Azerbaijan.US
Starting next year, amendments to Azerbaijan’s Tax Code will further reduce the tax burden on dividend income. The tax rate on foreign-source dividends received by individuals will be lowered from 14% to 5%, marking a significant cut.
.
This move follows an earlier reform: as of January 1, 2024, the tax on dividends from domestic companies was already reduced from 10% to 5%. As a result, Azerbaijan is completing a two-stage reduction of dividend taxation, aligning domestic and foreign dividend income under the same 5% rate.
The government says the changes are aimed at encouraging voluntary disclosure of overseas income, improving tax compliance, and increasing transparency.
Under current rules, Azerbaijani residents earning dividends abroad must file an income tax declaration and pay a 14% tax. Taxes already withheld overseas are credited against the tax due in Azerbaijan. From next year, however, the reduced 5% rate will apply.
Economic expert Emin Sattarov noted that dividend tax rates in most countries exceed 5%.
“If a taxpayer has already paid 4% tax abroad, only the remaining 1% will be due in Azerbaijan. If the foreign tax rate is 5% or higher, no additional tax will be payable domestically,” he explained.
Individuals are advised to register with tax authorities in advance and submit their income declarations by March 30 of the following year, attaching documents confirming taxes paid abroad. In the absence of such documentation, the tax authority will automatically assess tax at the 5% rate.
Azerbaijan participates in bilateral and multilateral agreements on the exchange of financial information, enabling authorities to identify undeclared foreign income and recover unpaid taxes. Penalties remain in place for failure to declare taxable income.
Analysts say the harmonization of dividend tax rates at 5% for both domestic and foreign income is expected to encourage the repatriation of capital previously kept abroad due to higher tax costs, redirecting funds into local investment and economic activity.
