What tax changes apply in Azerbaijan from 2026?
From 1 January 2026, Azerbaijan introduces significant amendments to its tax legislation. The reforms affect personal income tax, payroll taxation, VAT, digital services, and tax administration, and have a direct impact on business operations and financial planning.
The year 2026 is considered a transition year, requiring companies to reassess their tax and financial strategies.
Personal Income Tax in Azerbaijan – 2026
- Expiry of tax incentives for employees in the non-oil, non-government sector
- Full reinstatement of personal income tax on private-sector salaries
- Introduction of a phased PIT rate system for 2026–2028
Impact on businesses:
- increased payroll costs
- need to revise HR and compensation structures
Business Taxation and SME Updates
Simplified Tax Regime
- Expanded eligibility for the simplified tax regime
- Revised VAT registration thresholds
- Reduced administrative burden for SMEs and entrepreneurs
Tax Incentives
Tax incentives remain applicable to:
- liberated territories
- Nakhchivan Autonomous Republic
- priority economic sectors
VAT and Digital Services in Azerbaijan
As of 2026:
- Non-resident companies providing digital services to individuals in Azerbaijan must register for VAT
- VAT must be charged and remitted on digital services
Covered services include:
SaaS platforms, online subscriptions, marketplaces, digital advertising, cloud and IT services.
Tax Administration and Compliance
- Expanded electronic tax reporting
- Enhanced risk-based tax audits
- Increased compliance and transparency requirements for businesses
Key Takeaway for Companies
2026 is a critical tax adaptation year in Azerbaijan. The reforms affect:
- payroll budgeting
- financial and tax modelling
- compliance and risk management
Early preparation enables businesses to mitigate risks and maintain financial stability.
How ABC Consulting Can Support Your Business
- impact assessment of tax changes
- payroll and incentive optimisation
- tax planning and compliance
- professional representation before tax authorities