28 Aug 2023

HOW ARE REMOTE SERVICES INCOME TAXED?

As an individual, I need to open a TIN and a related bank account to receive the income I earn by providing remote consulting services to a company located in a foreign country. What kind of income is this income? What should be the designation when opening a TIN account and what is the amount of tax to be paid monthly? Do I have to pay the mandatory state social insurance fee when receiving the income?

The State Tax Service stated that the activity mentioned in the request is considered an entrepreneurial activity and must be registered as a taxpayer before starting that activity.
Depending on the type of activity, a natural person must pay the appropriate tax at the rates specified in the Tax Code in accordance with the taxation system selected in the submitted application and the resulting taxation objects.
According to the request, if the income is paid only by the taxpayer and because he serves another taxpayer as a sole proprietor, that taxpayer does not have the right to be a simplified taxpayer and he must act as an income tax payer.
If the mentioned activity is carried out as a payer of income tax, income tax is calculated at the rate of 20 percent and paid to the state budget from the remaining amount after deducting the expenses incurred in connection with obtaining that income.
It should also be taken into account that 75 percent of the income from the entrepreneurial activity of individual entrepreneurs who are micro-entrepreneurs who keep records of income and expenses in the manner determined by the Tax Code is exempt from income tax. In the case of a micro-entrepreneurial entity (persons with an average number of employees in the range of 1-10 people and an annual income not exceeding 200,000 manats), they can get a 75 percent tax discount by keeping records of income and expenses.
Also, 50 percent of the minimum monthly wage for entrepreneurial activity in the construction field, 25 percent in other fields, 100 percent in Baku, 90 percent in Sumgait and Ganja cities, 80 percent in other cities, 60 percent in administrative territorial units and settlements that are the administrative center of district administrative territorial units, In rural areas, 50 percent of the compulsory social insurance fee must be calculated and paid every month.

Basis: Articles 33, 34, 101.3, 102.1.30, 218.5.10, 218.6.2 of the Tax Code, Law No. 250-IQ of the Republic of Azerbaijan "On Social Insurance".