OMM Redaksiyası
Income tax rates on employment income in Azerbaijan will change from Jan. 1, 2027. Individuals earning up to 2,500 manats per month will pay income tax at a rate of 5%.
Operative Information Center-OMM reports that the change will apply to monthly employment income earned by individuals working for taxpayers outside the oil and gas sector and in the non-state sector.
The new rules will remain in force from Jan. 1, 2027, through Jan. 1, 2028.
How much income tax will be withheld from salaries?
Under the new rules, income tax will be calculated in three tiers depending on the salary amount:
- Monthly income up to 2,500 manats – 5%;
- From 2,500 to 8,000 manats – 125 manats plus 10% of the amount exceeding 2,500 manats;
- More than 8,000 manats – 675 manats plus 14% of the amount exceeding 8,000 manats.
It is important to note that the same rate is not applied to the entire salary amount once it exceeds 2,500 or 8,000 manats. Tax is calculated progressively.
How much tax will be paid on a salary of 2,500 manats?
Starting in 2027, an employee with taxable monthly income of 2,500 manats will have income tax calculated at 5%.
Five percent of 2,500 manats is 125 manats.
However, legislation continues to provide an income tax exemption on the first 200 manats of monthly income for individuals earning up to 2,500 manats. This exemption is taken into account in the actual calculation.
How will tax be calculated for salaries above 8,000 manats?
For example, if an employee’s taxable monthly income is 10,000 manats, the calculation will be as follows:
675 manats plus 14% of the 2,000 manats exceeding 8,000 manats.
Fourteen percent of 2,000 manats is 280 manats.
Therefore, the income tax will total 955 manats.
This example shows only the calculation of income tax. Social insurance, compulsory health insurance and unemployment insurance contributions may also be withheld from an employee’s salary.
What rules apply in 2026?
Currently, from Jan. 1, 2026, through Jan. 1, 2027, income tax for employees in the same category is calculated at lower rates.
During this period:
- Income up to 2,500 manats – 3%;
- 2,500–8,000 manats – 75 manats plus 10% of the amount exceeding 2,500 manats;
- More than 8,000 manats – 625 manats plus 14% of the amount exceeding 8,000 manats.
From 2027, the rate in the first tier will increase from 3% to 5%. The fixed amounts for income between 2,500 and 8,000 manats and for income above 8,000 manats will also rise from 75 to 125 manats and from 625 to 675 manats, respectively.
Further changes to income tax rates
Under the legislation, from Jan. 1, 2028, the income tax rate for monthly income of up to 2,500 manats is scheduled to reach 7%.
From that date, tax on income between 2,500 and 8,000 manats will be calculated as 175 manats plus 10% of the amount exceeding 2,500 manats, while tax on income above 8,000 manats will be 725 manats plus 14% of the amount exceeding 8,000 manats.
Who will be affected by the change?
These income tax rates apply to individuals employed by taxpayers operating outside the oil and gas sector and classified as part of the non-state sector.
This means it would not be correct to assume that the same rules will automatically apply to all employees’ salaries. When tax is calculated, the sector and field of activity of the employer are taken into account in accordance with legislative criteria.
According to the State Tax Service, the changes are part of a phased tax mechanism that began in 2026 and will continue in subsequent years. The rate for income of up to 2,500 manats is scheduled to be 3% in 2026, 5% in 2027 and 7% from 2028.
