Azerbaijan.US
Azerbaijan is preparing changes aimed at bringing the rental housing market out of the shadow economy by reducing taxes and simplifying administrative procedures.
Although renting out residential property is legally subject to taxation, a significant share of rental agreements remains informal. The new rules are designed to encourage landlords to legalize rental relationships by lowering the tax burden and making contracts easier to formalize.
Under the proposed changes, the personal income tax rate on rental income earned by individuals from leasing housing to other individuals will be reduced from 14% to 10%. This represents a decrease of nearly 30% in tax liabilities.
At the same time, the 14% tax rate will remain unchanged for properties rented out as part of business activity or leased to legal entities.
Authorities say the reform is intended to curb tax evasion, promote formal rental contracts, and increase transparency in the housing market.
Experts note that notarized rental agreements provide additional legal protection for property owners. In cases of property damage, liability rests with the tenant, reducing risks for landlords.
The new rules also address situations where apartments are provided to relatives or close family members free of charge. In such cases, parties may still sign a contract that specifies obligations rather than income, confirming that the property is not being rented on a commercial basis.
However, challenges remain for owners of undocumented properties who cannot complete notarized agreements. In these cases, a simplified contract may still be used for tax purposes. Once registered, the property owner is required to pay a 10% tax on rental income.
Monitoring of unregistered rental activity has already begun in several areas. Local executive authorities, municipalities, and the State Agency for Property Issues are using databases, social media listings, citizen reports, and utility consumption data to identify informal rental arrangements.
