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Azerbaijan

The Republic of Azerbaijan, which is a Regional Hub in Central Eurasia is a rapidly developing market and is becoming the golden location for global investment. There has been a positive inclination towards the company setup process in Azerbaijan over the past several years. As per the reports published by the World Bank, the region of  Azerbaijan holds the worth of 54.62 Billion USD.

Azerbaijan, with Baku as its capital, is one of the perfect investment destinations for any business from startups to SMEs. The government has incorporated a number of flexibilities to provide the greatest business formation experience in response to the development of commercial businesses.

This guide covers all the fundamental information a business investor needs to be aware of before starting a company in Azerbaijan. If you are severe regarding incorporating your business in the Republic of Azerbaijan then you are in the right place. Let’s start by understanding the economic outlook of the region.

Azerbaijan Economic Outlook

Backed by petroleum and natural gas, Azerbaijan is one of the emerging grounds, that ranks in a good position among the countries with the largest gas reserve in the world. Over the years, the Azerbaijani government has been eyeing to leverage the non-oil segment to enhance the nation’s revenue.

From 2023, Total will start gas production from the “Absheron” field, which has a gas potential of more than 300 billion cubic meters. Azerbaijan’s purposeful activity in the energy field has transformed the country into a regional energy hub.

Thanks to the efficient and transparent management of revenues, the State Oil Fund has quickly become one of the world’s most transparent funds and ensured long-term financial profits for the present and future generations. Azerbaijan’s greater participation in international markets further increases the country’s power.

In 2020, the “Karabakh” field went down in history as the first oil field discovered in the years of independence (with 60 million tons of oil).

Azerbaijan also has the largest fleet in the Caspian Sea.

One of the world’s largest gas fields – “Shah Deniz”, was discovered by Azerbaijani geologists in the middle of the 20th century.

In 1996, a consortium established by SOCAR and international oil companies discovered large reserves in the gas field, and the result exceeded expectations. The field is estimated to contain gas reserves of 1.2 trillion cubic meters, and it is considered one of a few vast gas fields in the world.

In the following years, the discovery of “Umid” and “Absheron” fields confirmed Azerbaijan’s possession of large gas fields. It opened a new page in the history of the natural resources of Azerbaijan.

Azerbaijan has become the initiator, shareholder and host country of the strategically important Southern Gas Corridor project. Turkey and Georgia were the first to join the initiative, and they were subsequently followed by Italy, Greece, Bulgaria and Albania. Currently, new and potential partners include Bosnia and Herzegovina, Croatia and Montenegro.

Azerbaijan is already exporting its gas to neighboring countries, and new pipelines have been built to start exporting it to the European market.

Work on developing the D230 block and the “Shafag-Asiman” gas field is underway together with BP, the operator of the “Shah Deniz” and “Azeri-Chirag-Gunashli” projects. From 2023, Total will start gas production from the “Absheron” field, which has a gas potential of more than 300 billion cubic meters.

Azerbaijan’s purposeful activity in the energy field has transformed the country into a regional energy hub.

Business Opportunities in Azerbaijan

Both newbies and experienced business players are welcomed in the Azerbaijani region. There are numerous booming business opportunities, including the following:

• Import-Export
• Manufacturing
• Tourism
• Hospitality
• Food and drink
• Agriculture
• Information technology
• Retail etc.

Apart from the business mentioned above opportunities, there are many more business opportunities in Azerbaijan.

How to Start a Business in Azerbaijan?

Starting a business in Azerbaijan involves numerous steps that an investor needs to take care of. Some of the essential steps required are:

1. Understanding Your Business Needs

The first and most important responsibility for each business is to understand its commercial activitiy. The business owners need to be clear regarding the target market and the business activities that need to be carried out effectively.

2. Choosing a Strategic Location

Business investors can move forward with location choices in Azerbaijan thanks to a variety of flexibility possibilities. To concentrate on specific industry sectors, a number of free zones, industrial parks, and sites have been established. Make sure to select the ideal business location after weighing the advantages and disadvantages of various locations.

3. Select a Business Name

This stands as one of the crucial and essential tasks at the same time. While choosing a trading name in Azerbaijan, the investors need to be aware that the selected business name shouldn’t be the same as competitors.

