The Tax Code of the Republic of Azerbaijan

Article 102. Exemptions and privileges on income tax
102.1. The following income of physical persons shall not be subject to income tax:
102.1.1. wages obtained abroad by employees of diplomatic services, assigned to work in foreign states within rotation program, persons exercising administrative and technical maintenance of the diplomatic service and military personnel, engaged in the protection of diplomatic missions and consulates of the Republic of Azerbaijan, which operate in foreign countries and international organizations and need protection, income from official employment, received by employees of diplomatic and consular services, which are not the citizens of Azerbaijan;
102.1.2. income from the work-place of a person who is not a resident of the Republic of Azerbaijan - if this income is paid by an employer or in the name of an employer who is not a resident of the Republic of Azerbaijan and is not paid by a permanent establishment of a non-resident;
102.1.3. income received as gift, moneyed assistance, lump-sum grant and inheritance in calendar year:
102.1.3.1. Part of the value of gifts, moneyed assistance, lump-sum grant for the payment of education and medical treatment fees amounting to up to 1000 manats, part of the value of the moneyed assistance, lump-sum grant for the payment of medical treatment abroad amounting up to 2000 manats, part of the value of succession amounting up to 20000 manats.
Persons, who received payments for education or medical treatment services, such privilege is provided only in cases, when they submit relevant documents, verifying the payments of these amounts as appropriate;
102.1.3.2. in the event that a gift or inheritance is received from family members of the taxpayer- the entire value of such gift;
102.1.4. with the exception of allowances paid in connection with the temporary loss of ability to work (earning capacity), government allowances, irreplaceable government transfers, government pensions, government living allowances, in case of termination of labor contract due to reduction of the number of employees and staff, allowances paid to employees in accordance with Labor Code of the Republic of Azerbaijan, as well as one-time individual payments or moneyed assistances from the resources of the State Budget based on the Laws of the Republic of Azerbaijan and decisions of the appropriate government authorities.
102.1.5. alimony;
102.1.6. if monthly income, gained in connection with a paid job at the main workplace (where the labor record is maintained) of a physical person is up to 2500 manats, then the part in the amount of 1 livingwage in the country, if annual income is up to 30000 manats, then in the amount of 12 livingwages in the country.
102.1.7. income from the realization of movable tangible assets, except for precious stones and metals, precious stone and metal products, fine art works, antique items as well as property which is used in the entrepreneurial activity of a taxpayer.
102.1.8. funds paid by money or in kind in the event of insurance case for compensation of damage to the life of an insured and beneficiary, as well as damages to his property and property interests, and also all types of mandatory insurance and voluntary medical insurance premiums paid by employer, insurance premiums paid by employer to insurers of the Republic of Azerbaijan on accumulative life insurance and pension insurance under contract concluded for not less than 3 years, any amounts paid to the insured and beneficiary after 3 years term from the moment of entering the accumulative life insurance and pension insurance contract into effect.
