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Azerbaijan corporate tax - guide for international expansion

Paola Faben Oliveira

22.12.25

Read time 9 minutes

Are you considering expanding your business operations to Azerbaijan? Understanding the corporate tax landscape is crucial for making informed decisions about your international business strategy.

Azerbaijan offers an attractive business environment in the South Caucasus region, strategically positioned between Europe and Asia. With its oil-rich economy and growing non-oil sectors, the country presents significant opportunities for international businesses. However, navigating the corporate tax system requires careful planning and compliance with local regulations.

Whether you're establishing a new subsidiary or expanding existing operations, having the right financial infrastructure is essential. Wise Business can help streamline your international payments and currency management, making it easier to handle corporate tax obligations and day-to-day business transactions in Azerbaijan.

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This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

Azerbaijan Corporate Tax Rate in 2025

The standard corporate income tax rate in Azerbaijan is 20% for most businesses. This rate applies to the worldwide income of Azerbaijani tax-resident companies and to Azerbaijan-source income of non-resident companies operating through permanent establishments.¹

Azerbaijan offers several preferential tax regimes for specific sectors and activities. Companies operating under the simplified tax regime may pay 2% on gross revenue if their annual turnover does not exceed AZN 200,000 and they are not registered for VAT. Certain activities, such as catering services, are subject to a higher simplified rate of 8%.¹

The country also provides special treatment through various exemptions and incentives. Taxpayers producing agricultural products are exempt from profit tax, VAT and property tax for a 13-year period starting from 1 January 2014. Companies established in industrial or high-tech parks enjoy 10-year exemptions from profit, property and land taxes, while those obtaining investment promotion certificates benefit from a 50% reduction in profit tax for a period of seven years.²

Foreign companies are subject to corporate income tax only on their Azerbaijan-source income, which includes income derived from permanent establishments, immovable property, or investment income such as dividends, interest and royalties. Non-resident companies without permanent establishments are generally subject to withholding tax at source on their Azerbaijan-source income.³

How to Pay Corporate Tax in Azerbaijan

Corporate tax payments in Azerbaijan are made in Azerbaijani Manat (AZN) to the relevant tax authority. Companies must register with the tax authorities and obtain a taxpayer identification number (TIN/registration) to operate legally.⁴

The tax year in Azerbaijan runs from 1 January to 31 December for most resident companies. Annual corporate income tax returns must be filed by 31 March of the following year (the specific date may depend on the taxpayer category). In many cases advance payments or instalments of the corporate tax liability are required during the year, though the exact schedule and method depend on the taxpayer’s size, sector and applicable regime.⁵

Advance payment rules may include instalments based on the previous year’s tax liability or estimated current year profits, helping to spread the tax burden. Businesses should verify local law or the tax authority’s guidance for their specific instalment schedule.⁵

Late payment penalties and interest apply to overdue amounts. Interest is generally charged at 0.1% per day (up to one year), with additional administrative fines imposed for late or incorrect filings.⁶

Under the thin-capitalisation and interest-deductibility rules: interest on foreign or related-party borrowings may only be deductible if the interest rate does not exceed 125% of the inter-bank auction rate. In addition, for borrowings from foreign parties, interest may not be deductible if the total foreign debt exceeds twice the taxpayer’s equity (capital) as from 1 January 2019 (excl. banks & credit institutions).⁷

Let's consider a practical example: if your company has an annual turnover of 1.5 million AZN with a profit margin of 15%, your taxable profit would be 225,000 AZN. At the standard corporate tax rate of 20%, your annual tax liability would be:

225,000 AZN × 20% = 45,000 AZN (approximately £21,200)

When expanding your business to Azerbaijan, the right financial tools will make the process smoother. Using a platform like Wise Business makes it easy to manage international finances. A multi-currency account allows businesses to pay for incorporation costs, registration fees, and government taxes in local currency without paying high exchange rate fees.

