Azerbaijan is expected to implement a radical overhaul of its income tax legislation in 2019 as part of a Budget package for next year that has just been submitted to Parliament.
The reforms include introducing benefits for private sector employees unless they work in the oil and gas sector, and regulating the payment ratio for state social insurance between employees and employers.
One of the most significant changes is the decision to exempt non-oil and gas, private sector workers from income tax if they earn up to 8,000 manats per year (US$4,692). Should an individual’s salary exceed this threshold, their income tax exemption will stand at 4%.
The non-taxable element of workers’ wages will also increase from 173 manats (US$101) to 200 manats (US$117) and apply to all sectors, including oil and gas, Azernews reported.
Another significant shift relates to the introduction of compulsory social insurance contributions. If an employee is paid 200 manats, their social insurance contributions will remain at current levels – they will pay 3% of their salary, while their employer pays 22%.
Above 200 manats, staff will pay six manats (US$3.52) plus 10% of the amount that exceeds 200 manats, while their employer will pay 44 manats (US$25.81) plus 15% of the amount exceeding 200 manats.
The Azerbaijani government predicts that 2018 income tax revenues will come in at 1.196 billion manats (US$0.7 billion), which is about 15.1% of the tax take total. While it estimates the proposed changes could lead to a drop in income tax levels, it believes that future income tax revenues will increase due to a reduction in the 'shadow economy', more transparency with regard to salaries, economic stimulus and the modernisation of tax administration.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
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Azerbaijan is expected to implement a radical overhaul of its income tax legislation in 2019 as part of a Budget package for next year that has just been submitted to Parliament.
The reforms include introducing benefits for private sector employees unless they work in the oil and gas sector, and regulating the payment ratio for state social insurance between employees and employers.
One of the most significant changes is the decision to exempt non-oil and gas, private sector workers from income tax if they earn up to 8,000 manats per year (US$4,692). Should an individual’s salary exceed this threshold, their income tax exemption will stand at 4%.
The non-taxable element of workers’ wages will also increase from 173 manats (US$101) to 200 manats (US$117) and apply to all sectors, including oil and gas, Azernews reported.
Another significant shift relates to the introduction of compulsory social insurance contributions. If an employee is paid 200 manats, their social insurance contributions will remain at current levels – they will pay 3% of their salary, while their employer pays 22%.
Above 200 manats, staff will pay six manats (US$3.52) plus 10% of the amount that exceeds 200 manats, while their employer will pay 44 manats (US$25.81) plus 15% of the amount exceeding 200 manats.
The Azerbaijani government predicts that 2018 income tax revenues will come in at 1.196 billion manats (US$0.7 billion), which is about 15.1% of the tax take total. While it estimates the proposed changes could lead to a drop in income tax levels, it believes that future income tax revenues will increase due to a reduction in the 'shadow economy', more transparency with regard to salaries, economic stimulus and the modernisation of tax administration.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
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Minding your manners in Central Europe
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