- There are no income or social security taxes.
- The taxable amount is the amount by which the market value of the shares on exercise exceeds the exercise price.
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%.
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.