Azerbaijan

In Azerbaijan, cryptocurrencies are legal and are classified as property or assets that show an increase in value under the country's Tax Code. They are not considered legal tender. While crypto activities like trading and mining are permitted, there is currently no dedicated legal framework for virtual assets, meaning general laws apply. The State Tax Service under the Ministry of Economy is responsible for governing cryptocurrency taxation, which falls under the general provisions of the Azerbaijani Tax Code. For individuals, income derived from cryptocurrency, including capital gains from sales, is taxed at a flat rate of 14%. This rate applies to income classified as non-entrepreneurial income, regardless of how long the crypto asset was held, meaning there is no distinction between short-term and long-term gains. Corporate entities engaging in crypto activities are subject to the standard corporate profit tax rate of 20%. Additionally, purchasing cryptocurrency from abroad incurs an 18% Value Added Tax (VAT), with banks deducting both this VAT and a 10% withholding tax on transfers to non-residents. Specific crypto activities are also subject to the 14% tax rate. Income from staking, including any yields, is taxed upon realization as non-entrepreneurial income. Profits from cryptocurrency mining are subject to a 14% profit tax, and VAT applies as an e-commerce activity. Yields from Decentralized Finance (DeFi) activities are also taxed at 14% as non-entrepreneurial income upon realization. Gains from the sale of Non-Fungible Tokens (NFTs) are subject to a 14% tax, treated as asset appreciation income. Both converting crypto to fiat currency and swapping one cryptocurrency for another are considered taxable events. Azerbaijan is working towards establishing a full legal framework for virtual assets. Dedicated crypto frameworks and specialized tax rules are expected to be introduced by the end of 2025, aiming to improve regulatory discipline and transparency in the sector.