Azerbaijan – Changes in Tax rate and Social Security Rates – 1st January 2026

Personal Income Tax rate

Effective January 1, 2026, the long-standing income tax holiday for private sector employees in the non-oil/gas sector in Azerbaijan will end. A new progressive income tax on wages will be introduced, with the following rates:

• 3% on monthly income up to AZN 2,500.
• 10% on the portion of income between AZN 2,501 and AZN 8,000.
• 14% on monthly income exceeding AZN 8,000.

This progressive structure is a permanent preferential regime, designed to gradually phase in taxation for income that was previously tax-exempt. The lowest bracket rate is scheduled to increase further in the following years: to 5% in 2027 and 7% from 2028.

Social & Health Insurance Contributions:

Amendments to the Social Insurance and Medical Insurance laws introduce reduced contribution rates for higher-income employees in the non-state, non-oil sector.

Mandatory Social Insurance

• The combined rate on monthly wages above AZN 8,000 will decrease from 25% to 21% (10% employee + 11% employer).
• Wages up to AZN 8,000 remain subject to the current rates (Employee: 3% on the first AZN 200 + 10% on the remainder; Employer: 22% on the first AZN 200 + 15% on the remainder).

Mandatory Health Insurance

• The total contribution rate on wage amounts above AZN 2,500 will be cut from 4% down to 1% (split 0.5% employee and 0.5% employer).

Unemployment Insurance

• Contributions for unemployment insurance remain unchanged at 1% total.

Please contact your Mercans’ services delivery team for any additional information regarding the implications of the above change.

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Azerbaijan – Changes in Tax rate and Social Security Rates – 1st January 2026

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