The Draft Law "On Amendments to the Tax Code" prepared for the purpose of improving tax legislation and administration and other normative legal act drafts related to it were adopted by the Milli Majlis in the 3rd reading. The main target areas of the changes made in the Tax Code this time are optimization of the tax burden of business entities, promotion of business activity, reduction of the tax burden of the population with social tax concessions, and improvement of measures to combat the "shadow economy" as in previous years.
The State Tax Service under the Ministry of Economy presents the changes and their justification to the attention of the public in parts.
One of the important changes in the direction of reducing the tax burden of the population through social benefits is related to the determination of benefits for the annual interest income paid on the savings of individuals.
As it is known, the annual interest income paid by the local bank and the branch of the foreign bank operating in the Republic of Azerbaijan on the deposits of individuals was exempt from income tax for 7 years from February 1, 2016. Since the exemption period ended on February 1, 2023, from that date, the interest income on deposits was taxed by banks at the source of payment at a rate of 10 percent.
New changes have been made in the Tax Code, depending on the amount of interest income on bank deposits in order to reduce the tax burden of the population and promote the long-term placement of savings. Thus, deposits of natural persons in national currency are placed in each bank (a branch of a foreign bank in the Republic of Azerbaijan) for a period of 18 months or more by a local bank and a branch of a foreign bank in the Republic of Azerbaijan and if the amount of the deposit is paid no earlier than 18 months, the full part of the calculated interest income is exempted from tax for a period of 3 years.
In addition, the legislation has been amended regarding the exemption from income tax of individuals of up to 200 manats of monthly interest income calculated on national currency deposits in each bank. In other cases, interest income is taxed by banks at the source of payment at a rate of 10 percent. This will apply to both national and foreign currency interest income.
