Baku: Azerbaijan has introduced the region’s lowest income tax rates through a new phased approach, as announced by Deputy Minister of Finance Azer Bayramov during a discussion on amendments to the Tax Code at a meeting of the Milli Majlis Committee on Economic Policy, Industry, and Entrepreneurship.

According to Azeri-Press News Agency, Bayramov highlighted that since 2019, a preferential mechanism has been in place for income tax and social insurance contributions on the monthly incomes of salaried employees in the private sector of the non-oil economy. The reforms have led to a significant increase in the wage fund of the non-oil private sector, which is expected to grow 2.7 times by 2024 compared to 2018. The current grace period will end in 2026, after which income tax will be levied at 14 percent for incomes up to 2,500 manats and at 25 percent for those exceeding this threshold. However, preferential rates will still apply, with income tax set at 3 percent for incomes up to 2,500 manats, representing an 80 percent reduction from the standard rate. This rate will gradually increase to 5 percent in 2027 and 7 percent in 2028.

Bayramov also emphasized that this phased tax implementation aims to stabilize prices and wages, allowing both employees and entrepreneurs to transition smoothly to the new tax regime. Under the new rules, the total burden on income from salaried work will range from 33-37 percent, aligning with or slightly below the regional average. Without the phased approach, the burden on entrepreneurs could have surged to 55 percent. This strategic move will help prevent sudden financial pressures on businesses and protect jobs while maintaining economic stability.