Ministry: 2019 to be turning point in fight against informal employment in Azerbaijan

Business Materials 20 November 2018 15:27 (UTC +04:00)

Baku, Azerbaijan, Nov. 20

By Sara Israfilbayova - Trend:

Measures to reduce the rates of compulsory social insurance and tax burden for entrepreneurs will be a turning point in the reduction of informal employment in Azerbaijan, Ministry of Labor and Social Protection of the Population of Azerbaijan told Trend.

The ministry stressed that as a result of reducing the tax burden on employers and employees, both will be interested in formalizing their relations starting from 2019.

In addition, the ministry noted that in order to combat informal employment, conferences, seminars and round tables are regularly organized with the participation of employers and employees.

In order to reduce informal employment, the ministry will also take measures stipulated by the employment strategy of Azerbaijan for 2019-2030, approved by the Decree of President of Azerbaijan Ilham Aliyev dated Oct. 30, 2018, the ministry added.

The amendments to the tax legislation, proposed for 2019, provides for the introduction of differentiation of compulsory social insurance contributions for employees of the private non-oil sector.

So, if the employee's monthly salary is 200 manats, the structure of social insurance contributions will remain at the current level. It means that the employee pays three percent of the salary, while the employer pays 22.

If the employee’s salary exceeds 200 manats, it is proposed to apply another deduction principle: the employee pays 6 manats and 10 percent of the amount exceeding 200 manats, and the employer pays 44 manats and 15 percent of the amount exceeding 200 manats.

At the same time, the government plans to exempt from income tax the private sector employees who are not involved in oil and gas sector.

So, from January 1, 2019, for a period of seven years, it is planned to provide 100 percent benefits (in other words, to be exempted from paying tax) on income tax on the salary of an employee. This applies to monthly salaries up to 8,000 manats. If the salary exceeds 8,000 manats, then the amount of exemption from income tax will be 44 percent. Currently, the income tax rate is 14 percent from income of up to 2,500 manats per month. The tax rate is 25 percent if the amount is above this figure.

The amount of tax-free income also increases from 173 to 200 manats. Unlike the previous amendment, this will apply to all sectors, including the oil and gas sector.