Capital Gains Taxation in Azerbaijan
Definition of Capital Gains
In Azerbaijan, capital gains are defined as the profit derived from the sale or disposal of capital assets. Capital assets include:
- Real estate properties
- Stocks and securities
- Bonds and debentures
- Business assets
There is no distinction between short-term and long-term capital gains for tax purposes.
Calculation of Taxable Capital Gains
Taxable capital gains are calculated as the difference between the selling price of the asset and its acquisition cost. The formula for calculating capital gains is:
Capital Gain = Selling Price - Acquisition Cost - Expenses
Adjustments or deductions may be allowed in the calculation of the gain, including expenses related to the sale (e.g., brokerage fees, legal fees) and any improvements made to the asset during ownership.
Tax Rates
Capital gains in Azerbaijan are taxed at a flat rate of 10%. This rate applies to all categories of capital gains, regardless of the holding period or the nature of the asset.
Legal Framework
The taxation of capital gains in Azerbaijan is governed by the following laws:
- Tax Code of the Republic of Azerbaijan (Article 104)
- Law on Income Tax (Article 12)
Legal Reasoning and Policy Objectives
The flat 10% capital gains tax rate in Azerbaijan aims to simplify the tax system and encourage investment. By providing a clear and predictable tax regime, the government seeks to attract foreign investment and stimulate economic growth.
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