Azerbaijan

Capital gains

There is no separate capital gains taxation in Azerbaijan. Proceeds from the disposal of capital assets are included in ordinary taxable income.

Dividend income

Effective from 1 January 2024, dividends paid by a resident enterprise are taxed at the source of payment at the rate of 5%. Consequently, such dividends received by Azerbaijan legal entities (being profit taxpayers) are not subject to profit tax in Azerbaijan.

Interest income

Azerbaijani source interests paid by a resident or a non-resident’s PE, or on behalf of such establishment, shall be taxed at the source of payment at a rate of 10%.

Interest amounts received by local legal entities are subject to profit tax, and any tax withheld could be credited against due profit tax.

Royalty income

Royalty received by non-residents from an Azerbaijani resident and PE of a non-resident in Azerbaijan is taxed at the source of payment at the rate of 14%.

Royalty income received by Azerbaijan tax resident legal entities is subject to profit tax.

Foreign income

If a resident of Azerbaijan directly or indirectly holds more than 20% of shareholders’ equity or possesses more than 20% of the voting shares of a foreign legal entity that, in turn, receives income from a state with favourable taxation, then such income shall be included in the resident’s taxable income.

If an enterprise is considered as a CFC, its profit shall be taxed in the Republic of Azerbaijan (see the Group taxation section).

A state with favourable taxation is considered a country in which the tax rate is two or more times lower than that determined under the Tax Code of Azerbaijan, or a country in which the laws on confidentiality of information about companies exist (which allow secrecy to be maintained concerning financial information, as well as the actual owner of property or receiver of income).

A list of countries and territories with a favourable tax regime was approved. Please access the list (only in Azerbaijani) at: https://az.president.az/articles/24547

Any payment made to a low-tax jurisdiction is subject to withholding tax (WHT) at 10%.