Changes to the Tax Code: tax on land and its salePosted by: admin | Posted on: Февраль 14, 2017
Transparency Azerbaijan Anti-corruption Public Union welcomes introduction of the new simplified tax on sales of land that entered into force as of 1 January 2017. Besides that, although several changes were made to the Tax Code on the annual land tax, there is still a need to make corrections to certain points.
On 20 November 2015, Transparency Azerbaijan arranged a public discussion on taxation of real estate, both proceeds from sales and annual real estate tax, including land tax. Several recommendations were made, including recommendation to base taxation of the proceeds from sales of land on the size of the land and other respective coefficients, rather than on the profit made from sales.
Our organization is pleased that the problem of presentation of land that evoked our concern was attended to by the Law on Changes to the Tax Code of 16 December 2016. As of 1 January 2017 proceeds from sales of land will be taxed upon a simplified formula based on the size of the land and respective coefficients, depending on the land destination and geographic location.
Also, in line with our recommendations, proceeds from sales of agricultural land plots will be taxed upon the same formula with the quality of land (bonitet schedule) taken into account.
According to the changes, lands used for agricultural purposes and/or those that cannot be used for this purpose because of problems with either irrigation, or melioration or other agro-technical reasons, will be taxed at 0.06 manat for a conventional unit (100 square meters, according to Article 206.1-1). Other lands with agricultural destination will be taxed at the rate of 2 manats for a 100 sq meters.
The changes of above are designed to stimulate putting agricultural lands into use, whereas actual use of the land or impossibility of its use for agro technical reasons will be judged by respective executive bodies and supported by a certificate. As this norm creates a potential corruption loophole, we believe it is vital to design online certification mechanisms to ensure development of the agricultural sector.
Also, there is a big problem with defining destination of land in the country and most of the land that is not used for agricultural purposes is in the ownership of poor population, the tax rate is believed to be high for rural dwellers.
Finally, our recommendations are:
1) To reduce tax tariffs as per Article 206.1-;
2) To annul requirement to submit certification of executive authorities as per Article 206.1-1:
· in order to create a mechanism enabling to derive information on use of agricultural lands from the State Social Protection Fund data base;
· in order to electronize the procedure and criteria to make a judgment on impossibility to put land into use for agro-technical reasons, such as irrigation, amelioration and other.
New tax tools applied at land sales and annual taxation of real estate is explained in details and supported by sample can be downloaded here:
The recommendations and explanatory documents are prepared in the framework of the “Azerbaijan Partnership for Transparency” (APT) Project and with financial support of the US Agency for International Development (USAID).