Doing Business
in Azerbaijan
Doing Business in Azerbaijan03
1Doing Business in Azerbaijan
Country overview .........................................2
Economy ................................................4
Business overview .........................................6
Licensing of business activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Labor licensing requirements ...................................7
Profit repatriation ............................................8
Currency regulations ..........................................8
Land ownership ..............................................8
Establishing a business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Types of business presence .....................................9
Taxation ................................................10
Introduction ................................................11
Statutory tax regime .........................................11
Corporate taxation ...........................................11
Individual tax ...............................................15
Value added tax (VAT) ........................................17
Other taxes and fees .........................................18
Withholding tax .............................................22
Accounting and reporting ..................................24
Investment Incentive Certificates ................................25
EY Azerbaijan ...........................................26
Introduction ................................................27
Services ...................................................27
Assurance ..................................................27
Tax & Law ..................................................27
Consulting .................................................28
Strategy and Transactions .....................................28
Contacts ...............................................29
Contents
Doing Business in Azerbaijan2
1
Country
overview
3Doing Business in Azerbaijan
According to the Constitution adopted
on 12 November 1995, Azerbaijan is
a democratic, secular, unitary republic
based on the rule of law. The country
is governed by the president, who is
directly elected for a seven-year term
by popular vote.
Currently, the President of Azerbaijan
is Ilham Aliyev. The First Vice-President
of Azerbaijan is appointed by and
subordinate to the President. This
position is currently held by Mehriban
Aliyeva. The Government (Cabinet
of Ministers) is subordinate to the
President, who appoints the Prime
Minister (subject to the approval of
the legislature) and other ministers.
The highest legislative body is
the 125-member single-chamber
parliament, known as Milli Majlis, which
is elected for a five-year term by popular
vote. Milli Majlis may be dissolved by
the President in cases prescribed by the
Constitution. In addition, the President
is able to veto its decisions.
The Republic of Azerbaijan gained its
independence from the Soviet Union in
1991. It joined 11 other former Soviet
republics to form the Commonwealth of
Independent States (CIS) in 1993.
General statistics*
Population Approx. 10 million
Territory 86,600 square kilometers (approx. 33,400 sq. miles)
Neighboring countries Russia, Iran, Armenia, Georgia, Turkmenistan, Kazakhstan, Turkey
Main ethnic group Azerbaijani (91.6%)
Ethnic minorities Russian, Lezghi, Talysh, Tatar
Capital Baku (pop. 2,300,500)
Other populous cities Sumgait (pop. 346,100)
Gandja (pop. 335,800)
Autonomous Republic Nakhchivan Autonomous Republic (pop. 461,500)
*Source: https://www.stat.gov.az/
Doing Business in Azerbaijan4
2
Economy
5Doing Business in Azerbaijan
Azerbaijan’s vast oil reserves attract
foreign investment into the country’s
economy. Several major oil contracts
have been signed since 1994.
According to a 2019 report issued
by the Azerbaijani State Statistics
Committee, foreign investments in
the oil & gas sector made up 54% (US$
4,900.8 mln) of all foreign investments.
The Ministry of the Economy of the
Republic of Azerbaijan has reported that
the oil & gas sector accounted for 79%
of capital expenditure in 2021.
Following the success of oil & gas
projects, the Government declared a
policy calling for the development of
the non-oil sector. Rapid progress in this
area has seen the share of total foreign
investment going to oil & gas gradually
fall compared with earlier years. The
Ministry of the Economy of the Republic
of Azerbaijan reported that 64.2% of
investments went to the non-oil sector.
On 26 May 2000, the President of
Azerbaijan signed the Law on the Main
Export Pipeline (“MEP”). The MEP,
which connects Baku with the Turkish
oil terminal in Ceyhan via Georgia, is
the main route for the transportation
of Azerbaijani crude to the world oil
market. On 26 October 2001, Milli
Majlis also passed a law ratifying the
Agreement on the South Caucasus
Pipeline (“SCP”). The SCP is the
main route for the transportation of
Azerbaijani gas to the world market.
