BAKU, Azerbaijan, November 19. The Azerbaijani parliament has adopted the draft law on amendments to the Tax Code included in the 2026 state budget package in the first reading, Trend reports.
The draft law was discussed at today’s plenary session of the parliament.
The draft amendments to the Tax Code consist of three blocks and include 145 amendments across 45 main articles.
The main directions of the amendments to the Tax Code are as follows:
1. Promoting the investment environment and entrepreneurial activity, reducing the tax burden on business entities
- Granting the same tax benefits to business entities operating in the Nakhchivan Autonomous Republic as applied to the liberated territories (profit (revenue), VAT on imports (application of the benefit for the import of fixed assets, raw materials and materials only to residents of industrial and technological parks, industrial districts and persons receiving an investment promotion document), property, land and simplified tax exemptions for 10 years from January 1, 2026)
- Exemption from VAT on the sale of cargo trucks produced in Azerbaijan and on the import of their spare parts
- Cancellation of VAT exemption for electric-motor vehicles; VAT exemption until January 1, 2027 for importing and selling electric buses without seats, handles, and installed monitors
- From January 1, 2027, a seven-year VAT exemption on the sale of locally produced passenger cars, provided full industrial assembly (including painting & welding) is performed (Note: existing incentives for producers in Nakhchivan remain until January 1, 2030)
- Extension of agricultural tax incentives to fisheries
- Granting concessions on VAT and simplified tax to the public catering sector (from January 1, 2026, when calculating VAT to the state budget by persons engaged in public catering activities, 50 percent of their turnover formed on the basis of non-cash payments made through POS terminals will be deducted from their total turnover subject to VAT, and non-cash turnover for those persons paying simplified tax will be subject to simplified tax at a rate of six percent)
- Applying zero-percent VAT and excise on goods sold to duty-free shops
- Reduction of the tax rate on dividend income of individuals from abroad from 14 percent to five percent
- VAT exemption on import and sale of organomineral fertilizers
- VAT concessions for equipment imported by contractors for public-private partnership (PPP) construction projects
- Extension of tax benefits for media entities for three more years
- Extension of VAT exemption for equipment imported for the Heydar Aliyev Oil Refinery modernization project for three more years
- Exemption from VAT for three years from 01.05.2026 for the import of all types of goods by shipbuilding and ship repair enterprises for that activity, based on a supporting document
2. Regulation of tax incomes and budget revenues
Regulation of the fiscal burden on wage revenues in the non-oil private sector:
- implementation of progressive revenue tax rates
(depending on the monthly revenue amount, seven percent - three
percent in 2026; five percent in 2027, 10 percent, and 14
percent);
- reduction in social insurance contributions for the salary
portion above 8,000 manat ($4,705)
from 25 percent to 21 percent (10 percent employee, 11 percent
employer);
- reduction in mandatory health insurance contributions for the
salary portion above
2,500 manat ($1,470) from four percent to one percent (0.5 percent
employee, 0.5 percent employer).
- Adding quadricycles and mobile devices to excisable goods:
– 20 manat ($11.76) excise per mobile device;
– Individuals may import 1 device per year duty-free for personal use. - Eliminating the portion of excise currently transferred to the Mandatory Health Insurance Fund and redirecting it fully to the state budget; abolishing mandatory health insurance fees on fuel; increasing the road tax rate.
- Oil & gas sector: switching from percentage-based mining/excise tax to fixed-amount tax based on production volume.
• Increasing excise rates on alcoholic beverages and tobacco products (0.2 manat, or $0.12, increase per liter of drinking alcohol, vodka, cognac, and energy drinks, 9.5 manat, or $5.59, increase per 1,000 units of cigarillos and cigarettes, 0.1 manat, or $0.06, increase per liter of non-fortified alcoholic drinks)
• Increasing uplift coefficients applied to excise amounts for vehicles older than seven years at the time of import (petrol passenger cars: from 1.2 to 1.5, diesel passenger cars from 1.5 to 2)
• Applying the property-tax benefit for taxpayers in education, healthcare, culture, and sports at a reduced level - from 100 percent to 75 percent
• Attributing to the taxpayer's income and expenses the amount of depreciation calculated for fixed assets and intangible assets purchased or installed at the expense of other funds allocated from the state budget and attributed to assets, with the exception of funds allocated to state enterprises within the framework of the state investment program of the state budget and attributed to assets, for investment projects that meet the criteria determined by the Cabinet of Ministers:
- depreciation is calculated in full for fixed assets and intangible assets purchased or installed using subsidies (government assistance) allocated from the state budget or extra-budgetary state funds, and this depreciation amount is treated as income of the taxpayer;
- subsidies allocated from the state budget or extra-budgetary state funds for purchasing or installing non-depreciable assets are not treated as income or loss.
- VAT paid when purchasing goods (works, services) using subsidy funds allocated for assets cannot be deducted (i.e., not creditable).
- Expanding the voluntary disclosure system: taxpayers may voluntarily declare obligations for periods older than three years, regardless of field audit.
3. Improving tax control and combating the shadow economy
- Reducing tax on the rental income of individuals from 14 percent to 10 percent
- Raising VAT-registration threshold (increasing the 200,000 manat ($117,640) turnover limit two times for cashless payments in retail trade and services provided to persons not registered with the tax authority. Thus, by raising the VAT-registration threshold to 400,000 manat ($235,280), the aim is to stimulate the formation of cashless turnover.
- Introducing a VAT cashback mechanism for barbershops, beauty salons, and cosmetology centers
- Increasing fines for unregistered entrepreneurial activity from 40 manat ($23.53) to 200 manat ($117.65)
- Abolishing electronic audit; introducing “Horizontal Monitoring”, giving taxpayers the option to choose either declining-balance or straight-line depreciation
- Recognizing legal and physical persons operating in liberated territories as residents of those territories, even if registered centrally, enabling them to receive benefits
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