🗞️ 2026 Tax 🪙 Package

2026 TAX UPDATE HIGHLIGHTS

Law No. 297-VIIQD of 9 December 2025 introduces a statutory cooperative compliance regime, extends mandatory electronic submission channels, incentivizes cashless-transactions, and reforms depreciation, excise, highway and mining taxes, and special regimes. Most measures take effect 1 January 2026.

Profits Tax

The amendments update depreciation rules by establishing statutory straight-line depreciation periods for each asset category, revising declining-balance rules, and regulating the conditions for changing depreciation methods. Major repair and improvement costs that exceed the statutory 'current repair' thresholds must be capitalized and added to the tax base of fixed assets. A 40 percent limit on deductible depreciation applies to specified assets financed through state investment mechanisms.

Depreciation allowances for taxpayers under horizontal monitoring (see below) are calculated using either the straight‑line method or the declining balance method, while for other taxpayers they, excluding amortization, are calculated only by the declining balance method.

VAT

For threshold and simplified-tax base calculations the amendment applies a 0.5 coefficient to a qualifying POS turnover, i.e., POS receipts count at half their face value for determining eligibility of a turnover for the simplified tax. E-invoices must be issued within the statutory window (generally within five days of the work/service date), with special timing rules for international carriage (issue at start of transport), regular services (issue at start of calendar month) and for advance receipts (upon receipt).

VAT e-registration for non‑resident suppliers of digital and e‑commerce services, including software‑as‑a‑service (SaaS) and other software‑based offerings, was introduced through the Cabinet of Ministers' Resolution No. 387 of 30 October 2023, as subsequently amended, which approved the rules for tax and VAT e-registration, re‑registration, de‑registration of non‑residents engaged in e-commerce and reporting and paying by them the VAT. The State Tax Service operationalized the regime via the dedicated e‑commerce registration portal in July 2024. The regime becomes mandatory from 1 January 2026 for all affected non‑resident digital service providers, including SaaS suppliers.

Personal Income Tax

Payroll taxation in the non-oil, non-gas, and non-state sectors is scheduled to be adjusted gradually from 2026 to 2028. The personal income tax rates will be increased for a monthly taxable income up to AZN2,500 from zero to three percent in 2026, five percent in 2027, and seven percent from 2028. Monthly income within the AZN2,500–8,000 and over bands is taxed using a fixed base amount plus ten percent of the excess over AZN2,500 and 14 percent of the excess over AZN8,000, respectively.

Administration

Horizontal monitoring (cooperative compliance) is a voluntary framework that allows eligible taxpayers to collaborate with a tax authority through early risk disclosure, ongoing engagement, and strong internal controls, rather than solely relying on retrospective enforcement. Eligibility requires that the taxpayer be a medium- or large-sized business with automated accounting systems, a compliant internal control framework, and a non-risky classification. Applications for monitoring during subsequent six to eight months, due no later than September each year, must demonstrate accurate tax calculation and payment in the previous and current calendar years, as well as the design and operation of internal controls that mitigate risks.

The amendments specify that the sole trigger for unscheduled field audits of taxpayers under horizontal monitoring is a transfer pricing request from foreign tax authorities concerning foreign‑source income. E-submission for services listed in the ERPS becomes mandatory. Late-payment interest rules are clarified regarding the confirmation of underpaid tax liabilities after field tax audits or horizontal monitoring, including statutory limits on the period for which interest accrues.

Horizontal monitoring is expected to supersede tax partnership (transparent taxpayer) regime.

Naxcivan Special Regime

The amendments extend Tax Code Chapter XIX special tax regime to the Autonomous Republic, define a 'Naxcivan resident,' and establish the regime for ten years starting 1 January 2026. In addition to residency- and activity-based VAT exemptions, the amendments introduce phased until 2036 state subsidies for mandatory social insurance contributions for qualifying non-state employers.

Miscellaneous

Law No. 215‑VIIQD of 21 June 2025 reduces periods to notify of amendments to the facts of corporate registration, such as address, capital, CEO, and others, from 40 to 15 business days and imposes bankruptcy-related reporting obligations on individual entrepreneurs.

Law No. 277‑VIIQD of 24 October 2025 grants six-year exemptions from profits, property, and land taxes for qualifying residents of industrial parks engaged in designated economic activities, effective 1 January 2025.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.