Azerbaijan Drops Interest Tax, Imposes Capital Flow Tax
January 20, 2016 Taxation in Azerbaijan
BAKU – As the Azerbaijani manat sees a continued decline, the government is now resorting to tax measures to ensure that capital is not transferred overseas.
Earlier this week the head of the Central Bank of Azerbaijan Elman Rustamov announced that new tax measures will soon be implemented to help reign in capital outflows from the country, and to encourage deposits to be kept in locals banks.
From February 1st this year, all interest paid on deposits held in local banks and local branches of foreign banks will be exempt from taxation, which was previously set at 10 percent.
Further, all money transfers abroad, including, foreign direct investment, foreign securities purchases, and foreign property purchases, will be taxed at a rate of 20 percent, however, the tax will not apply to foreign transfers for healthcare and education.
Cumulatively, the measures are expected to encourage individuals and businesses to keep more cash and investments in the country.
Azerbaijan has recently seen mass devaluation of the local manat, as the government sees mass declines in revenues with falling international oil prices, and following a move by the government to drop the peg of the manat to the USD.