Payroll Taxes in Azerbaijan (2026)

Payroll taxes in Azerbaijan are mainly income tax of the employees and mandatory social contributions, which are deducted by the employer and paid on behalf of the employees.

In this Article, we provide a summary of the main issues about payroll in Azerbaijan. Payroll is usually defined as the "list of employees and payments owed to them by the employer due to employment". Nowadays, payroll is primarily understood as payment of wages to the employees and deductions of income taxes and mandatory social contributions from the employee wages and other employment income. For complete guide about payroll calculation and related labour law regime, please see the following article: 

https://www.caspianlegalcenter.az/insights/more/payroll-azerbaijan

Payroll taxes in Azerbaijan have been eliminated to a great degree since 1 January 2019 for 7 years. 

Currently, in the private non-oil sector, depending on the amount of monthly wages, income of up to 2500 manats will be taxed at a rate of 3% from 2026, 5% from 2027, and 7% in subsequent years; income in the range of 2,500–8,000 manats will be taxed at a rate of 10%; and income exceeding 8,000 manats will be taxed at a rate of 14%. In this context, the tax relief under which income tax is not withheld from a 200-manat portion of the employee’s monthly income when such income does not exceed 2500 manats will remain in force.

In the oil and gas industry, the payroll taxes in Azerbaijan are 14% for the income (salary) up to 2500 AZN per month, and 25% for the salary exceeding 2500 AZN.

Unemployment insurance payment must be made as follows: 0.5% from the employee’s salary and 0.5% by the employer from its funds.

Changes are also being made to mandatory medical insurance rates applicable to the private sector. Prior to the amendments in 2025, 2% was withheld from the portion of the employee’s salary up to 8,000 manats and 0.5% from the portion exceeding 8,000 manats, while the employer paid 2% on the portion of the salary up to 8,000 manats and 0.5% on the portion exceeding 8,000 manats. As of 1 January 2026, both the employee and the employer will pay 2% on the portion of the salary up to 2500 manats, and 0.5% on the portion exceeding 2500 manats. As a result, the total compulsory health insurance contribution rate for salaries in the 2,500–8,000 manat range is reduced from 4% to 1%. 

The implementation of mandatory medical insurance payments shall be performed throughout the year in accordance with the time-table to be established.

Under the Payroll taxation system in Azerbaijan, in addition to income tax (payroll tax), mandatory social insurance contributions are also paid. Thus, from 1 January 2026, in the private sector, where an employee’s monthly income from paid employment is up to 8,000 manats, the rates of social insurance contributions withheld from the employee and paid at the employer’s expense will continue to apply at the currently effective levels. 

Specifically, if the salary is up to 200 manats, the monthly salary is multiplied by 3%. If the salary is from 200 manats up to 8,000 manats, 10% of the portion up to 8,000 manats is calculated and added to 6 manats, and this amount is withheld. If the salary exceeds 8,000 manats, 10% of the portion exceeding 8,000 manats is added to 786 manats and deducted from income. Accordingly, for the portion of the employee’s salary exceeding 8,000 manats, the rate is reduced by 4 percentage points from 25% to 21%, of which 10% applies to the employee and 11% to the employer. 

Unlike income tax, social insurance payment for the foreigners working under product sharing agreements in the oil-gas industry is exempted. In other words, such foreign employees would be subject to income tax only, not any social contribution shall be imposed. 

 The Payroll taxes in Azerbaijan may be summarized as follows:

• Income tax: 30% (in the private oil and gas sector for income up to 2500 AZN); 10% (in the private non-oil and gas sector for income from 2500 AZN to 8000 AZN); 14% (in the private non-oil and gas sector for income exceeding 8000 AZN); 14%–25% (public service and oil and gas sector); 

• Mandatory social insurance contribution: 25% (private non-oil and gas sector for income up to 8000 AZN); 21% (private non-oil and gas sector for income exceeding 8000 AZN); 
 

• Mandatory unemployment insurance: 1%.
 

• Mandatory health insurance: 4% - 2% paid by the employee and 2% by the employer (for private non-oil and gas sector income up to 2500 AZN); 1% - 0.5% paid by the employee and 0.5% by the employer (for private non-oil and gas sector income exceeding 2500 AZN); 14-25% (public service and oil-gas industry).

Sarting from 1 January 2025, minimum salary in Azerbaijan is 400 AZN. 

Last update: 03.02.2026