Employment taxes in Azerbaijan
- Emil Khudiyev (Lawyer)
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When entering new job, it is important to understand what amount will be credited to your bank card after all taxes have been deducted. Many people believe that salary is the amount specified in the contract, but in fact, the employer accrues gross salary, from which taxes and insurance premiums are withheld.
Before getting a job, it is important to calculate your future salary “in hand”, taking into account all taxes and contributions. This will help to avoid unexpected expenses and plan your budget correctly.
In this article, we will analyze what taxes employees pay in Azerbaijan, as well as how to calculate your net salary.
What taxes are withheld from salaries in Azerbaijan?
According to the Tax Code of Azerbaijan, the following mandatory payments are withheld from an employee’s salary:
- Payroll tax;
- Mandatory contributions to state social insurance;
- Unemployment insurance contributions;
- Mandatory health insurance.
Payroll tax
The amount of payroll tax depends on the sector in which the employee works:
• Private sector (except for the oil and gas industry):
Until January 1, 2026, salaries up to 8,000 manat are exempt from income tax.
If the salary exceeds 8,000 manat, the tax is 14% on the excess amount.
• Public sector and oil and gas industry:
Income tax is 14% of the salary up to 2,500 manat.
For amounts exceeding 2,500 manat, a rate of 25% is applied.
Mandatory health insurance and
Unemployment insurance contributions
Compulsory health insurance in Azerbaijan is 2% of the salary up to 8,000 manat and 0.5% of the amount exceeding 8,000 manat.
Unemployment insurance in Azerbaijan is 0.5% of the salary.
Voluntary deductions
In addition to mandatory taxes and insurance premiums, an employee can make additional deductions, such as:
- Membership fees to trade unions and political parties;
- Charitable donations;
- Deductions to personal pension funds.
These payments are made only with the consent of the employee. If you want to make such deductions, it is enough to write a statement to the employer indicating the amount and purpose of the payment.
FAQ
What is "gross salary" and how is it different from "net salary"?
Gross salary is the total amount your employer pays you before taxes and insurance contributions are deducted. Net income is the amount that goes directly to your card after all mandatory deductions.
Can I change the amount of my voluntary deductions at any time?
Yes, you can change the amount of voluntary contributions at any time by submitting a written statement to your employer.
How are contributions for compulsory health insurance calculated if the salary exceeds 8,000 manat?
For salaries up to 8,000 manats, the compulsory health insurance rate is 2%. If the salary exceeds this amount, 0.5% is charged on the amount that exceeds 8,000 manats.
How much tax is withheld from salaries in Azerbaijan?
Employees in Azerbaijan pay several types of taxes and contributions: income tax, social security, health insurance, and unemployment insurance. The rates depend on the sector (public or private) and the size of the salary.
Who is exempt from income tax?
Until January 1, 2026, private sector employees (except for the oil and gas industry) do not pay income tax if their salary does not exceed 8,000 manat.
What to do if tax is withheld incorrectly?
If you notice errors in the calculations, you should contact your company’s accounting department. In case of disagreement, you can file a complaint with the tax service of Azerbaijan.
Is it mandatory to pay for health insurance?
Yes, from April 1, 2021, compulsory health insurance is paid by all employees: 2% of the salary up to 8,000 manat and 0.5% of the amount above this threshold.
What taxes do employees of government sector pay?
Civil servants pay income tax (14% on amounts up to 2,500 manat and 25% on excess), as well as 3% for social security, 0.5% for unemployment insurance and health insurance contributions.
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