Company tax basics in Azerbaijan: profit tax, VAT, simplified tax

Once a company is registered in Azerbaijan, two questions follow: which tax regime applies, and when VAT registration becomes mandatory. The short answer, as the State Tax Service describes it: a person not registered for VAT whose taxable transactions in any month (or months) within 12 consecutive months are 200,000 manat or less can use the simplified tax, at 2% of revenue in the general case, unless the activity is excluded¹. Above that threshold, registration for VAT, charged at 18%, becomes mandatory². Profit tax is charged at 20%³, and a legal entity on the simplified tax does not pay it¹.

This is general tax information, not tax advice. Which regime suits your company, and whether a legal entity in your line of business qualifies for the simplified tax, are questions for a licensed tax adviser or accountant in Azerbaijan to confirm.

The three regimes side by side

1) Simplified tax: for small businesses starting out

According to the 2025 edition of the Service’s simplified-tax brochure, the simplified tax is available to persons not registered for VAT whose taxable transactions in any month (or months) within 12 consecutive months amount to 200,000 manat or less; they pay tax on revenue rather than on profit¹. (For the 2026 change affecting POS sales, see below.) The brochure gives the general rate as 2% of amounts received for goods and services, and 8% for public-catering businesses whose turnover exceeds 200,000 manat and that choose the simplified method¹. According to the 2026 edition of the Service’s Q&A on the amendments to the Tax Code, public-catering turnover paid cashless through POS terminals is taxed at 6% for three years from 1 January 2026⁴.

According to the same brochure, a legal entity on the simplified tax is not a payer of VAT or profit tax¹, and it files one return per quarter, by the 20th of the month following the quarter¹. Ask your adviser which other obligations still apply to your company.

It is not open to everyone. The same brochure lists those who cannot use it, including credit institutions, professional participants in the insurance market, investment funds, persons earning income from leasing property or from royalties, wholesale traders, and those carrying on activities that require a licence (with some exceptions)¹. The full list is longer and may have changed since that edition, so do not assume your activity qualifies until your adviser or the Service has checked it.

2) General regime: profit tax

Profit tax is charged at 20% of the difference between income and deductible expenses³. According to the 2025 edition of the Service’s profit-tax brochure, the annual return is due by 31 March of the following year³, and a quarterly statement of current tax payments is due by the 15th of the month following the quarter³. Your adviser should confirm when the payment itself falls due.

3) VAT: when is it mandatory?

The 2024 edition of the Service’s VAT brochure gives the rate as 18% on each taxable transaction and taxable import². It says that registration becomes mandatory when taxable transactions exceed 200,000 manat in any month (or months) within 12 consecutive months, or when a single contract exceeds 200,000 manat²; that a person who passes the threshold must apply for registration within 10 days from the 1st of the following month²; and that VAT returns are due by the 20th of the month following each calendar month². It also says that you may apply to register for VAT voluntarily².

What changed in 2026

In the 2026 edition of its Q&A on the amendments to the Tax Code, the State Tax Service applies the 200,000 manat VAT threshold but counts turnover from cashless POS-terminal payments in retail trade and services to the public (in the Q&A’s wording, services to persons not registered with the tax authority) at a coefficient of 0.5⁴. In the Service’s own example, an individual entrepreneur in retail with 250,000 manat of POS-terminal sales and 70,000 manat in cash (320,000 manat in total) counts 195,000 manat towards the threshold, so no obligation to register arises⁴. The 2026 edition of the Service’s flyer for simplified-tax payers applies the same coefficient to the simplified-tax eligibility test⁵.

When the change was announced on 10 December 2025, the Service described it as doubling the limit from 200,000 to 400,000 manat for such cashless turnover in retail trade and services to the public⁶. That is where the “400,000” figure in the headlines comes from. It is not a new threshold for every company: other turnover still counts in full⁴.

The filing calendar at a glance

• Monthly: VAT return (if registered) by the 20th of the following month².
• Quarterly: simplified tax return by the 20th of the month after the quarter¹, or the profit tax statement of current payments by the 15th³.
• Annually: profit tax return by 31 March³.

Employees and dividends

In a post of 28 December 2023, the State Tax Service reported amendments to the Tax Code, adopted by parliament, providing for a reduction of the withholding tax rate on dividends from 10% to 5%⁷. The post gives no effective date, so check the rate that applies to any distribution with the Service or a tax adviser. Hiring staff brings payroll obligations: the 2026 edition of the Service’s flyer for private employers outside the oil and gas sector says that, from 1 January 2026, income tax and mandatory state social insurance contributions on salaries are paid at rates set by monthly salary band⁸. For employees of these employers, Article 101.1-1 of the Tax Code, as we read it on 3 October 2026, sets the monthly income-tax table by period: one table applies from 1 January 2026 to 1 January 2027, a second from 1 January 2027 to 1 January 2028 and a third from 1 January 2028. The rate on monthly pay up to 2,500 manat is 3% in the first period, 5% in the second and 7% in the third; above 2,500 manat the 10% and 14% band rates stay the same, but the fixed amounts added to them rise with the first band⁹. Confirm the bands and rates in force for the month you are paying with the Service or your accountant before you run payroll.

When this may not suit you

This overview is not enough on its own if:

• your company will work in finance or insurance, trade wholesale, earn income from leasing or royalties, or need a licence, since any of these can exclude it from the simplified tax¹;
• you will import goods or sell to customers abroad;
• you expect to pass the 200,000 manat threshold in your first year²;
• you are not sure whether a legal entity in your line of business qualifies for the simplified tax.

In these cases, have a licensed tax adviser determine the regime before you start trading. This article does not cover sector-specific taxes, property tax and land tax, or double taxation treaties.

Frequently asked questions