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Tax Headline Data / Stock Option Plan / Azerbaijan

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Grant

  • There are no income or social security taxes.

Exercise

  • Income Tax is payable up to a maximum rate of 25%, withheld by the Local Company.

  • Employee State Social Insurance is payable up to a maximum rate of 3%, withheld by the Local Company (uncapped).

  • Employer State Social Insurance is payable up to a maximum rate of 22%, payable by the Local Company (uncapped).

  • The taxable amount is the amount by which the market value of the shares on exercise exceeds the exercise price.

Sale

  • Income Tax is payable on the growth in value of the shares up to a maximum rate of 20%, payable by the Participant.

Other / Notes

Additional Issues - Reporting

The Local Company must file areport with the State Tax Service by the 20th day of the month following the quarter in which the tax event arises.

Additional Issues - Sector Specific Taxation

Employees working in sectors outside the oil and gas sectors and public sectors are subject to a reduced rate of tax for 7 years from January 2019 such that Participants are subject to income tax at 14% on amounts over 8,000 AZN. In addition, Employee State Social Insurance contributions are capped at 3% up to 200 manats, and amounts exceeding 200 manats are subject to a 10% rate. Employer State Social Insurance contributions are capped at 22% up to 200 manats, and amounts exceeding 200 manats are subject to a rate of 15%. 

Dividends

Once a Participant has acquired shares in the Company, they will pay Income Tax on dividends received at a maximum rate of 14%.  The Income Tax is payable by the Participant and there are no withholding or reporting obligations for the Local Company.  

Corporate Tax Deduction

The availability of a corporate tax deduction for share based awards is unclear, even where a recharge arrangement is in place. Local advice is recommended. 

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