In particular, the SCP pipeline is used to
ship natural gas from the offshore
Shah-Deniz gas field to Turkey.
The country has one state-owned oil
refinery. Large petrochemical and
metallurgical plants are located in
Sumgait, 28 kilometers from Baku.
In addition, there are 5 so-called
industrial parks and 3 high-tech parks in
Azerbaijan. These provide a 10-year tax
holiday for entrepreneurs operating as
residents of the parks.
The President of Azerbaijan signed
a decree on additional measures to
improve the business environment and
strengthen the country’s position in
international rankings on 13 July 2016.
That decree set up a special body
(Commission) tasked with generating
proposals for the establishment of
a favorable business environment,
developing an appropriate legal and
institutional framework and preparing
an action plan to achieve the goals set.
Doing Business in Azerbaijan6
3
Business
overview
7Doing Business in Azerbaijan
Licensing of business
activity
The Law on Licenses and Permits,
adopted on 15 March 2016, establishes
a “one-stop-shop” principle for issuing
licenses. The Ministry of the Economy
of Azerbaijan maintains the Register of
Licenses and Permits.
It should also be noted that licenses to
conduct business activity are normally
granted for an indefinite term, save for
specific exceptions.
Labor licensing
requirements
Foreign employees are required to have
individual work permits issued by the
State Migration Service of Azerbaijan.
Severe penalties are prescribed for
employers that fail to obtain a work
permit: AZN 3,000 to AZN 4,000 for
executive officers and AZN 15,000
to AZN 20,000 for legal entities. The
penalty rises to AZN 35,000 if the
violation is committed in relation to
three or more foreign employees.
Heads and deputy heads of branches/
representative offices of foreign
companies and foreign entrepreneurs
are exempt from the requirement to
obtain work permits. The same rule
applies to heads and deputy heads of
legal entities established in Azerbaijan
that have at least one foreign (corporate
or individual) founder.
Furthermore, a foreigner or stateless
person has the right to work in the
Republic of Azerbaijan without obtaining
a work permit provided that he/she is
on a business trip in an area of business
specifically permitted by the Cabinet of
Ministers of Azerbaijan and the period
of the business trip does not exceed a
cumulative total of 90 days in a year.
Foreign citizens coming to Azerbaijan
for more than fifteen days must register
with the State Migration Service within
fifteen days, based on an application
made by the landlord (owner) of the
premises where the visitor is residing.
Foreign citizens wishing to live in
Azerbaijan are required to obtain a
temporary residence permit before their
visas or visa-free stay expire. Temporary
residence and work permits are issued
under the one-stop-shop principle. State
duty for a temporary residence permit
or for a work permit varies depending
on the period of validity (e.g., AZN 120-
160 for a one-year temporary residence
permit and AZN 1,000-1,400 for a one-
year work permit).
The employer must register the
conclusion, amendment and termination
of employment contracts electronically
in the E-government web-based
information system using an enhanced
electronic signature to authenticate
entries made.
Doing Business in Azerbaijan8
Profit repatriation
Under the Law on the Protection
of Foreign Investment (adopted on
15 January 1992) and the Law on
Investment Activity (adopted on 13
January 1995) (collectively the “Foreign
Investment Laws”), foreign investors are
entitled to repatriate profit in convertible
currency after the payment of all taxes
and other fees that are due.
Currency regulations
The official currency of Azerbaijan is
the Manat (AZN). Foreign companies
and individuals may have both AZN
and foreign currency accounts at local
banks. All settlements within Azerbaijan,
including the payment of salaries,
must be made in AZN, save for certain
specific exceptions.
Land ownership
Land ownership in Azerbaijan is
governed by a set of legal acts, including
the Law on Land Reform, the Law
on the Land Market, the Civil Code
of Azerbaijan and the Land Code.
Azerbaijani citizens and legal entities
are permitted to own land.
Foreign individuals and legal entities
cannot acquire land in Azerbaijan, but
they have the right to lease land. Foreign
individuals and legal entities may
purchase dwellings. In such instances,
the land on which the acquired dwellings
are situated is rented to those foreign
individuals and legal entities.