4. Get the Required Documents and Proceed towards Commercial Registration

It is important to note that documentation plays a crucial role when it comes to the business setup in Azerbaijan. To complete the business (Limited Liability Company in Azerbaijan, LLC) registration process, an investor needs to provide a set of stated documents which includes:

• Application Form – Form provided by the State Tax Service. Also these document needs to be notarized.
• Incorporation documents – Charter of a company, Resolution of Shareholders on the establishment of LLC and appointment of legal representative.
• Information about the shareholders and founders – IDs, passports of founders. The Articles of Association, Memorandum, and Certificate from the Trade Registry are required if the owners or shareholders are foreign legal entities.
• The legal representative’s notarial permission in cases, where the shareholder is not the company’s legal representative (director).
• Receipt evidencing payment of state registration fee and charter capital. Official registration fee for new LLC is 11 manats (AZN) and must be paid in advance before incorporation. State duty for registration of representative offices and branches of foreign legal entity is 220 manats (AZN). If specified by the charter, the capital must be paid within three months after the company’s registration.

All of these documents must be submitted to the Legal Entity Registration Department at the State Tax Service.

5. Upon formal registration, the following actions must be done in practice before starting actual business operations:

• Obtaining Mobile Signature (ASAN Imza) for the legal representative
• Obtaining corporate seal for the company
• Opening of bank account upon submitting a copy of tax certificate to the selected bank via the e-taxes system and depositing the capital. In Azerbaijan, opening a bank account is a need for business incorporation. Customers and business owners/investors can conduct commercial transactions more easily when they have a corporate bank account. Additionally, it aids entrepreneurs in separating their personal and business finances. Following the company registration, it is necessary to open a bank account within three months and to deposit 100 per cent of the company capital. The International Bank of Azerbaijan offers the ideal service, as it provides a receipt for receiving the company capital, and the Azerbaijani Centre for Company Registration is automatically notified.
• Registration of the legal representative’s employment agreement at the state registry of employment agreement notices.

6. Hire the Labor Force

Selecting the right candidate for the right job is very important for any business. It is to be kept in mind that once the company incorporation tasks get done, it requires an adequate number of people to manage it. An employer needs to onboard the employees by providing an employee visa.

7. Proceed with Post Incorporation Process

Once the business is established, maintaining things the same is a big challenge. Implementing the post-incorporation services required for every organization to run efficiently is one of the simplest ways to keep it safe. Some of the services include the following:

• Tax Services
• Accounting and Bookkeeping
• Intellectual Property Services
• Legal Services

Implementing these fundamentals will help you to keep a track on your business growth, and take the necessary steps accordingly.

Types of Business Entities in Azerbaijan

A business investor in Azerbaijan can select any one of the business entities:

1. Micro business entity (1-10 employees)
2. Small business entity (11-50 employees)
3. Medium business entity (51-250 employees)
4. Large business entity (251 and above employees)

Types of companies in Azerbaijan:

• Limited liability company (L.L.C.)

A preferred business entity that is used for commercial purposes worldwide is the limited liability company (LLC). An LLC in Azerbaijan can be established at least by one member and it is not subject to minimum share capital.

• Public Limited Liability or Joint Stock company

This type of company is suitable for large operations. A joint stock company (JSC) in Azerbaijan can be settled in two forms: open and closed. An open JSC in Azerbaijan can be registered by one or more persons or even companies. This entity is available and also suggested for large businesses, and furthermore, it is subject to transferable bonds.

• Sole proprietorship

This is the simplest legal entity for a one-person business. The establishment of a sole trader is simple and easy as it does not imply the formal registration of a private limited liability company, for example. Even if this business form is available for all investors, it is mainly used by professionals such as crafters and accountants who can manage their own activities as small businesses or practices.

• Partnership

Partnership in Azerbaijan requires a minimum of two members and is suitable for small enterprises. Business persons might be interested in opening a general or a limited partnership in Azerbaijan. In a limited partnership formed by two entrepreneurs, one has limited responsibilities and must deal with the firms’ future investments. The second partner is in charge of most responsibilities of the partnership, including debts and obligations.

