Starting next year, income earned by individuals from renting out their privately owned residential properties will be subject to taxation, according to the draft State Budget for 2026.
Under the proposed changes, a 10 percent withholding tax will be applied to income received by individuals who rent their residential properties to other private persons.
The measure does not apply to accommodations located within hotels or similar hospitality facilities.
The move aims to broaden the tax base and bring rental income under formal regulation, as the government seeks to ensure fiscal transparency in the growing housing market.
Analysts say the initiative could have a dual effect: while it may increase state revenue, it could also raise rental prices in major cities such as Baku, where informal leasing remains widespread.
If adopted, the new rule will take effect from January 1, 2026.
