BAKU, Azerbaijan, December 26. To decrease the population's tax burden and encourage long-term deposit placement, new revisions to the Tax Code on taxation of interest income on bank deposits based on the amount in Azerbaijan have been made, the State Tax Service said, Trend reports.
The bill amending the Tax Code and other associated draft regulatory legislative acts developed to strengthen tax legislation and administration was adopted in its third reading by the Azerbaijani Milli Majlis (Parliament).
From February 1, 2016, annual interest income paid on deposits of individuals by a local bank and a branch of a foreign bank operating in Azerbaijan was excluded from income tax for 7 years. Because the exemption period expired on February 1, 2023, banks began taxing interest income on deposits at a rate of 10 percent at source on that day.
To decrease the population's tax burden and encourage long-term deposit placement, new adjustments to the Tax Code have been adopted regarding the taxation of interest income on bank deposits based on the amount. Thus, when a local bank and a branch of a foreign bank in Azerbaijan place an individual deposit in national currency in each bank (branch of a foreign bank in Azerbaijan) for a period of 18 months or more, and the deposit amount is paid not earlier than after 18 months, the full part of the accrued interest income is exempt from taxation for a period of three years.
Furthermore, the legislation was revised to exempt from personal income tax the portion of monthly interest income earned on deposits in national currency held by each bank up to 200 manat. In other circumstances, banks are required to tax interest income at the source at a rate of 10 percent. This will apply to both domestic and foreign currency interest income.