Tax exemptions for a category of cultural workers in Azerbaijan

Where
Azerbaijan
When
2018
Who
Key objectives of the measure:

The measure, introduced in 2001, aims to stimulate artistic production by exempting artists from income and property taxes. This resulted in number of intra-governmental consultations, with participation of the Ministry of Culture and Ministry of Taxes, together with the Parlimanent of the Republic of Azerbaijan. 

Scope of the measure:
National
Nature of the measure:
legislative, regulatory, financial
Main feature of the measure:

According to Tax Code, exemptions and privileges are defined for income tax of physical persons (article 102), profit tax of legal persons (article 106), property tax (article 199) and tax on land (article 207). Article 102.1.12 of the code  foresees that income of physical persons from craft production of copper, tin and pottery products, house appliances, gardening instruments, national music instruments, toys, souvenirs, house appliances made of reeds and cane, involved in embroidery and production of house appliances from wood shall not be subject to income tax. Similarly, Article 199.2. of the same code establishes that buildings of art workshops or parts of buildings where such workshops are located that belong to natural persons involved in entrepreneurial activity without establishing the legal entity on craft production of copper, tin and pottery products, house appliances, gardening instruments, national music instruments, toys, souvenirs, house appliances made of reeds and cane, involved in embroidery and production of house appliances from wood shall not be subject to property tax. 

Results expected through the implementation of the measure:

The current measures has already brought a number of positive results, which is testified by increase of artists making use of the tax exemptions between 2001 and 2017, as well as more interest from young artists to get involved in production and cultural industries. The measure enabled its main beneficiaries and creators to sustain their living through artistic production, which was particularly important for young creators, and created an enabling environment for diversification of creative products. 

It is also important to note that the demand for artistic products has increased in the meantime, with the greater development of incoming tourism in parallel, especailly since 2014 with more tourists coming from Arab countries, but also Asia and Europe. Combined with increased opportunities the crafts market started to offer locally, this measure proved to be crucial in satisfying the demand for cultural goods and services and resulted in income increase for local and national economy.

The local departments of Ministry of Taxes and Ministry of Culture have played huge role in the implementation of the measure by raising awareness of local artists and providing regular monitorying of its efficiency. The measure proved to be most efficient in the regions and cities with large concentration of craftsmen and artists falling under the beneficiary category of the measure, such as Baku, Ganja, Sheki, Lahij and Ismayilli.

Financial resources allocated to implement the measure:

25 000 AZN, coming from the state budget. The measure did not involve huges costs, since the decisions was purely regulatory.

Goal(s) of UNESCO's 2005 Convention
Area(s) of Monitoring
Cultural Domain(s)
Design
Cultural Value Chain
Creation