Establishing a business
The Foreign Investment Laws provide
the legal framework for foreign
investment in Azerbaijan. They stipulate
the types of entity foreign companies
can invest in, the rules governing the
repatriation of profit, and the general
rights and guarantees provided to
foreign investors. Foreigners can invest
in a business venture in Azerbaijan in a
number of ways, such as:
• Establishing a fully owned subsidiary
• Acquiring shares in an existing
company
• Establishing a joint venture with
Azerbaijani companies and individuals
• Entering into other acceptable forms
of investment agreement
9Doing Business in Azerbaijan
Various registration requirements apply
to foreign companies establishing a
business presence in Azerbaijan. A
special license to conduct business
is required for companies operating
in telecommunications, sea and air
transportation, insurance and other
regulated industries. The State Tax
Service is charged with registering
the business presence of commercial
legal entities based on a one-stop-shop
principle.
Types of business
presence
The following forms of commercial legal
entity exist in Azerbaijan:
• Open and closed joint-stock
companies
• Additional and limited liability
companies
• General and limited partnerships
Foreign investors wishing to establish a
presence in Azerbaijan may opt for any
of the above forms. Foreign entities may
also operate in Azerbaijan through a
branch or a representative office.
Joint-stock companies (JSCs)
A JSC is governed by the Civil Code.
A JSC is established by at least one legal
en
tity or individual. The liability of a JSC
shareholder is limited to the value of his
shares. JSCs fall into two categories —
“closed” and “open” JSCs. The shares of
closed JSCs are not freely transferable
and the company must have a minimum
capital of AZN 2,000. The shares of
open JSCs are freely transferable, but
the company must have a minimum
capital of AZN 4,000.
Limited liability companies (LLCs)
LLCs may be founded by one or
more legal entities and/or individuals
with the founding members having
a participating interest in the LLC
proportional to the amount paid into the
charter capital. Each owner’s liability is
limited to the amount invested in the
LLC. LLCs do not issue shares.
A participating interest in an LLC is
freely transferable to third parties.
Partnerships
General and limited partnerships are
governed by the Civil Code. A general
partnership is established by at least two
legal entities or individual entrepreneurs
with all partners having unlimited liability.
A limited partnership is established by at
least two legal entities and/or individual
entrepreneurs with at least one partner
having unlimited liability.
Branch or Representative Office
Foreign companies may operate
in Azerbaijan without establishing
a local legal entity if they register
a branch or representative office
with the State Tax Service instead.
Branches and representative offices
are allowed to conduct commercial
activities in Azerbaijan. The state duty
for the registration of a branch or
representative office is AZN 220.
Other forms of legal entity
Apart from commercial entities,
Azerbaijani legislation also provides for
non-commercial legal entities and public
legal entities.
A non-commercial legal entity is an
entity that neither generates profit as
its main purpose nor distributes profit
among its members. Non-commercial
legal entities may be created in the form
of public associations, funds, or unions
of legal entities.
Public legal entities engage in activities
of state and public significance.
They may be founded by executive
authorities designated by the President
of Azerbaijan on behalf of the
government or by municipal bodies on
behalf of municipalities. They may also
be founded by other public legal entities
if the charters of the latter authorize
this.
Doing Business in Azerbaijan10
4
Taxation
11Doing Business in Azerbaijan
Introduction
There are currently two separate and
distinct tax regimes in operation in
Azerbaijan. These are the statutory
profit tax regime and the special tax
regime. The latter is applicable in
limited cases, in particular to oil &
gas and mining companies operating
under Production Sharing Agreements
(“PSAs”) and/or Host Government
Agreements (“HGAs”), as well as
companies operating in special areas
(e.g., ports and high-tech parks). The
statutory (general) profit tax regime is
applicable to all other entities operating
in Azerbaijan.
Foreign companies that are deemed to
have a permanent establishment (“PE”)
in Azerbaijan are taxed on income
derived from the commercial activities
of the PE in the country. Foreign
companies receiving income from
Azerbaijani sources other than
a PE are subject to withholding tax
on the amount of such income.
