At today's plenary session of the Milli Majlis, a draft law on amendments to the Tax Code, Migration Code, the laws "On Social Insurance Fee", "On Customs Tariff", "On Licenses and Permits" and "On Public Procurement" was adopted in the first reading.
The new law brings the concepts of "Digital technology", "artificial intelligence technology", "innovation product", "cybersecurity" and "cloud computing services" (recognized as direct services, not considered royalties or rent) into a legal framework.
Official status is granted to individuals who provide independent services in the field of digital technologies, artificial intelligence and cybersecurity without involving hired workers and who are residents of an industrial/technology park.
This activity of individuals working remotely in the territory of Azerbaijan under a contract with foreign non-resident companies will not lead to the establishment of a permanent representative office of a foreign company in the country. Freelancers and digital travelers will benefit from extensive benefits after being registered for tax purposes.
In addition, the income of individuals and legal entities (except technopark residents) providing services in the field of digital technologies, artificial intelligence, development of innovative products and cybersecurity from this activity is exempt from tax. Condition: The funds from exported services must be transferred to accounts in Azerbaijani banks.
Income tax will be levied at a rate of 0 percent on the monthly income from hired work of highly qualified migrants working in the mentioned fields, specialists who have not had tax obligations in Azerbaijan in the last 24 months, and Azerbaijani citizens returning to the country from abroad to work in these fields.
Dividends paid by legal entities engaged in these activities are also fully exempt from tax for a period of 20 years.
Also, 100 percent of the investment amount invested in venture capital funds, "Startup" or companies with technopark certificates by accredited investors, individuals or legal entities in a non-cash manner is deducted from the total taxable income/profit of that investor in the reporting year.
The amount withdrawn must not exceed 50% of the investor's annual income/profit; the parties must not be mutually dependent persons; the investor must not own more than 50% of the company's share and the acquired share must be held in ownership for at least 3 years (if the company goes bankrupt, the amount is not recoverable for tax purposes).
Dividends paid by venture capital funds to their investors are exempt from income tax. Similar exemptions apply to income and dividends from investments made through crowdfunding platforms.
95 percent of income and profits from the transfer of copyright objects, software and know-how created in Azerbaijan as a result of their own research and development work, technology transfer or sale to other persons are exempt from tax.
Funds received for digital projects within the framework of grant agreements and subsidies are not included in taxable income.
The total chronological duration of a mobile tax audit conducted on a taxpayer, including extensions, suspensions and additional audits, cannot exceed 90 business days in any case. After this period, no additional taxes or sanctions can be calculated.
If the total debt of companies that have just received a "Startup" or technopark certificate (in the first 3 years) during the tax audit does not exceed 50,000 manat, no order will be sent to freeze funds in their bank accounts from the moment of filing a complaint with a higher authority or court until the final decision is made (except for risky taxpayers).
If the tax exemption or grace period begins or ends in the middle of the year, the grace period will be calculated in proportion to the number of days or based on actual figures when accurate accounting is carried out.
