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Qabil Ashirov

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Azerbaijan is preparing an extensive package of tax incentives aimed at accelerating the development of digital technologies, artificial intelligence (AI), cybersecurity, and innovation-driven industries, AzerNEWS reports.

According to information presented during a meeting of the Economic Policy, Industry and Entrepreneurship Committee of the Milli Majlis, the proposed measures are included in a draft law introducing amendments to several legislative acts.

Under the proposal, highly qualified migrants working in digital technologies, artificial intelligence, cybersecurity, and innovation-related fields will benefit from significant tax exemptions. The incentives will also apply to individuals who have not had tax obligations in Azerbaijan or have held non-resident status for at least the previous 24 months, Azerbaijani citizens returning to the country, and specialists engaged in scientific research and experimental development activities.

Beginning on July 1, 2026, income earned from salaries by these categories of professionals will be subject to a zero percent income tax rate for a period of 20 years.

The draft legislation also proposes a 20-year exemption from income and profit taxes for individuals and companies engaged in the development, advancement, and implementation of digital technologies, artificial intelligence, and innovative products, as well as those providing cybersecurity services. The same tax exemption would extend to dividends distributed by legal entities operating in these sectors.

A key feature of the package is support for the commercialization of innovation. Under the proposal, 95 percent of income and profits generated from royalties, technology transfer agreements, and sales transactions involving intangible assets—such as software, innovative products, and know-how developed through research and development (R&D) activities—would be exempt from taxation.

The draft law also seeks to stimulate startup formation and venture capital investment. Investments made by accredited investors into venture capital funds, companies holding a Startup Certificate, or businesses registered within technology parks would be fully deductible from taxable income and profits, subject to specified conditions.

In addition, investments made through crowdfunding platforms, dividends generated from such investments, and income earned by venture capital funds through dividends and capital appreciation would also qualify for tax incentives.

Another significant provision targets the attraction of global talent. Highly qualified specialists relocating to Azerbaijan to work in digital technologies, artificial intelligence, innovation, and cybersecurity would benefit from a 20-year tax exemption on income earned from foreign sources.

Furthermore, grants and subsidies allocated for financing projects in these sectors would not be considered taxable income.

The package also includes substantial incentives related to property and land taxation. Business entities operating in the targeted sectors would be exempt from property and land taxes on assets used for their activities for a period of 20 years.

As an additional measure to strengthen technological capacity, the draft law proposes tax and customs incentives for the import of machinery, technological equipment, devices, materials, and raw materials used in digital technology and artificial intelligence activities. These benefits would take effect on July 1, 2026, and remain in force for ten years.

If adopted, the reforms would represent one of the most comprehensive incentive frameworks in the region, reflecting Azerbaijan’s ambition to position itself as a leading hub for innovation, advanced technology, cybersecurity, and artificial intelligence development.