The PSA regime is a set of rules covering
20+ production-sharing agreements
that have been ratified by the Milli
Majlis. The PSA regime generally applies
to all contractor parties under the PSAs
and their direct and indirect foreign
subcontractors. The HGA tax regime
applies to entities working on the Baku-
Tbilisi-Ceyhan oil export pipeline and the
South Caucasus Pipeline. For a complete
summary of the PSA and HGA regimes
mentioned in this paragraph, please
refer to our separate Azerbaijan oil &
gas tax guide.
Statutory tax regime
The tax regime outlined below is based
on the Tax Code enacted on 1 January
2001, as amended up to 2022. The
main taxes and payments affecting
foreign investors operating under the
statutory regime are as follows:
• Corporate profit tax
• Personal income tax
• Value added tax
In addition to the above, the legislation
envisages social fund contributions and
other taxes and charges (e.g., excise
tax, property tax, road tax and land tax).
Corporate taxation
Profit tax
The following entities are subject to
profit tax in Azerbaijan:
• Azerbaijani legal entities, with or
without foreign ownership
• Permanent establishments of foreign
legal entities
• Representative offices of foreign
legal entities engaged in commercial
activities in Azerbaijan
• Non-commercial organizations
deriving income from commercial
activities
Taxable profit includes trading profit,
capital gains, profit from financial
activities and other profit sources.
Residents, including entities with
foreign investments, are taxed on
worldwide profit. Non-residents are
taxed only on profit from business
carried on in Azerbaijan.
Permanent Establishments (PEs)
The Tax Code defines a PE as a non-
resident foreign legal entity or natural
person that carries on commercial
activities for no less than 90 cumulative
days in any twelve-month period.
Where activities associated with a
building or repair site or an installation
or assembly project and related
supervisory activities are carried out
by a non-resident general contractor,
time spent on those projects by
subcontractors engaged by the
general contractor which are related
entities of the general contractor and/
or whose work it oversees is added to
the period of activity of the general
contractor itself. This applies only where
subcontractors’ activities last for more
than 30 days.
However, the Tax Code also provides
that entities that carry on exclusively
any or any combination of the following
activities do not create a PE in
Azerbaijan:
• The storage and display of goods
• The storage of goods for processing
by another entity and subsequent
export from Azerbaijan
• The purchase of goods for
proprietary use and the collection of
information
• Any other preparatory or auxiliary
activities for proprietary purposes
If a non-resident and entities related to it
carry on joint activities involving any of
the activities listed above in the Republic
of Azerbaijan for business purposes
or if the results of such joint activities
Doing Business in Azerbaijan12
are not of a preparatory or auxiliary
nature and/or the activities carried on
by the persons concerned are mutually
complementary as part of a single
business process, the activities of those
entities will be deemed to create a PE in
Azerbaijan.
Foreign companies that operate in
Azerbaijan without establishing a PE are
subject to withholding tax (see below)
on any taxable income received from
Azerbaijani sources.
It should be noted that the provisions
of double tax treaties (see the list of
effective double tax treaties below)
prevail over those in the Tax Code.
Tax rates
The general profit tax rate is 20%. An
additional branch remittance tax of 10%
applies to profit remittances from the
branch to the head office. The taxable
base is net profit after taxes.
Determination of taxable profit
Annual income disclosed in a company’s
Azerbaijani statutory accounts is
reduced by all business expenses except
for those specifically disallowed by the
Tax Code. The most significant items
of non-deductible expenditures for tax
purposes are:
• Depreciation and repair expenses in
excess of the established limits (to
be capitalized and expensed through
depreciation)
• Entertainment, accommodation
and meal expenses (except for
meal expenses for the provision of
“therapeutic nourishment”, milk and
similar foodstuffs to employees, which
are deductible up to certain limits)
• Losses arising from spoilage and
other damage in excess of natural loss
limits set by the relevant executive
authority are deductible for profit tax
purposes
• Business travel expenses in excess of
the statutory limits
Capital gains
There is no separate capital gains tax
in Azerbaijan. Capital gains are subject
to profit tax in Azerbaijan only when an
asset is alienated. Gains arising from
the disposal of assets are calculated
as the difference between the sale price
and the net book value of an asset
(excluding VAT).
