Dividends of physical entities' deposits to be exempt from income tax
By Aynur Jafarova
Dividends of physical entities' deposits in banks and other credit institutions of Azerbaijan will be again exempt from income tax.
A government source told Trend Agency that unlike previous years, [first tax exemptions introduced in 1999] the government has decided to improve the mechanism of application of tax benefits for depositors.
“Based on the old law, the validity of moratorium was introduced for maximum three years. Now the new law that will come into force in 2015 is expected to eliminate the time-frame. But it will keep restrictions on the amount of the deposits to be exempt from tax,” the source noted.
The source did not specify the amount that will be subjected to the exemptions. However, given that the amount of insurance coverage on deposits of physical entities in Azerbaijan does not exceed 30,000 manats, one can assume that the tax benefits will be applied on deposits invested in the banking system within the limits of the similar amount.
Thus, the income tax will be applied to dividends on deposits, the amount of which exceeds the non-taxable portion of the deposit.
The draft law was presented to the parliament for consideration. Its adoption is expected in the coming days.
Such a decision [keeping tax benefits] is aimed at supporting not only the banking system of the country, but also increasing the interests of small investors, who will be able to keep their savings in banks on a longer-term period of time, without any fear of cancellation of tax benefits.
Currently, the average interest rate on deposits is around 9.6 percent, which is quite a high rate, Chairman of the Central Bank of Azerbaijan Elman Rustamov believes. According to him, during the recent debates in Parliament over the law "On state budget for 2015" it was noted that this year the income of the population on bank deposits are expected to reach half a billion manats.
“This is quite a huge figure, and it plays an important role in improving the social situation of the population. During the same period,the profits of banks amounted to approximately 420-430 million mantas,” he added.