President Ilham Aliyev has signed amendments to the Tax Code, the Migration Code and several other laws that significantly expand tax benefits for holders of “Startup” certificates and technopark registration documents.
The changes signed by the president also touch the laws “On Social Insurance,” “On Customs Tariffs,” “On Licenses and Permits” and “On State Procurement,” alongside the Tax Code. Under the new rules, the tax exemption period on profits from innovation activity for individual entrepreneurs classified as micro or small business entities and holding a “Startup” certificate has been extended from three years to seven.
Starting from the first day of 2027, another new benefit will take effect: all income from the sale of shares or stakes in micro and small legal entities engaged solely in “Startup” activity will be fully exempt from profit and income tax, provided the shares are held for at least three years. This exemption will apply over a 10-year period.
During that same 10-year window, income earned by individuals from selling securities after investing in startups through crowdfunding platforms will also be tax-exempt. The same rule will apply to dividends paid to individuals from shares, excluding technopark residents. Dividends paid to venture capital fund members from profits generated by the fund’s investments in micro and small businesses will benefit from the same relief over the same period.
20-year relief for foreign software services
Payments made by taxpayers holding a “Startup” certificate or technopark registration document to foreign companies without a permanent establishment in Azerbaijan — for cloud computing, infrastructure, platform, software and application programming interface services — will be fully exempt from both profit/income tax and value-added tax for 20 years starting in January 2027. However, the exemption will not apply if the purchased service is resold to third parties.
New terms for investment and R&D spending
Funds that accredited investors put into shares or stakes of companies holding a “Startup” or industrial-technology park certificate will also be deductible from the investor’s taxable income under certain conditions, starting in early 2027 and continuing for a 10-year period. This deduction cannot exceed half of the investor’s annual taxable income, there must be no affiliation between the investor and the company, and the acquired stake must be held for at least three years.
In addition, non-cash operating expenses that taxpayers incur to develop new products, or that they pay to “Startup” certificate holders, technopark residents and higher education or scientific institutions for research and experimental design work, will be deductible from taxable income at a 2.5 coefficient for 10 years starting in January 2027. This coefficient will not apply when the parties involved are mutually dependent.