102.1.9. income from the realization of immovable property which was the place of residence of a taxpayer for not less than 3 years;
102.1.10. compensation payments related to the compensation of losses caused;
102.1.11. income received directly from production of agricultural products;
102.1.12. income of physical persons from craft production of copper, tin and pottery products, house appliances, gardening instruments, national music instruments, toys, souvenirs, house appliances made of reeds and cane, involved in embroidery and production of house appliances from wood;
102.1.13. the amount of wins received from lotteries officially registered by respective executive power body, as well as obligations of the internal state winning bonds;
102.1.14. Compensation payment to natural persons:
102.1.14.1. the amount of additional payments stipulated under the legislation, as well as daily traveling expense payments to the crews of marine transport, established by the relevant executive authority instead of daily traveling expenses to the workers, which are always on road during business hours, or their work at field site and field organizations;
102.1.14.2.amountsof travelling expenses established by the decisionof the relevant executivepower;
102.1.14.3. lump sump amounts paid during the termination of the labor contract as a result of downsizing of staff, or death of employee;
102.1.14.4. amounts of expenditure, paid in accordance with procedures approved by the legislation at the expense of the employer for medical examination of employees involved in difficult, health deteriorating and hazardous areas;
102.1.14.5. the amount of free of charge treatment milk and other equivalent products provided to employees, engaged in areas with health deteriorating, heavy work conditions and underground work, as well as the value of special cloth, shoes and other personal protection equipment, issued to the employees within required time and required assortment;
102.1.14.6. amounts of allowances paid by the enterprises and organization to students, master of sciences, directed to receive the education out of work;
102.1.14.7. indexation sums of not received or deposited wages;
102.1.14.8. lump sump aid provided on the basis of decisions of relevant executive authorities, as well as foreign states and other organizations due to natural disasters and other emergency circumstances;
102.1.14.9. amounts of compensation paid to donors for the blood;
102.1.14.10. payment for the diving job;
102.1.14.11. allowance for burial;
102.1.14.12. amounts of lump sump financial aid, provided by relevant executive authorities;
102.1.14.13. financial aid, paid by public entities, charity societies and funds;
102.1.14.14. doles;
102.1.14.15. All types of payments to military servicemen, prosecutor office employees, associates of law-enforcement agencies and special telecommunications services, having special ranking (with exception of official payments and for military (special) rankings),as well as all types of wages and other financial payments to persons cooperating with investigation authorities, intelligence and counter-intelligence services;
102.1.14.16. additional amount paid to some category of military servants for their special service conditions;
102.1.14.16. Amount of allowance paid by the employer in accordance with legislation of due to call of the employee for military and alternative service;
102.1.14.18. additional amounts paid to cadets;
102.1.14.19. payment for parachute jump;
102.1.14.20. lump sump payment for continuous long-term service on navy ships and navy detachment agencies;
102.1.14.21. lump sump payment for continuous service in airborne troops;
102.1.14.22. lump sump payment to graduates of military facilities;
102.1.14.23. lump sump payment to navy servicemen;
102.1.14.24. payments to persons at military ship;
102.1.14.25. lump sump payment for provision of high military readiness and excellent discipline of troops;
102.1.14.26. payment allowance to military with service for fixed period instead of tobacco products;
102.1.14.27. lumps payment to ensigns, warrant officers and military officers serving above fixed period for establishment of initial conditions for the families;
102.1.14.28. transportation costs compensated to military for travels during the services;
102.1.14.29. funds for field (steppe) services;
102.1.14.30. compensation to military for leased accommodation;
102.1.14.31. monetary compensation issued to military instead of food;
102.1.14.32. monetary compensation issued to military for tailoring of uniform.
102.1.15. the complete value of prizes received as goods on competitions and tournaments. The value of monetary prizes received on international competitions and tournaments - up to 4000 manats, and for those received in in-country competitions and tournaments- up to200manats.
102.1.16. lump sum, paid as a result of voluntary retirement of the state employee reaching pensionable age;
102.1.17. monthly allowance to official salary of the deputies of Milli Mejlis and judges of the Republic of Azerbaijan for compensation of costs related with implementation of delegated authorities and monthly allowance to official salaries of the officials of executive power authorities, financial market supervisory body and Central bank of the Republic of Azerbaijan appointed to positions by the decisions of relevant executive authority, as well as other state authorities (agencies) for compensation of representation costs, related with implementation of their duties;
102.1.18. compensation payableto individualsunder the Law ofAzerbaijan Republic "On land acquisitionfor state needs";
102.1.19. winnings,received from sportsbetting games conductedin the manner specifiedin Article53-1of the Law of the Republic of Azerbaijan "On Physical Culture and Sport".
102.1.20. amount of pension,allowances and other paymentsto the formerPresident of the Republic of Azerbaijan and themembers of hisfamily;
102.1.21. income (other than income tax withheld fromwages), obtained from the activityin the industrialor technological parksby individualsinvolved in entrepreneurialactivities withoutforming a legal entity, being a residentsestablished in accordance withthe decision ofthe relevant executive authority of industrial andtechnological parks- within7 years fromthe reporting yearof registration inthe industrial andtechnological park, in accordance with the law;
102.1.22. the part of the annual interest rate being paid by a local bank or the branch of a foreign bank in the Republic of Azerbaijan up to 500 manats.
