Employment Cost Calculator for Azerbaijan
Calculate the total cost of employing someone in Azerbaijan, including taxes, benefits, and our management fee.
Employer Tax Contributions
| Tax Type | Rate | Base |
|---|---|---|
| Social Security (Non-Oil/Gas, Up to 8,000 AZN) | 22% | Gross Salary |
| Social Security (Oil/Gas & State) | 22% | Gross Salary |
| Unemployment Insurance | 0.5% | Gross Salary |
| Mandatory Medical Insurance (Up to 8,000 AZN) | 1% (non-oil/gas private sector, temporary) / 2% (oil/gas & state) | Gross Salary |
Filing & Compliance
- Employers must calculate and withhold Personal Income Tax (PIT) and employee contributions.
- Monthly payroll declarations must be filed and contributions remitted through the State Tax Service's online portal by the 20th day of the following month.
- Annual reporting summarizing total compensation and withheld taxes for each employee is also required.
In Azerbaijan, employers are responsible for withholding various taxes from employee salaries, which contribute to social security, unemployment insurance, and mandatory medical insurance. These deductions, along with the income tax, are crucial for compliance with Azerbaijani employment regulations.
Employee Tax Deductions in Azerbaijan
Income Tax
- Tax-Exempt Income: Monthly employment income up to 8,000 AZN is exempt from income tax for seven years, starting from January 1, 2019, for private sector employees (excluding those in the oil and gas industry).
- Tax Rates: Income above the exempt amount is taxed progressively, with the highest rate currently at 25%. Income above the 8,000 AZN threshold, and investment income, is taxed at 14%. Individual entrepreneurs are taxed at a rate of 20%.
- Capital Gains: Capital gains are considered part of regular income and taxed at the standard individual income tax rate.
Social Security
- Employee Contribution: The social security contribution is split into two parts: 3% on income up to 200 AZN and 10% on income exceeding 200 AZN, plus a flat fee of 6 AZN.
- Liberated Territories Subsidy: Employees in the private sector of liberated territories (excluding oil and gas) receive a government subsidy on their social security contributions. The subsidy is currently 100% (from January 1, 2023, to December 31, 2025), and will decrease gradually in the following years.
Unemployment Insurance
- Employee Contribution: Employees contribute 0.5% of their salary to unemployment insurance.
Mandatory Medical Insurance
- Employee Contribution: The mandatory medical insurance contribution is tiered: 1% on income up to 8,000 AZN and 0.5% on income above 8,000 AZN, plus a flat fee of 160 AZN.
Employer Tax Contributions in Azerbaijan
Social Security
- Employer Contribution: Employers contribute 22% of the employee's salary for social security. This is in addition to the employee's contribution.
- Liberated Territories Subsidy: Similar to employees, employers in liberated territories (excluding oil and gas) receive a subsidy on their portion of social security contributions. The subsidy is currently 100% and decreases over time according to the current schedule.
Additional Information
- Minimum Wage: The national minimum wage is 400 AZN. As of February 5, 2025. This figure might be subject to change.
- Payroll Frequency: Payroll is typically processed monthly or bi-monthly in Azerbaijan.
- Overtime: Overtime work is subject to specific regulations, including limits on consecutive overtime hours and situations when overtime is allowed.
It is important to consult official government resources for the most recent updates to these tax regulations and specific details related to individual circumstances.
