Azerbaijan is considering a new rental-tax option that would allow owners of apartments and other property to register, file a declaration, deduct documented expenses from rental income and pay 20% tax on the remainder.
The amendment is included in a package of proposed Tax Code changes linked to the 2027 state budget, Vesti Baku reported. It is not yet in force.
To use the proposed system, a landlord would have to notify the tax authority and the tenant. Withholding tax at the source would stop the following month, and the final liability would be calculated at the end of the year using the owner’s income and documented expenses.
Tax already withheld during the year would be credited against the annual obligation. If the full credit could not be used immediately, the balance could be carried forward without a time limit.
The new option would not abolish the existing rates for ordinary rentals. Since 2026, income earned by individuals from renting residential property to other individuals has been taxed at 10% of gross receipts. A 14% rate applies to other property.
Landlords would therefore be able to compare two systems: paying tax on total rent or deducting eligible expenses and applying a 20% rate to net income. Which is more favorable would depend on the owner’s documented costs.