Azerbaijan

Income received from Azerbaijan sources not attributable to a PE of a non-resident in Azerbaijan is subject to WHT at the following rates:

• Dividends paid by resident enterprises: 5%.
• Dividends paid by a non-resident enterprise: 5 %.
• Interest paid by residents, PEs of non-residents, or on behalf of such PEs (except for interest paid to resident banks or to PEs of non-resident banks): 10%.
• Rental fees for movable and immovable property: 14%.
• Royalties: 14%.
• Risk insurance or reinsurance payments: 4%.
• Telecommunications or international transport services: 6%.
• Other Azerbaijani-source income: 10%.
• Payments to low-tax jurisdictions: 10%.

If a resident enterprise or a PE of a non-resident receives interest, royalties, or rental fees taxable at the source of payment in Azerbaijan, it is entitled to consider the tax deducted from the source of payment, provided that the documents supporting the tax deduction are in place.

Direct or indirect payments to a person in a country with a favourable tax regime are considered income from an Azerbaijani source and subject to 10% WHT. The list of countries concerned is determined annually (see Foreign income in the Income determination section for a link to the list).

Banks and the national operator of the postal service must deduct 10% WHT from funds transferred by residents to digital wallets, which refer to software to carry out electronic payments.

Moreover, local banks, branches of a foreign banks in the Republic of Azerbaijan, or national postal operators shall be required to withhold tax at the source of payment when individuals who are not registered with the tax authority are making payments to countries or territories subject to preferential taxation.

Tax treaties

The following chart contains the WHT rates that are applicable to dividend, interest, and royalty payments by Azerbaijan residents to non-residents under the tax treaties in force as of 1 January 2022. If the treaty rate is higher than the domestic rate, the latter is applicable, provided that the necessary administrative procedures are followed.

Notes

1. The lower dividend rate applies if the qualifying company meets certain criteria (e.g. participation and capital holding criteria).
2. The lower interest rate applies, inter alia, to interest paid by public bodies or to bank loans.
3. The lower royalty rate applies to royalties for patents, designs or models, plans, secret formulas or processes, computer software, know-how, etc.

Rules on administration of double tax treaties (DTTs) are effective as of 1 July 2017. The following amendments are established:

• Advance tax relief may be obtained for all type of income, including business (active income) if such income is not attributable to a PE in Azerbaijan. Previously, such relief might only be obtained for dividends, interest, royalties, and income from international shipments.
• Applications may also be filed electronically along with a hard-copy submission. Previously, only hard-copy submission was possible.
• No requirement to get respective DTT application approved by the overseas tax authorities. Only a tax residency certificate is required to be approved by the foreign tax authorities.
• Tax office may also return the approved applications to the income payer (tax agents) in the online regime.

More detailed information about applicability of lower rates may be found in respective DTTs.