There are 3 main types of legal entities that can be used to set up operations as a foreign company in Azerbaijan:

• the subsidiary (a company that belongs to another company, which is usually referred to as the parent company or the holding company)
• the branch office (a location of a business, other than the main office, where business is conducted)
• the representative or liaison office (an office opened in a foreign market as a first step for establishing a relationship with potential buyers or sellers)

Each of these legal entities has its own registration requirements which can be explained by one of our company formation agents in Azerbaijan. We can also help you set up any of the business forms presented above.

List of Free Zones in Azerbaijan

• Alat Free Economic Zone

An essential part of the President of the Republic of Azerbaijan’s and our government’s overall strategy to create a knowledge-based and globally competitive economy in Azerbaijan is the establishment and successful development of Alat Free Economic Zone. This will enable our nation to become a highly competitive participant in international economic relations with a diversified and export-oriented economy, creating high-added value based on a world-class attractiveness.

There are no restrictions to the amount of investments in the charter capital by foreign of local shareholders.

Free Zone Competent Authority, Free Zone Administrative Offices, Free Zone Legal Entities and their Employees, Free Zone Residents are exempt from all taxes on their activities in the free zone.

Investors, shareholders, Free Zone Residents, Free Zone legal entities have the right to invest in the Free Zone and the right to transfer abroad their funds from their activities without any restrictions.

Moreover, they have the right to operate and perform operations in any foreign currency without any limitation.

• Industrial Park and Sites

An industrial park is an area that has the necessary infrastructure and management institutions for the implementation of entrepreneurial activity, is used for the purposes of competitive product production and service provision through the application of modern technologies, and helps the effective activity and development of entrepreneurs.

Investments in industrial parks and sites in Azerbaijan have reached $3.7 billion, leading to significant growth in goods production and export operations.

Currently, five industrial parks – Sumgait, Balakhani, Mingachevir, Garadagh, and Pirallahi, and four industrial sites – Neftchala, Masalli, Hajigabul, and Sabirabad operate in Azerbaijan. The residents of industrial parks are exempt from property, land and profit taxes for 10 years from the date of their registration. They are also free from paying value-added tax (VAT) and customs duties for machinery, technological equipment, and facilities imported for production purposes, for 10 and 7 years, respectively, since being granted residency status.

Meanwhile, the government has established two new industrial parks in the Azerbaijani territories liberated from the Armenian occupation in 2020, namely the Aghdam and Jabrayil districts.

Construction at the Aghdam Industrial Park is scheduled to start sometime in August on a territory measuring 190 hectares (470 acres). Nine enterprises have already been granted a residency status at the park. The priority areas of the park are the production of construction materials, packaging of agricultural products, canned fruits and vegetables, meat and dairy products, production and processing of feed and fertilizers, as well as refrigeration, storage, and other services. Residents are expected to invest a total of nearly $30 million in the Aghdam Industrial Park.

The foundation stone of the “Araz Valley Economic Zone” Industrial Park in Jabrayil was laid in October 2021. The country’s authorities have granted 200 hectares (494 acres) of land for the park’s construction. Once completed, it will comprise agricultural processing, industrial, social, and technical zones. A logistics and trade center, warehouse complexes, wholesale and retail facilities, a truck park, customs point, filling stations, car, and other equipment repair points will also operate in the park. The resident enterprises will have the necessary conditions to produce construction materials, pack agricultural products, as well as manufacture and process canned fruits and vegetables, wine, meat, silk, and others.

The law of Azerbaijan Republic on “Alat Free Economic Zone”

Tax Scenario in Azerbaijan

All company types available in Azerbaijan are liable to taxation. The local legislation distinguishes between personal taxation, applicable to natural persons obtaining a taxable income from activities developed in this country, and corporate taxation, applicable to legal entities developing commercial operations here. Our team of consultants in company formation in Azerbaijan can offer advice on the local tax system; below, you can find the highlights of the corporate tax and the withholding taxes charged in this country:

All business entities that are available in Azerbaijan are liable to taxation. The local legislation makes a distinction between corporate taxation, which applies to legal companies conducting commercial operations here, and personal taxation, which is applicable to natural persons receiving a taxable income from activities created in this country.

