Azerbaijan has approved several amendments to the Azerbaijan Tax Code on 27 December 2024. Key amendments include a reduction of branch profit tax rate, new corporate income tax exemptions, and revised transfer pricing penalties.
Reduction of branch profit tax rate
The tax rate on the branch or permanent establishment profits sent to a non-resident parent in Azerbaijan is reduced from 10% to 5%;
New corporate income tax exemptions
Certain corporate income tax exemptions are introduced, including:
- A 10-year exemption for dividends paid by technology park residents working in system integration, software development, and implementation activities outside the park, starting from the year they receive their registration certificate;
- A 90% tax exemption on profits for museums, theatres, symphonies, and film producers for 5 years starting 1 January 2025;
- an exemption for profits earned by private partners in public-private partnership projects and producers in renewable energy electricity projects with a state purchase obligation for the period set in the partnership agreement, but not exceeding 30 years, including construction.
New VAT exemptions
- New VAT exemptions have been introduced, such as an eight-year exemption for selling Azerbaijan-made buses and related spare parts for production, starting on 1 January 2025.
- VAT exemptions are also applicable for the import of machinery and equipment for public-private partnerships. Exemptions also apply for producers in renewable energy electricity projects with a state purchase obligation for the period set in the partnership agreement, but not exceeding 30 years, including construction.
Revised transfer pricing penalties
Transfer pricing penalties or fines have been updated. The fines for failing to submit transfer pricing or CFC reports or providing incorrect information have been increased from AZN 2,000 to AZN 6,000. Additionally, a penalty of AZN 6,000 will be imposed for not submitting transfer pricing documentation within 60 days after being requested by tax authorities.
The amendments went into force on 1 January 2025.
