Proposals made on decrease of income tax for individuals in Azerbaijan

Baku. 27 April. REPORT.AZ/ One of the proposals is to introduce new - the third category on taxes for Azerbaijani companies with the annual turnover not exceeding 50,000 AZN.

Report informs, Mustafa Abbasbayli, Member of the Board and Head of the Legal Committee of the Caspian European Club said, speaking on the proposals sent to President Ilham Aliyev by the club on reforms in several fields of economy.

M.Abbasbayli said that CEIBC proposes from the moment of registration through the first year of operation a company with a turnover of up to 50,000 manats pays no taxes: 'With regard to the tax system, we offer a few items. The first one is to set tariffs on a value added tax. It is common knowledge that the developed countries have several categories of value added tax in place. In our country it makes 0% or 18%. Again, the developed economies use in practice several categories with rates up to 21%. Rates are much lower for first-necessity products. We offer the similar form of taxation in the part of VAT'.

'Also, in our opinion one of the proposals in the field of taxation is to introduce the third category to taxation. The fact is that there are two main tax regimes in place in Azerbaijan now: a simplified kind of tax and a normal kind of tax. The second one envisages a tax rate for company profit at 20%. We propose to introduce the third clause on taxes for companies with the annual turnover not exceeding 50,000 manats. Thus, from the moment of registration through the first year of operation a company with a turnover of up to 50,000 manats pays no taxes. When a turnover reaches 50,000 manats or after one year of operation a company can shift to a simplified system, which envisages charging of only 4% as tax from an annual turnover', Committee Head said.

Provisions on decrease in a tax base for individuals also among the club's proposals: 'One of the points we envisaged in the tax system is also a simplification or reduction of profit taxes for individuals. Currently it together with social insurance rates ranges from 39% to 50%. If a salary of an individual is up to 2,500 manats, he pays 39%, with a salary over 2,500 manats an individual shall pay 50%. A business entity pays income tax at a rate of 20%, so according to this scheme, rates are more favourable for companies rather than for individuals. Unfortunately, we see the cases when companies start to indicate lower amounts of salaries than the applicable level. We propose to reduce taxes on salaries of individuals to align them with the level of a tax rate for company profits. Again, here we have taken into account the international experience. For example, in Georgia, a tax rate on salaries of individuals is 20%, and income tax together with dividends is 20% too. Accordingly, there is no need for companies to lower actual amounts of salaries of their employees since in both cases the amount of tax is the same'.