Azerbaijan Freelancer & Individual Entrepreneur — Simplified Tax or General Regime Return

Establish the client's identity, tax year, sector, and which regime applies. The central fork is whether the entrepreneur qualifies for the simplified 2% turnover tax (annual turnover ≤ AZN 200,000, not VAT-registered) or must use the general regime (20% on net profit). Also check for the micro-entrepreneur 75% exemption (listed services, income ≤ AZN 45,000) and the 3-year startup certificate exemption. Confirm whether the 2025 private non-oil holiday applies or the new 2026 progressive schedule.

Collect and classify all revenue transactions for the year from Azerbaijani bank accounts (Kapital Bank, PASHA Bank, ABB, Bank Respublika, Unibank/Leobank) and foreign payment platforms (Stripe, PayPal, Wise, Payoneer, Upwork, Fiverr). Match each credit line to business income using the Azerbaijani pattern library (KÖÇÜRMƏ, XİDMƏT HAQQI, QONORAR, STRIPE PAYOUT, etc.) and exclude internal transfers (DAXİLİ KÖÇÜRMƏ) and loan receipts. Convert any USD/EUR income to AZN at the Central Bank of Azerbaijan rate on the date received.

For clients on the general 20% profit-tax regime, classify all debit transactions into deductible operating expenses, capital items requiring depreciation, and non-deductible items. Apply the Azerbaijani expense pattern library: office rent (OFİS İCARƏSİ), accountancy fees (MÜHASİB), advertising (REKLAM), bank charges (BANK HAQQI), software subscriptions (Google Workspace, Adobe, GitHub, etc.), and business travel (AZAL, hotels, Bolt). Separate capital items (laptops, furniture, vehicles) for depreciation. Flag mixed-use items (home office, vehicle, phone) requiring apportionment.

Compute the income tax liability under the confirmed regime: 2% of gross turnover (simplified) or 20% of net profit (general). Apply the micro-entrepreneur 75% income exemption if eligibility is confirmed. Calculate DSMF social insurance, unemployment insurance (0.5% employee share), and compulsory medical insurance separately — self-employed rates are activity- and region-dependent and require confirmation with the State Tax Service. Credit any quarterly advance payments (avans vergi) already made during the year (due 15th of the month following each quarter).

Prepare and submit the annual income tax return (gəlir vergisi bəyannaməsi) on the State Tax Service portal (taxes.gov.az) by 31 March of the following year. Simplified-regime entrepreneurs report gross turnover and pay 2% monthly or quarterly; the annual return reconciles the full year. General-regime entrepreneurs declare net profit, allowable deductions, and compute the 20% liability. Attach supporting schedules. A 3-month extension is available if the tax has already been paid in full. Flag any late-payment interest exposure (0.1% per day) or underreporting penalty risk (50% of understated tax under Article 58).