According to article 224.1.2 of the Code, 75 percent of income from entrepreneurial activities is exempt from income tax and income tax. In addition, there are concessions on property taxes and land taxes. Economist Ismail Bagirov comments on the topic.
The main purpose of applying these articles of the Tax Code is to determine the procedure for calculating taxes on income from entrepreneurial activities of individual entrepreneurs and legal entities, as well as calculating taxes payable for property and land used in business, taking into account changes during a pandemic. According to article 222.2 of the Tax Code, the benefits provided to taxpayers in connection with the pandemic period are applied for one year from January 1, 2020. Example 1:
The total annual income of an individual entrepreneur who pays tax on profit from hotel services in 2020 is 70,000 manat, and the costs associated with this activity are 20,000 manat. Let’s consider the tax calculation for this case.
According to article 222.5 of the Tax Code, since hotel activities are an activity to which a discount applies, an individual entrepreneur has the right to apply a 75 percent discount in accordance with article 224.1.2 of the Tax Code. To do this, to determine the tax-free part of the income of an individual entrepreneur with the remaining 50,000 manats (70,000 – 20,000 = 50,000 manats) after deducting the cost of income from the total income 37,500 manats (50,000 x 75%) = 37,500 manats) income tax from the difference between the amount – 12,500 manats (50,000 – 37,500 = 12,500 manats) to 2,500 manats (12,500 x 20% = 2,500 manats). Example 2:
The total annual income of a legal entity with 8 employees from completing an advanced training course in taxes and accounting for business entities in 2020 is 90,000 manat, and its expenses – 30,000 manat. In this case, let’s take a look at the tax calculation.
According to article 218.5.10 of the Tax Code, persons providing services to business entities do not have the right to be a payer of the simplified tax. Consequently, a legal entity that conducts training courses in tax and accounting for business entities must act as a payer of income tax. According to Article 222.5 of the Tax Code, since professional development activities are an activity to which a discount applies, a legal entity has the right to apply a 75 percent discount in accordance with Article 224.1.2 of the Tax Code. To do this, 45,000 manats (60,000 x 75%) obtained by applying a 75 percent discount to profit to determine the tax-free part of the profit from the remaining 60,000 manats (90,000 – 30,000 = 60,000 manats) after deducting the expenses of the legal entity to receive income. = 45,000 manats) from the difference between the amount, that is, 15,000 manats (60,000 – 45,000 = 15,000 manats), the legal entity will calculate the profit tax in the amount of 3,000 manats (15,000 x 20% = 3,000 manats).
It should be noted that individual entrepreneurs and legal entities carrying out activities specified in Article 222.5 of the Tax Code are exempted from paying property and land tax in 2020 in full.
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