Gains arising from the alienation of
shares or other participating interests
in resident enterprises are also subject
to general profit tax. Such gains are
calculated as the difference between the
actual sale price and the nominal value
of sold shares if the shares/participating
interests are sold for a price exceeding
the proportional value of net assets
of the company corresponding to the
alienated shares/participating interest.
If the sale price is lower than
the proportional value of net assets,
the gain is calculated as the difference
between the proportional value of net
assets as at the date of sale and the
nominal value of the alienated shares.
50% of a taxpayer’s income from the sale
of shares/participating interests owned
by the taxpayer for at least 3 (three)
years is exempt from profit tax.
Interest and dividends
Interest (except for interest on loans paid
to local banks or non-resident banks with
PEs in Azerbaijan) and dividend income
received from Azerbaijani companies and
PEs of foreign companies are subject to
10% withholding tax.
Depreciation charges
All assets with a net book value of more
than AZN 500 and a useful life of more
than one year must be capitalized and
expensed through depreciation. The
applicable depreciation rates depend
on the category to which the assets
belong. The following are the maximum
depreciation rates by category for the
most common groups of assets:
Micro-enterprises are entitled to make
depreciation deductions for fixed assets
used in their entrepreneurial activities
at 2x the depreciation rates shown
above, while small enterprises may make
deductions at 1.5x the rates shown above.
Type of assets Rate of
depreciation (%)
Capitalized land
improvements and
buildings
up to 7
Machinery and
equipment
up to 20
High technology
equipment
up to 25
Means of transport up to 25
Livestock up to 20
Intangibles 10 (for those with
an indeterminate
period of use)
All other assets up to 20
13Doing Business in Azerbaijan
Depreciation rates are applied to the
net book value of assets. Depreciation
may be applied at a lower rate than the
maximum rate. The balance resulting
from using the lower rate may be
claimed in future periods.
Losses and bad debts
Entities that have deductible expenses
in excess of their annual income may
carry the resulting losses forward for
a period of up to five years and offset
them against profits for those years
without any limitation. Bad debts may
be deducted from taxable income only if
they are recognized as having no value
in the company’s accounts and were
reflected as income in previous periods.
Losses and bad debts recovered in
future periods are recognized as income
in the period of their recovery.
Transfer pricing rules
The Regulations on the Calculation
and Application of Transfer Prices
(“Regulations”) were adopted by the
Ministry of Taxes in 2017. They are
used for profit tax purposes. Transfer
prices calculated under the Regulations
may be used to recalculate profit tax
in respect of controlled transactions
between the following persons:
• A resident of Azerbaijan and a
non-resident related entity, and
between the same resident and any
of its establishments, branches or
other subsidiaries located in another
country (territory)
• A PE of a non-resident in Azerbaijan
and the non-resident itself or any of
its representative offices, branches or
divisions located in other countries or
any other person located in another
country that is a related entity of the
non-resident
• A resident of Azerbaijan and/or a PE
of a non-resident in Azerbaijan and
entities incorporated (registered)
in jurisdictions identified as having
preferential tax regimes
• A resident of Azerbaijan or a PE of a
non-resident in Azerbaijan and non-
residents in the following cases:
— If the transactions involve goods
traded on international commodities
exchanges
— If the total income of the resident
or the PE of a non-resident in
Azerbaijan exceeds AZN 30 mln
or transactions with a single non-
resident account for more than 30
per cent of total income (expense)
during the tax year
As a rule, where the prices or margins
in controlled transactions involving
supplies of goods (works, services) are
not consistent with those in comparable
transactions carried out between
unrelated parties under the same or
similar conditions at arm’s length, the
tax base of the transaction may be
recalculated based on transfer prices.
The Regulations also lay down certain
contingent methods for determining
transfer prices if no information is
available on comparable transactions.
