Ilham Aliyev approves amendments to a number of laws related to startups
President Ilham Aliyev has approved amendments to the Tax Code, the Migration Code, as well as to the laws "On Social Insurance," "On Customs Tariff," "On Licenses and Permits," and "On Public Procurement."
As Report informs, according to the document, starting January 1, 2027, for a period of 10 years, 100% of income from the sale of participation interests or shares of a taxpayer will be exempt from income and profit tax for a period of 3 years, if these interests or shares belong to a legal entity that is a micro- or small business entity, has received a "Startup Certificate" or a certificate of registration in a technology park, and does not carry out any other activity.
Under the current legislation, income from innovative activity of startups that are micro- or small business entities and operate as individual entrepreneurs is exempt from income and profit tax for three years from the date of receiving the "Startup Certificate." This period is being increased from three to seven years.
The exemption from income and profit tax will also apply to income of individuals from the sale of securities obtained as a result of investment through a crowdfunding platform in persons that have received a "Startup Certificate" or a certificate of registration in an industrial or technology park — for a period of 10 years starting January 1, 2027; dividends paid to individuals on the aforementioned participation interests (shares), with the exception of participation interests (shares) of residents of technology parks — for a period of 10 years starting January 1, 2027; payments to non-residents that do not have a permanent establishment in the Republic of Azerbaijan for cloud computing, infrastructure, platform, and software services, as well as application programming interface (API) services, received by taxpayers holding a "Startup Certificate" or a certificate of registration in a technology park directly to support their own activities and not classified as royalties — for a period of 20 years starting January 1, 2027; dividends paid to participants (shareholders, unit holders) of venture funds from the profit received by these funds from investments in micro- and small business entities holding a "Startup Certificate" or a certificate of registration in an industrial or technology park — for a period of 10 years starting January 1, 2027.
The draft also stipulates that, starting January 1, 2027, for 10 years, the amounts of investments by accredited investors in the acquisition of shares or participation interests in resident legal entities holding a "Startup Certificate" or a certificate of registration of an industrial or technology park will be deducted from the taxable aggregate income of an individual entrepreneur, provided that the established conditions are met.
In particular, the amount of such a deduction must not exceed 50% of the individual entrepreneur's taxable aggregate income for the relevant reporting year after the deduction of expenses. The investor must not be a mutually dependent person with the founders or heads of the executive body of the company attracting the investment, and the acquired interest or shares must remain continuously in his ownership for at least three years.