The highlights of the corporate tax and withholding taxes levied in this nation are listed below:

• the corporate income tax, applicable to legal entities or to branch offices of foreign companies, is charged at a rate of 20%;
• starting with 1st of January 2013, the corporate income tax is exempted from payment in the case of resident entities registered in industrial and technological parks, the tax exemption being available for a period of 7 years since the moment of registration;
• companies in Azerbaijan with a yearly turnover of up to AZN 200,000 can be registered as simplified taxpayers;
• simplified taxpayers offering trading services will be taxed at a rate of 6% on their yearly profits;
• businesses operating in the catering industry are taxed at a rate of 8%;
• Azerbaijan applies withholding taxes, interest being taxed at a rate of 10%, rent, and royalties at 14%, while financial and insurance services are taxed at a rate of 4%.

Considering that the taxes applicable to local businesses might differ depending on their annual revenue as well as their legal status, we cordially encourage you to get in touch with our team of advisors for company registration in Azerbaijan for comprehensive details on the local tax system. Our experts can provide further details on the company kinds that are offered here in Azerbaijan as well as the paperwork that needs to be completed when a particular legal entity is incorporated.

Why Invest in Azerbaijan?

Why Register a Company in Azerbaijan?

• How to start a business in Azerbaijan?
• How to set up a company in Azerbaijan?
• Find out about the documents required for registering a  Company in Azerbaijan
• Register company in Azerbaijan
• Starting a Business in Azerbaijan | Register company in Baku
• How can a foreigner register company in Azerbaijan?
• Company Registration in Azerbaijan | Business Set Up in Baku
• We help foreign investors open different types of companies in Azerbaijan
• Set up a Limited Liability Company in Azerbaijan

Investment in Azerbaijan is one of the profitable moves that any business investor can make. It is one of the easiest ways to make the user move or available business finance and leverage business profits. Here’s a guide on why invest in Azerbaijan, which will help you to understand the investment scenario more clearly:

• A business-focused and growing economy
• Huge investment opportunities
• Suitable for newbies as well as experienced business professionals

For foreigners interested in establishing a business here, Azerbaijan has a number of competitive advantages. The country has excellent reputations among the economies of the world, and it should be highlighted that it ranks as the 18th economy globally in terms of how simple it is to launch a company (as revealed by the Doing Business Report, 2018 edition, carried out by the World Bank). The research examines the economic climate in 190 jurisdictions.

Businessmen interested in forming a company in Azerbaijan should also be aware that the local commercial law gives them the option to launch a local company with 100% foreign ownership. With almost no restrictions on the rights of the company’s founders, owners, financing options, or other significant issues that would be of interest to companies looking to expand on a foreign market, international investors are also permitted to establish joint ventures.

• Azerbaijan is an energy-abundant nation, with vast reserves of oil and natural gas. This factor acts as the backbone of its industry, and hence there is no dearth of fuel for an industrial setup here.
• The corporate income tax in Azerbaijan is just 20%, it is less than average rate.
• The country offers a fertile business environment with its infrastructure, investment incentives and financial services.

Azerbaijan offers a set of competitive advantages to foreigners interested in opening a company here. The country has very good credentials amongst all the economies of the world and it must be noted that it ranks as the 18th economy at a global level with regards to the easiness of starting a business (as revealed by the Doing Business Report, 2018 edition, carried out by the World Bank). The report analyses the business environment of 190 jurisdictions.

Businessmen interested in company formation in Azerbaijan should also be aware of the fact that the commercial legislation applicable in this country provides the right of starting a local business with 100% foreign ownership. Foreign investors are also allowed to establish joint ventures with almost no restrictions regarding the rights of the company’s founders, shareholders, financing methods, and other important matters that can be of interest for those seeking to expand on a foreign market.

Azerbaijan Government Initiatives

Over the years, the government has been implementing multiple business strategies to uplift the economy to a great extent. An Investment promotion document is one such initiative that has been implemented. The core idea behind this is to strengthen the economy of Azerbaijan, widen the business scope for global investors and develop a favourable climate to fetch-in more FDI and LI.

Thus, you have got a clear idea regarding the economy of the region of Azerbaijan along with the business establishment process. It turns out to be wise to move forward with the aid of business experts since dealing alone could out to be challenging.

Why Alliance Tax & Finance ?

“Alliance Tax & Finance” has been one of the best finance and legal consultants in Azerbaijan, which has been focusing on providing hassle-free operations.

Our team of professionals is knowledgeable about the procedure for incorporating a business and has business setup options specific to your company. Please feel free to contact our professionals if you are interested in setting up a business in Azerbaijan. We will be happy to help.