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Tax Compliance in Azerbaijan

To stay compliant with the Azerbaijan corporate tax policy, businesses must follow strict rules for filing and payments. Effective corporate tax planning helps meet these deadlines and avoid penalties.⁵

Register Early: Make sure you get your Tax Identification Number (TIN/VOEN) right when you incorporate. This lets you legally operate and begin corporate tax prep.
Use Tax Extensions: You can ask for up to a three-month filing extension for your profit tax return, but you must apply before the March 31st deadline and pay the full tax amount due at the time of the request.
Know the Audit Rules: An ordinary on-site tax audit can only happen once a year. The tax authority has three years after the tax period ends to calculate or recalculate taxes. They have five years to impose any calculated penalties.

International Expansion to Azerbaijan

Azerbaijan is a great choice for international business expansion. Its main appeal is its strategic location. It sits in the South Caucasus, linking Western Asia and Eastern Europe. This makes it a key part of the Trans-Caspian East-West Trade Corridor that connects China and Europe.⁸

Its central location provides major advantages in shipping and transit. Businesses can reach markets across 16 time zones, from Tokyo to New York. For shippers, this route can save up to 70% of the time compared to the maritime route from China to Europe.⁸ The country has invested heavily in modern roads and rail, including north-south and east-west corridors. This strong infrastructure includes eight new international airports, with another on the way.

Azerbaijan also offers good access to a large regional market. It has Free Trade Agreements (FTAs) with ten regional countries, plus a Preferential Trade Agreement (PTA) with Türkiye. These agreements allow for imports of goods free of customs duties. The total market size of these partner countries is 367 million people with a combined GDP of $3.2 trillion.⁹

Interestingly, the country's economy is becoming more diverse. While known for oil, the non-oil sector now makes up over 61.94% of the national economy.¹⁰ This growth makes the economy more stable.

The workforce is another strong point. Azerbaijan has a population of over 10.1 million, and 43% are aged 29 or younger. This young population is well-educated, with a 99.8% literacy rate. The growing number of university graduates ensures plenty of skilled labor.¹¹

The government has created a liberal investment climate. This includes ratifying 53 bilateral treaties for investment protection. To help international businesses, Azerbaijan has also signed bilateral treaties for the avoidance of double taxation with 55 countries. This framework reduces cross-border tax issues and increases investor certainty.¹² The standard Azerbaijan corporate tax rate is 20% of net profits, which is applied to the net profit of the company.

Setting up your business in Azerbaijan are:¹³

Do Market Research and create a solid Business Plan.
Choose a Legal Structure (like an LLC or joint-stock company) and a business name.
Register your business with the Ministry of Taxes.
Set up Tax Registration to get your Taxpayer Identification Number (TIN) and select your tax regime. This step is crucial for operating legally.
Open a business bank account and get any necessary licenses or permits.

To ensure your setup and tax matters are handled correctly, it's wise to work with local experts. Large firms have professional corporate tax consultants or corporate tax solicitor services to guide your expansion.

Incorporation of Business in Azerbaijan

To register a company, applicants must submit several documents to the State Tax Service, either in person or through an authorized representative:^{14 15}

Application Form: The official registration request.
Company Charter (Articles of Association): Details the company's goals, structure, address, and internal rules.
Decision on Establishment: A formal written decision by the founders to start the company.
Identification Documents: Copies of valid IDs (like passports) for all founders and the appointed head of the company.
Proof of Payment: A receipt for the state registration fee and proof of the deposited Charter Capital (for entities like the LLC).
Power of Attorney (if needed): A legal document if an agent is filing on the founder's behalf.

To set up a business in Azerbaijan, the main place for registration is the State Tax Service (DÖVLƏT VERGİ XİDMƏTİ) under the Ministry of Economy. The process follows the country's tax and corporate law.

Foreign investors can choose from several legal forms, with the Limited Liability Company (LLC) being the most common.¹⁶

Limited Liability Company (LLC): This is the most popular type. It can be started by one or more people or companies. The key benefit is that the owner's liability is limited to their investment in the company's charter capital. LLCs do not issue shares.
Joint Stock Company (JSC): Shareholders' liability is only for the value of their shares.
- Closed JSC: Shares cannot be traded freely. Minimum capital is AZN 2,000 (about $1,175 USD).
- Open JSC: Shares can be traded freely. Minimum capital is AZN 4,000 (about $2,350 USD).
Subsidiary Company: This is a fully recognized Azerbaijani legal entity, registered as an LLC or JSC, and subject to all local laws, including for tax and accounting.
Representative Office: This is a local office of a foreign company used for non-commercial purposes like representing the parent company's interests. It's a "non-resident" entity. It is not subject to profit tax if its activities are strictly representative.
Branch: A Branch can carry out some or all of the Head Office's commercial functions. Like a Representative Office, it is generally subject to the same legal and tax rules, but it can channel income to overseas accounts if registered with local authorities.