102.1.22. the annual interest income paid on deposits of individuals by local banks and branches of foreign banks in Azerbaijan, as well as dividends on investment securities, discounting (difference caused by lower placement of bonds than its nominal value) and interest income paid by issuer - within 3 -year period beginning from 1 February 2016;
102.1.23 - 50 percent of income earned after receiving investment promotion certificate by individual entreprenur – within 7 years.
102.2. The monthly taxable income from any type of employment shall be reduced by the amount of 400 manats for following persons:
102.2.1. National Heroes of the Republic of Azerbaijan;
102.2.2. Heroes of the Soviet Union and Social Labor;
102.2.3. persons awarded with all three degrees of the Honorary Order;
102.2.4. disabled war veteran of disability groups I and II;
102.2.5. widowed wives (husbands) of war participants who were killed at war or died later;
102.2.6. income of persons who were awarded orders and medals for heroic labor in the home front during the years of 1941-1945.
102.2.7. persons who received the status of war veterans in accordance with legislation;
102.2.8. persons who acquired radiation and radiation sickness or had these diseases as a result of accidents at Chernobyl AES, radiation accidents in civil or military atomic facilities, as well as tests, training or other work related to any kind of nuclear facilities (installations) and nuclear weapons and space technology;
102.3. The monthly taxable income of disabled people of I and II groups (except for veterans of war), persons under age of 18 with limited levels of health from any type employment shall be reduced by the amount of 200 manats.
102.4. The taxable income of the following persons from employment shall be reduced by the amount equal to 100 manats:
102.4.1. parents of war participants who were killed at war or died later, including parents and wives (husbands) of people in state service who died during the performance of their duties. Such privilege shall be granted to the wives (husbands) of these persons, provided that they have not married again;
102.4.2. parents and wives (husbands of persons who were killed as a result of the intervention of Soviet troops on January 20, 1990 and during the protection of the integrity of the territory of the Republic of Azerbaijan. Such privilege shall be given to the wives (husbands) of these persons, provided that they have not married again;
102.4.3. military officials involved in the training and test gatherings and military servicemen who were sent to Afghanistan and other countries where war operations were conducted;
102.4.4. any of the parents (according to their own decision), wife (husband), guardian or patron taking care of a child with limited level of health with whom they live together, who need a permanent care and who is an invalid from childhood or belongs to the 1st group of disability;
102.4.5. displaced people and persons of similar status. This privilege in accordance with housing legislation or civil legislation deals is not applicable to persons, residing permanently as a result of obtaining of personal dwelling space.
102.5. The taxable monthly income of a spouse caring for three persons, to include pupils and students under the age of 23, shall be reduced by an amount equivalent to 50 manats of such spouse.
This rule shall be valid for children until the end of the year they reach the age of 18, for students В?” age of 23, or in the event a of death of children or persons under patronage.
The taxable income of physical persons shall be reduced beginning from the year when children are born or when patronage starts.
When the number of persons under patronage lessens (except in the case of death) during a year the deduction of an amount for the support of persons under patronage shall be terminated starting from the month following the month in which the number of such persons lessened.
102.6. The following shall not be persons under patronage:
102.6.1. persons who receive a scholarship, pension, and unemployment grant (other than children);
102.6.2. persons who are on state maintenance (students of technical colleges, children maintained in nurseries and kindergartens);
102.6.3. students of special schools and children maintained at boarding schools for whose maintenance guardians are not charged, as well as children maintained at boarding schools attached to state maintained schools.
102.7. If a physical person has several grounds for the right to privilege in accordance with articles 102.2, 102.3 and 102.4 of this Code such person shall be entitled to one of these privileges which is greater in amount.
102.8. During calculation of tax levied from the salary, a physical person’s right to tax privileges stipulated in this Article shall arise upon the submission of documents determined by the relevant central executive authorities of the Republic of Azerbaijan and shall be exercised at the main workplace (where such physical person’s labor record is maintained).