Doing Business in Azerbaijan14
Taxpayers must submit a notification
to the tax authorities in respect of
controlled transactions exceeding AZN
500,000 during a reporting period. As
an exception, controlled transactions
between a resident of Azerbaijan or a PE
of a non-resident in Azerbaijan and non-
residents are subject to a notification
requirement irrespective of the
transaction value in the following cases:
• If the transactions involve goods
traded on international commodities
exchanges
• If the total income of the resident or
the PE of a non-resident in Azerbaijan
exceeds AZN 30 mln or transactions
with a single non-resident account for
more than 30 per cent of total income
(expense) during the tax year
The deadline for submitting the
notification is 31 March of the year
following the reporting year. In addition,
taxpayers must submit transfer pricing
documentation to the tax authorities
upon their request.
Controlled Foreign Companies
Controlled foreign company rules
were incorporated into the Tax Code
with effect from 2022. A non-resident
enterprise registered in a state
(territory) with a preferential tax regime
is subject to taxation in Azerbaijan in the
following cases:
• If a resident entity directly or indirectly
owns more than 50% of the voting
shares or more than 50% of the charter
capital of the foreign entity or has a
right to receive more than 50% of the
profits of that foreign entity and
• If tax actually paid on profit of the
controlled foreign company is at least
two times less than profit tax payable
under the tax legislation of Azerbaijan
and
• If more than 30% of the annual income
of the foreign entity is made up of the
following:
— Interest on financial assets
— Royalties on intellectual property
— Income from the sale of shares and
equity interests
— Income from financial leasing
— Income from insurance, banking and
other financial activities
— Income from companies generating
income from goods and services that
do not create economic value
Where profit of a controlled foreign
company is taxed in Azerbaijan, an
allowance is made for tax already paid
on that profit.
However, the following types of income
received from a controlled foreign
company are exempt from tax in
Azerbaijan:
• Dividends received from a controlled
foreign company
• Where a resident entity is a subsidiary
of a controlled foreign company –
taxable profit attributable to that
resident entity
• Income generated through a
permanent establishment of a
controlled foreign company in
Azerbaijan, and income received from
a company established in Azerbaijan
that is taxable in Azerbaijan
Market prices
In the case of import and export
operations, barter transactions,
transactions between related parties and
transactions in which the price differs by
more than 10% in the case of wholesale
trade, 20% in the case of construction
and manufacturing and 30% in the case
of other economic activities from prices
in transactions for the same (similar)
goods (works, services) on the market
during the preceding 30 days, or where
property is insured for amounts exceeding
its net book value, or where the minimum
amount of monthly rent for real estate
(other than housing) is required to be
established for tax purposes, taxes may be
recalculated based on the market price.
Declarations and payments
Profit tax is calculated on a calendar
year basis. All taxpayers must submit
their profit tax returns no later than 31
March of the year following the reporting
year. The deadline may be extended
by three months provided that tax is
paid in full by the original due date.
Tax installments are due quarterly by
the 15th of the month following each
quarter. Tax installments are estimated
as one quarter of the tax payable for
the previous calendar year or may be
calculated by multiplying income for
the latest quarter by the ratio of tax to
annual income for the previous year.
The final payment of the balance due
must be made no later than 31 March of
the following year. Failure to comply may
result in penalties (for details of these,
see the Interest and penalties section
below).
15Doing Business in Azerbaijan
Individual tax
Residency rules/scope
A resident is defined as an individual
who is physically present in the Republic
of Azerbaijan for a period of 183 days or
more in a calendar year. Individuals not
meeting this requirement are considered
to be non-residents unless otherwise
determined by the application of tie-
breaker rules.
Residents are taxed on their worldwide
income, while non-residents are taxed
only on their Azerbaijani source income.
Tax on Azerbaijani source income is
normally paid by withholding tax at
source at progressive rates. Income
from overseas sources is assessed
on a current year basis for residents.
An Azerbaijani source of income is
defined as any income from commercial
activities and sources in Azerbaijan, and
specifically includes dividends received
from Azerbaijani companies, income
from the sale of shares and participating
interests in Azerbaijani companies,
income from employment in Azerbaijan,
etc. The place of payment is irrelevant in
determining the source of income.
