Business Opportunities In Azerbaijan: A Comprehensive Guide

Azerbaijan has implemented numerous projects to encourage foreign investors and businessmen to invest in the country since its independence from the Soviet Union in 1991. The country's economic policy is centred on openness to international trade and a positive attitude towards foreign capital and workers. Azerbaijan has stable economic indicators, which, along with its favourable legislation, makes it an attractive prospect for foreign investors. The country ranks 34th among 190 countries in terms of ease of doing business, and 9th for ease of starting a business. There are five steps for business registration in Azerbaijan, including obtaining the necessary forms, completing the forms in Azerbaijani, and opening an Azerbaijani bank account.

Company registration

Registration Process:

• Obtain the necessary business registration forms: The required forms can be obtained in person from the Azerbaijani Centre for Company Registration (a division of the Taxation Ministry) or downloaded online. All forms are in Azerbaijani, but English and Russian-speaking staff are available at the Centre to assist.
• Complete the forms: It is recommended to seek assistance with completing the forms, as they are in Azerbaijani. A translation centre is located below Notary Office No.1, at 43 Uzeyir Hajibeyov Street.
• Legalise and translate foreign documents: Documents 1, 3, and 5 need to be legalised by a notary. Advice can be sought from Notarial Office No. 46, located on Zarifa Aliyeva Road.
• Submit the registration documents and company certificates: The registration dossier should be submitted to the Azerbaijani Centre for Company Registration. After one week, the Centre should be contacted, and a plastic card with a unique registration number will be provided, acting as the registration certificate.
• Open an Azerbaijani bank account and deposit the capital: After registering the company, a bank account must be opened within three months, and 100% of the company capital deposited. The International Bank of Azerbaijan is recommended as it provides a receipt for the company capital, and the Azerbaijani Centre for Company Registration is automatically notified.

Additional Considerations:

• Company Type: There are several types of legal entities to choose from in Azerbaijan, including limited liability companies (LLCs), additional liability companies, and joint-stock companies. Many businesses opt for LLCs due to their practicality, and they are the most popular among foreign businessmen, especially for small and medium enterprises.
• Directors: There is no requirement to hire local employees for specific positions, and there are no residency requirements for directors. However, it is recommended to hire a local director to increase the likelihood of a positive decision when opening a bank account.
• Company Name: The trade name must be new and unique to Azerbaijan.
• Share Capital: There is no minimum amount of share capital required for LLCs. For open joint-stock companies (JSCs), the minimum capital amount is 4000 AZN, and for closed JSCs, it is 2000 AZN. The capital can be paid before registration or within three months of registering.
• Employment Agreements: After company registration, employment agreements must be registered, including that of the company director.
• Reporting: Companies must report to state authorities for tax, social security, and statistics.

Professional Support:

While the process is relatively straightforward, seeking professional legal and tax advice is recommended to ensure compliance with all regulations and to optimise the company structure for tax purposes.

Business licensing

To start a business in Azerbaijan, registering your business is often sufficient. However, certain specific business activities require licences or permits. These include:

• Disposal and neutralisation of toxic industrial waste
• Private medical activity
• Pharmaceutical business activities, including production, wholesale, and retail sale of pharmaceuticals
• Production, import, export, and transit transportation of precursors
• Educational business activities, covering preschool, general, professional-specialised, secondary specialised, higher education, and religious education
• Business activities related to communication services, such as organisation of telephone and wireless telephone communication, IP telephony, and express mail services
• Teleradio broadcasting business activities, including television and radio broadcasting
• Storage of radioactive and ionising radiation waste
• Transportation of dangerous goods
• Installation and operation of liquid and natural gas facilities
• Mining, mountain and borehole drilling
• Installation and repair of elevators
• Operation of attractions
• Installation and repair of lifting devices, metallurgical equipment, pressure boilers, and tanks
• Conducting diagnostics and other technical inspections of equipment and technical devices used in potentially dangerous facilities
• Fire protection activities
• Engineering research for buildings and facilities requiring construction permits
• Construction and installation of buildings and facilities requiring permission
• Designing buildings and facilities subject to construction permits and information procedures
• Private veterinary practice
• Production and sales of veterinary drugs
• Production or import of plant protection products and agrochemicals
• Organisation of individual hunting farms
• Supply of raw materials of wild medicinal plants for production
• Preparation of various types of seals and stamps

The relevant state agency issues Business Licences (Permits) in Azerbaijan, and it is possible to apply for these both offline and online. The processing time varies based on the type of business activity. Importantly, these licences are issued for an unlimited period.

