8000 manats, then every month, 14 percent of your salary is withheld as tax. Suppose you work outside the oil and gas sector and the public sector and your salary is 9000 manats. Then every month, 14 percent of this salary, i.e., 1260 manats, is withheld as income tax.
This rule (no income tax withheld from persons working outside the oil and gas sector and the public sector with salaries up to 8000 manats; only a 14 percent tax withheld if the salary exceeds 8000 manats) has been in effect since January 2019. According to Article 101.1-1 of the Tax Code, this rule is valid for a period of 7 years. For persons working outside the oil and gas sector and the public sector with salaries up to 8000 manats, as well as those earning more than 8000 manats, the period of this concession ends at the end of 2025.
How will income tax be withheld from salaries starting January 2026? Will the concession period be extended for those not working in the oil and gas sector and public sector? Or will new concessions be applied for such persons in some form? It is unknown. Official bodies still refrain from answering these questions. Therefore, many people think that starting January 2026, income tax withholding from the salaries of those not working in the oil and gas sector and public sector will also begin.
In that case, how much money will be withheld monthly for tax from the salaries of persons working outside the oil and gas sector and public sector who, according to Article 101.1-1 of the Tax Code and having salaries up to 8000 manats, have not paid any income tax for nearly 7 years? And what about those whose salary exceeds 8000 manats – will they still have to pay 14 percent tax monthly?
Medianews.az reports that if there is no change in the matter—that is, if the concession period is not extended or new concession types are not applied—then the situation of persons working outside the oil and gas sector and public sector will change. Both those with salaries up to 8000 manats and those with more than 8000 manats will have income tax withheld from their salary according to the first method shown above. In other words, whether you work in the oil and gas sector and public sector, or outside these sectors, it does not matter: if your salary is up to 2500 manats, 14 percent (350 manats) will be withheld every month; if it is more than 2500 manats, then 14 percent will be withheld from the part up to 2500 manats (350 manats), and 25 percent from the remaining part as income tax.
Toğrul Ali,
Medianews.az