Rates
Income earned from employment in the
oil and gas or public sectors is subject to
the following tax rates:
Starting from 1 January 2019,
individuals whose monthly income
is less than AZN 2,500 are exempt
from tax on the first AZN 200 of their
income. Annual income of individuals
engaged in non-entrepreneurial activity
is taxed at the rate of 14%. Individuals
whose annual income is less than
AZN 30,000 are exempt from tax on
the first AZN 2,400 of their income.
Individuals who derive income from
business activities without forming
a legal entity are liable to personal
income tax at the rate of 20%.
Effective from 1 January 2019,
employees not working in the oil and
gas and public sectors are eligible for
reduced PIT rates as follows for a period
of 7 years:
Monthly taxable
income
Tax rates
Up to AZN 8,000 0%
Over AZN 8,000 14% of the amount
exceeding AZN 8,000
Determination of taxable income
Virtually all forms of compensation
to an employee are taxable, including
hardship and cost of living allowances,
payments by an employer for the
education of an employee’s child and
payment of taxes on behalf of an
employee, unless they are specifically
exempted. One such exemption is
accommodation and meal expenses
incurred by an employer on behalf
of employees, provided that no tax
deduction is made for these expenses
on the profit tax return.
Social Insurance Fund contributions
payable by employees
Subject to the exception below, both
Azerbaijani and foreign nationals
earning employment income in
Azerbaijan must contribute 3% of their
gross salary to the Social Insurance Fund
of Azerbaijan (“Fund”).
For individuals engaged in employment
activities in neither the oil and gas
sector nor the public sector, the
following amounts must be withheld
from the employee for a period of 7
years starting from 1 January 2019:
Gross taxable monthly income of:
• below AZN 200 — 3% of the amount;
• above AZN 200— 10% of the amount
exceeding AZN 200 plus AZN 6.
Contributions are to be withheld
at source and remitted to the Fund
by the employer. Fund contributions
are not applicable to foreign employees
who are employed under PSA-related
contracts.
In addition, effective from 1 January
2018, employers must withhold 0.5%
from the employee’s monthly wage
and contribute it to the Unemployment
Fund as an unemployment insurance
premium.
Mandatory medical insurance
Under the Law of the Republic of
Azerbaijan "On Medical Insurance,
compulsory medical insurance was
introduced from 1 January 2021.
However, the Government is imple-
menting the compulsory medical
Monthly taxable
income
Tax rates
Up to AZN 2,500 14%
Over AZN 2,500 AZN 350 + 25%
of the amount exceeding
AZN 2,500
Doing Business in Azerbaijan16
insurance system gradually across the
country. The implementation process
will be completed in 2021.
The collection of compulsory medical
insurance contributions started from
1 January 2021.
Compulsory medical insurance
contributions are determined based on
taxable monthly income:
• below AZN 8000 – 2% at the expense
of the employee and 2% at the expense
of the employer
• above AZN 8000 – 0.5% of the amount
exceeding AZN 8000 plus AZN 160 at
the expense of the employee and the
same amount at the expense of the
employer
Contributions are to be withheld at
source and remitted to the State Agency
for Compulsory Medical Insurance by the
employer.
Capital gains and investment income
Sales of movable assets are not
generally subject to income tax unless
the disposal relates to business or other
entrepreneurial activities. The sale of
an immovable asset is not subject to
tax if it has been the place of residence
of the seller for at least five years.
Except for these two exemptions, all
other gains resulting from the sale
of property are taxable based on the
annual income tax rates for individuals
and the profit tax rate for legal entities.
Gains arising from the alienation of
shares or other participating interests
in resident enterprises are also subject
to general income tax. Such gains must
be calculated as the difference between
the actual sale price and the nominal
value of the sold shares if the shares/
participating interest are sold for a price
exceeding the proportional value of net
assets of the company corresponding
to the alienated shares/participating
interest. If the sale price is lower than
the proportional value of net assets,
the gain is calculated as the difference
between the proportional value of net
assets as at the date of sale and the
nominal value of the alienated shares.
Half of a taxpayer’s income from the
sale of shares/participating interest
owned by the taxpayer for at least
three years is exempt from income tax.
Interest on deposits of individuals
and dividends received by individual
shareholders of JSCs are exempt from
taxes until 1 February 2023.