To apply for a Business Licence (Permit), companies or their legal representatives must collect and submit the following documents:

• A copy of an extract from the State Register (if the applicant is a legal entity, a branch or representative office of a foreign legal entity)
• A copy of the identity card (if the applicant is an individual entrepreneur)
• A copy of the applicant’s taxpayer registration certificate
• A copy of a document confirming the applicant’s right to ownership, use, or lease for each object mentioned in the application (if the activity requiring the licence is related to the object)
• Depending on the type of activity, documents confirming the fulfillment of the conditions defined by the laws of the Republic of Azerbaijan and additional conditions defined by the Cabinet of Ministers of the Republic of Azerbaijan

Taxation and accounting

The Republic of Azerbaijan has a simple and stable taxation system, which is favourable for businesses. The country has implemented numerous projects to encourage foreign investors and has a positive attitude towards foreign capital and workers.

There are no minimum capital requirements to start a business in Azerbaijan, and the registration process is quick and easy. The country also offers a favourable tax policy, with many tax benefits for business development. For example, producers of agricultural products are exempt from paying profit, income, VAT, simplified tax, and property tax. Additionally, the low interest rate of taxes creates favourable conditions for entrepreneurs.

The process of company registration involves obtaining the necessary forms, completing them in the Azerbaijani language, and legalising and translating foreign documents. The registration documents and company certificates are then submitted, and an Azerbaijani bank account is opened. The International Bank of Azerbaijan is a good option, as it provides a receipt for receiving the company capital, and automatically notifies the Azerbaijani Centre for Company Registration.

The following taxes and contributions must be paid by medium-sized companies during their second year of operation: corporate income tax, value-added or sales tax, and labour taxes, including payroll taxes and social contributions.

Employment law

The Employment Code of Azerbaijan strictly regulates work regimes and conditions, specifying minimum standards that employers are required to meet. Employers and employees may agree on more favourable conditions for the employee via an employment agreement, but any agreement that restricts these mandatory standards is null and void.

The standard work week in Azerbaijan is 5 workdays, with normal working hours not exceeding 8 hours per day. Depending on the nature of the industry, service, and terms of employment, an employer may establish a 6-workday week with one day off within weekly working hours. The minimum annual leave is 21 days, with 30 days specified for specialist positions. The Employment Code also adds additional days of leave to the annual leave period, depending on the employee's experience.

The employer is responsible for providing safe employment conditions and mandatory workplace insurance. The Employment Code also lists valid grounds for terminating the contract by either the employee or the employer. All termination procedures and requirements must be followed to avoid any potential claims or losses.

Azerbaijan nominally allows the formation of labour unions and the right to strike, but in practice, most unions collaborate with the authoritarian regime, and many categories of workers are prohibited from striking. Most major industries are dominated by state-owned enterprises, where the government sets working conditions.

Business environment

Azerbaijan has a rapidly developing market and is becoming a prime location for global investment. The country has experienced impressive economic growth since gaining independence in 1991, with its vast oil and gas reserves attracting foreign investment. The country's energy policy has transformed Azerbaijan into a regional energy hub, with the country exporting gas to neighbouring countries and Europe through the Trans Anatolian (TANAP) and Trans Adriatic (TAP) pipelines.

The Azerbaijani government has introduced several flexibilities to provide a business-friendly environment, and the country ranks highly in terms of the simplicity of launching a business. Foreigners interested in establishing a business in Azerbaijan will find themselves in a friendly and hospitable environment. The country has a positive reputation among the world's economies, and there are few restrictions on the rights of company founders, owners, and financing options.

However, there are some challenges to doing business in Azerbaijan. The economy is centred on the oil and gas industry, and most foreigners find work within this sector. While business opportunities have diversified as the economy has expanded, the gap between rich and poor has widened, and wealth is increasingly concentrated in the hands of a small elite. Corruption is also an issue, and it can affect business dealings.

The capital, Baku, is the centre of business in Azerbaijan and is viewed as the most Western of its cities. It is where most expats working in the country are based. The official language of business is Azerbaijani (Azeri), and Russian is also widely spoken. While English is increasingly being used, it is not common, and it is recommended to hire an interpreter.

The business culture in Azerbaijan is hierarchical, and status is important. Decision-making can be time-consuming, so patience is essential. Building relationships is crucial, as Azeris tend to do business with people they know well and trust. Networking is essential, as many business deals are done through personal recommendations. It is customary to begin a meeting with a casual conversation about work and family before getting to the formal agenda.

Business hours are usually Monday to Friday, 9 am to 5 pm or 10 am to 6 pm, and some government offices are open on Saturdays. Punctuality is important, but meetings may still start late, as Azeris have a different view of time.

Frequently asked questions