Current tax legislation of Azerbaijan does not define separate taxes related to carbon emissions. However, numerous proactive initiatives have been implemented to safeguard the environment, including different tax incentives. First of all, it should be noted that "Action Plan for the implementation of the State Program on Road Safety in the Republic of Azerbaijan for 2019-2023" approved by the Order of the President of the Republic of Azerbaijan in 2018 envisages the stimulation of environmentally friendly, electric vehicles and production, import, export of such vehicles.

In addition, “Clean environment and “green growth” country” is determined in the “Azerbaijan 2030: National Priorities for Socio-Economic Development” approved by Order of the President of the Republic of Azerbaijan issued on February 2, 2021 as one of the five national priorities for socio-economic development of the country for the next decade. 

Simultaneously, measures such as environmental protection are encouraged through taxes.

Proceeding from the mentioned State Program and the National Priority in line with recent international trends in the promotion of electric and hybrid cars in order to increase the share of environmentally friendly vehicles in the country's automotive sector a number of provisions have been included in the Tax Code and the following transactions are exempted from VAT:

• the sale of electric vehicles along with their imports (Article 164.1.41);
• the import and sale of hybrid vehicles with a production period of 3 years and an engine capacity of not more than 2500 cubic centimeters for a period of 4 years from January 1, 2022 (Article 164.1.41-1);
• the import and sale of second and third level chargers for electric vehicles for a period of 5 years from January 1, 2022 (Article 164.1.41-2);
• import of liquefied gas-powered buses designed to carry more than 10 people, including the driver - from January 1, 2020 for 5 years (Article 164.1.39);
• Incomes gained from the transmission of electricity produced by an active consumer of the population up to 150 kW (including 150 kW) from renewable energy sources to the electricity supply network are exempt from income tax (Article 102.1.38)

At the same time, in order to protect public health, safeguard the environment, reduce the quantity of harmful emissions released into the atmosphere by motor vehicles, and improve the ecological situation, the importation of passenger cars older than 10 years from their production date into the territory of the Republic of Azerbaijan has been restricted, with the exception of vintage passenger cars and vehicles temporarily brought into the customs territory.

Additionally, from the date of obtaining the investment promotion certificate, 50% of the profit (income) earned over a period of 7 years is exempt from profit (income) tax (Article 102.1.23 and 106.1.17). Besides, property acquired through investment funds within the framework of the investment project is exempt from property tax (for 7 years), relevant land owned or used is exempt (for 7 years) from land tax (Article 199.11 and 207.5), and the import of machinery, technological equipment, and installations is exempt from VAT, based on the appropriate supporting documentation (Article 164.1.26)

Alongside the aforementioned, The State Tax Service has developed a “Medium-Term Tax Policy Strategy” that incorporates the priorities set out in the “Strategy for Socio-Economic Development 2022-2026” (prepared by the Ministry of Economy on the basis of “Azerbaijan 2030: National Priorities for Socio-Economic Development”) and reflects the conceptual directions of tax policy for the medium term.

https://e-qanun.az/framework/41118

https://president.az/az/articles/view/50474

https://e-qanun.az/framework/53819