Ministry of Taxes of the Republic of Azerbaijan 

PROPERTY TAX OF ENTERPRISES

Property tax

Property tax

The tax paid for fixed assets on the balance of the enterprises is defined as property tax.
Resident enterprises, as well as non-resident enterprises carrying out entrepreneurial activity through its permanent establishment in the Republic of Azerbaijan are payers of the property tax.

Taxable base

Followings are a taxable base:

• average annual value of fixed assets on the balance of enterprises;
• for non-resident enterprises, carrying out the business activity through permanent establishment in the Azerbaijan Republic - only the average annual value of fixed assets connected with permanent establishment.

Tax rates

Enterprises pay tax at the rate of 1% of the average annual residual value of fixed assets.

Tax reliefs and exemptions

Budget-funded institutions and organizations, state power and governing bodies, the National Bank and its offices, state funds and public entities for disabled people are exempt from property tax.
For the purposes of taxation the value of the enterprises property is reduced by the amount of value of following facilities:

• facilities used for the purposes of environment, fire protection and civil defence;
• product lines, railways and motorways, communication and power lines, melioration and watering facilities;
• taxable automobile transport means
• facilities of enterprises involved in education, health, culture and sports that used only for the purposes of such areas of activity;

Trolley buses and tramps used for the transportation of passengers in cities are exempt from property tax.

Procedure for calculation and payment of tax

Property tax is calculated based on the average annual residual value of the property of an enterprise.
The tax period for the property tax of the enterprise is a calendar year.
Property taxpayers pay 20 percent of annual tax amount not later than 15th day of the second month of each quarter.
Legal entities not operating as a payer of the property tax during the previous accounting year, however, are the payers of the property tax next year, as well as, newly established legal entities which are payers of property tax must carry out current tax payments at the amount of the 20 percent of the amount of the annual property tax to be calculated on such property not later than the 15th day of the second month of each quarter following the quarter in which such property was obtained. Current tax payments on property tax are the amounts of tax withheld from the taxpayer within the tax year.
The amount of tax to be paid to the state budget for accounting period is determined with consideration of previously calculated payments.
If taxpayer doesn’t pay the current tax payment on time, interest for each day of delay should be imposed in respect to the non-paid current tax payment.
Current tax payments on property tax should be calculated at the end of the reporting year and if the calculated current tax amount is more than tax amount on tax report, the over calculated amount and interests should be reduced.
An enterprise submits the annual tax return for property tax to the tax authority not later than March 31 of the year following the reporting year.

In case of abolishment of the legal person being taxpayer, that legal person should submit its property tax return to the tax authorities within 30 days from the date of decision on abolishment and in case if the date of such a decision is not mentioned for the permanent establishment of the non-resident, that permanent establishment should submit its tax return within 30 days from the date of legalization of the decision by representative missions of the Republic of Azerbaijan in other states (or by consular missions of other countries representing interests of the Republic of Azerbaijan) and in this case, the accounting period is from the beginning of the tax year until the date of termination of activities.
Taxes on annual tax return are paid before the submission deadline for such returns. The amount of calculated tax is deducted from income which is not limited.
The property tax of enterprises is paid to the state budget.
Below is an example of calculation of the property tax of an enterprise:

Residual Value at the beginning of the year: 28.000 manats

Residual Value at the end of the year: 24.000 manats

Average annual residual value: 26.000 manats = (28.000+24.000)/2

Property tax: 26.000 manats x 1% = 260 manats

For taxation purposes, the average annual residual value of an enterpriseнs property is the taxable value (with exception of automobile transport means) which is calculated in the following way:

• the residual value of enterprise’s property (with exception of transport means) at the beginning and end of the reporting year are summed and divided by two.
• in case the enterprise is established within accounting year, the residual value of its property (with exception of automobile transport means) on the balance as of the date of establishment and the end of reporting period are summed, divided by 24 and multiplied by the number of months starting from the one following the month when the enterprise was established until the end of the year.
• in case the enterprise is terminated within accounting year, the residual value of its property (with exception of automobile transport means) at the beginning of the year and the date of termination are summed, divided by 24 and multiplied by the number of months from the beginning of the year to the one before the month when the enterprise was terminated.

Financial sanctions and interests

Management of the enterprise is liable for correct calculation of the property tax on fixed assets and automobile transport means on the balance of the enterprise and its timely payment to the budget.
A financial sanction is imposed on a taxpayer for late submission of tax return without valid reasons based on the decision of the head (deputy) of the tax authority at the value of 40 times of conventional financial unit (40 manats).
In case the amount of tax indicated on tax report is less than the amount to be indicated on the report and if taxpayer fails to submit tax report and evades to pay the required tax amount to the state budget, the financial sanction shall be imposed on the taxpayer at the rate of 25 percent of understated or evaded tax amount.
For failure to pay the property tax or current tax payment within the specified period, the interest at the rate of 0,1% of the amount of the tax or current tax payment is imposed on the taxpayer or tax agent for each day of delay.
This interest is applied in respect to current tax payments for the whole period of delay but not more than for 1 year.