International Corporate Tax Best Practices

Managing corporate tax obligations across multiple jurisdictions requires a strategic approach that balances compliance with efficiency. Here are key practices for international businesses operating in Azerbaijan and other markets.

Maintain robust documentation and record-keeping systems that meet both local Azerbaijan requirements and international standards. This includes keeping detailed records of all transactions, transfer pricing documentation, and supporting evidence for tax positions taken. Azerbaijan's tax code requires comprehensive documentation for business expenses and income recognition.

Leverage double taxation treaties where available. Azerbaijan has signed double taxation agreements with numerous countries, which can help reduce withholding taxes and eliminate double taxation on the same income. Understanding these treaties is crucial for optimising your overall tax position and ensuring compliance with both jurisdictions' requirements.

Consider the impact of international tax developments, including OECD initiatives on base erosion and profit shifting. While Azerbaijan is not currently subject to the global minimum tax under Pillar Two, international businesses should monitor developments as the country continues to align with global tax standards.

Regular compliance reviews and staying updated with changing regulations are essential, particularly given Azerbaijan's ongoing economic reforms and periodic updates to tax legislation affecting both domestic and international businesses.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to Azerbaijan efficient and simple. It's the one account for managing your money globally.

With a Wise Business account, you can:

Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.
Get paid like a local: Use local account details for 8+ major currencies to easily receive payments from customers or investors.
Manage your money across borders: Hold and exchange 40+ currencies in one account, always with the mid-market exchange rate and low, transparent fees.
Streamline your accounting: Integrate with tools like Xero or QuickBooks to simplify tracking your company's international finances.
Empower your team: Provide multi-user access for your finance team and issue expense cards for international spending.

Wise is designed to support every step of your journey, from paying your first registration fee to receiving international payments and managing your global treasury.

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FAQs - Corporate Tax in Azerbaijan

Who is liable for corporate tax in Azerbaijan?

All legal entities incorporated in Azerbaijan are subject to corporate income tax on their worldwide income at the standard rate of 20%. Foreign companies are liable for tax only on their Azerbaijan-source income, including income from permanent establishments, real estate transactions, and certain investment activities. Non-resident enterprises without permanent establishments are subject to withholding tax at source.

Are there any tax incentives for businesses in Azerbaijan?

Yes, Azerbaijan offers extensive tax incentives, including simplified tax regimes for small businesses (2% on gross revenue), micro-business rates (5% on net profits), and complete exemptions for agricultural businesses until 2024. Companies in industrial and technological parks receive 7-year tax holidays, whilst investment promotion certificate holders benefit from 50% profit tax reductions. Start-up certificate holders and SME cluster participants also receive significant tax benefits.

What is the tax treatment of dividends in Azerbaijan?

Effective from 1 January 2024, dividends paid by resident enterprises are taxed at source at 5%. Dividends received by Azerbaijan legal entities from such payments are not subject to additional profit tax. This represents a significant change in dividend taxation policy aimed at encouraging domestic investment.

What is the process for registering for corporate tax in Azerbaijan?

Companies must register with the State Tax Service and obtain a taxpayer identification number. The registration process involves submitting incorporation documents and completing the necessary tax registration forms. Once registered, companies must file quarterly interim reports and annual returns by 31 March, making advance payments throughout the year.

What are the common pitfalls to avoid regarding corporate tax in Azerbaijan?

Common issues include failing to maintain adequate documentation for expenses, missing quarterly advance payment deadlines, and not properly applying thin capitalisation rules for foreign loans. Businesses should also ensure compliance with simplified tax regime requirements if applicable, properly classify income sources, and maintain accurate records for potential tax audits. Additionally, companies should be aware of the specific rules governing different tax incentive schemes to avoid inadvertent violations.

Sources used in this article:

Sources last checked 28/10/2025

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This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.

We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.