How to Do Business In Azerbaijan?

Doing business in Azerbaijan is increasingly streamlined, as the country has implemented reforms to create a more business-friendly environment. Azerbaijan’s strategic location, growing economy, and government efforts to diversify away from oil and gas make it an appealing market.

Here is a comprehensive guide to doing business in Azerbaijan, covering the business environment, company formation process, and key sectors.

1. The Business Environment

Azerbaijan has shown a commitment to improving its business climate, as evidenced by its high ranking in the World Bank’s former Doing Business Report for ease of starting a business.

Key Characteristics:

• Strategic Location: Positioned at the crossroads of Europe and Asia, it offers connectivity to major regional and global markets.
• Government Focus: The government is actively promoting the non-oil sectors to diversify the economy, targeting Agriculture, Tourism, Information and Communications Technology (ICT), and Transportation/Logistics.
• Investment Climate: Generally, the climate is favorable with low corporate taxes and streamlined regulations. Foreign investments enjoy legal protection.
• Challenges: While reforms are ongoing, be aware of potential challenges such as navigating regulatory frameworks, competition from established local players, and historical issues with corruption and judicial transparency.
• Foreign Ownership: Most legal structures, particularly the Limited Liability Company (LLC), allow 100% foreign ownership with no requirement for a local partner.

2. Step-by-Step Guide to Company Registration (for Foreigners)

The Limited Liability Company (LLC), or Məhdud Məsuliyyətli Cəmiyyət (MMC), is the most popular and recommended legal entity for foreign investors. The registration process is primarily managed by the State Tax Service (under the Ministry of Economy).

A. Pre-Registration Steps

1. Choose a Legal Structure: The LLC (MMC) is generally preferred.
   • Minimum Capital: No statutory minimum capital is required for an LLC.
   • Other Forms: You can also establish a Joint-Stock Company (JSC), a branch office, or a representative office. JSCs, for example, have a minimum charter capital requirement (approximately AZN 4,000).
2. Select Company Name and Legal Address: Check the name availability via the State Registry. Secure a legal address (e.g., an office lease contract).
3. Prepare Documents:
   • Passport copy of the founder(s) and legal representative (director).
   • Articles of Association (Company Charter) and a Decision on Company Establishment (must be in Azerbaijani).
   • Foreign documents (e.g., from a parent company) must be notarized, translated into Azerbaijani, and often apostilled or legalized.
   • Proof of Domiciliation (legal address document).

B. Registration & Post-Registration Steps

1. Submit Documents to the State Tax Service: The documents can be submitted in person or, if using an electronic signature or local representative, online. The standard state registration fee for an LLC submitted on paper is currently low (around 15 AZN).
   • Note: Registration for an LLC is often completed quickly, sometimes within 2 to 5 business days of submission if all documents are correct.
2. Obtain Registration Certificate and TIN: Upon registration, you will receive the Tax Identification Number (TIN) and the Registration Certificate.
3. Open a Corporate Bank Account & Deposit Capital: You must open a bank account and deposit the company’s charter capital (if any is specified in the charter) within three months of registration.
4. Register for ASAN Imza (Electronic Signature): This electronic signature is crucial for digital tax filings, online submissions, and ongoing corporate compliance.
5. Obtain Necessary Permits/Licenses: Depending on your business activity (e.g., construction, finance, food services), you must apply for specific licenses and permits from the relevant government departments.

3. Taxation and Labor

Key Taxes:

Export to Sheets

Labor and Social Contributions:

• Employer Contributions: Approximately 17.5% of an employee’s gross income (covering Social Security, Unemployment, and Mandatory Medical Insurance).
• Employee Contributions: Deductions for the employee are approximately 6.5% of salary (Social Security, Medical Insurance).
• Foreign Employees: A foreign director is generally required to obtain a Temporary Residence Permit (TRP). Other foreign employees typically need a separate Work Permit in addition to a TRP.

4. Key Sectors for Investment

While the economy is heavily dependent on the Oil and Gas sector, the government is actively promoting growth and foreign investment in the non-oil economy. Promising sectors include:

5. Tips for Success

• Seek Local Expertise: Given that all official registration documents are in the Azerbaijani language, engaging a local legal or consulting firm can significantly expedite the process and ensure compliance.
• Consider Remote Options: Foreigners can register a company remotely via a legal representative with a Power of Attorney.
• Utilize EOR/PEO Services: For quick entry into the market without establishing a full local entity, using an Employer of Record (EOR) or Professional Employer Organization (PEO) service can handle payroll, compliance, and hiring for local staff.