Declarations and payments
Both residents and non-residents must
complete and file their income tax
declarations no later than 31 March
of the following tax year. Tax must be
paid before the filing deadline. Where
17Doing Business in Azerbaijan
a taxpayer only has Azerbaijani source
income, which is subject to withholding
tax at source, the individual is not
required to submit an income tax
declaration.
The deadline for filing declarations may
be extended by three months provided
that tax is paid in full by the original due
date. Failure to comply may result in
penalties (for details of these, see the
Interest and penalties section below).
Value added tax (VAT)
Scope
All companies that do business and/
or import goods and services into
Azerbaijan are subject to VAT.
Effective from 1 January 2017, the
trade-markup applied to retail sales
of agricultural produce is also subject
to VAT.
Rate
The standard VAT rate is 18%.
VAT registration
There are detailed requirements for
VAT registration and accounting, with
set penalties for non-compliance. Legal
entities and individuals with taxable
turnover exceeding AZN 200,000 over
twelve consecutive months, excluding
those involved in trade and public
catering services, must register as VAT
payers.
Other companies doing business in
Azerbaijan may register voluntarily.
Only registered VAT payers may charge
VAT or claim credit for input VAT that
they pay.
Determination of the taxable base
VAT is levied on turnover from supplies
of all goods and services, including
imports, unless they are zero rated or
specifically exempt. Barter and free
supplies of goods and services are
specifically included in the taxable
base. All excise taxes and customs
duties paid are also included in the
taxable base for VAT purposes.
Zero-rated goods and services include
exports, transit and international
transportation, purchases of goods
and services for projects funded by
international loans, and imports paid
for with foreign financial donations.
Exempted goods and services include:
• Financial services
• Currency and securities transactions
• Publications
Generally, goods are deemed to be
imported or exported if they undergo
customs clearance.
There are detailed place of supply
rules for determining the treatment
of exported and imported services.
Azerbaijani tax legislation generally
allows credit for input VAT on
commercial goods or services.
However, credit is allowed only if VAT is
paid to suppliers through a designated
VAT deposit account (see below for
additional information). Credit is not
allowed for input VAT in relation to VAT
exempt goods or services (such input
VAT can only be claimed as a deduction
for profit tax purposes). If input VAT
exceeds output VAT, the excess input
VAT may be carried forward or offset
against certain VAT or other tax
liabilities. Taxpayers may also apply
to the tax authorities for a refund of
excess input VAT. VAT on purchases
of fixed and intangible assets is not
capitalized as part of the asset’s cost,
but offset against output VAT.
Reverse charge of VAT
Foreign companies that provide
services in Azerbaijan without
establishing a PE must pay VAT on
taxable sales in Azerbaijan. In such
cases, VAT is applied through the
reverse charge mechanism. In other
words, it is self-assessed by the
recipient of the services and remitted to
the state budget.
VAT deposit accounts
All VAT payers are required to remit
VAT amounts through designated
bank accounts known as VAT deposit
accounts. Only VAT payments made
through these accounts may be
credited against output VAT. The VAT is
then claimed by the payer.
Declarations and payments
Declarations must be filed and VAT
must be remitted monthly by the 20th
of the following month. Whereas before
1 January 2020, output VAT was
generally accounted for on both accrual
and cash bases and input VAT was
accounted for on a cash basis, starting
from 1 January 2020 both output and
input VAT is accounted for on a cash
basis. VAT on imported goods is paid
separately at the point of customs
clearance.
Doing Business in Azerbaijan18
Timing of transactions for VAT
purposes
In accordance with amendments
made to the Tax Code effective from
1 January 2020, for VAT purposes
transactions are recognized based on
the date of payment. “Payment” in
this context means the receipt of the
principal amount due (exclusive of VAT)
for goods (works, services) supplied.
Provisions have been introduced to
clarify the concept of payment in
specific cases. Specifically, the date of
payment is defined as:
• The date on which money is received
by the taxpayer in cash or as a
transfer to an account held by or
otherwise at the disposal of the
taxpayer
• In the case of mutual settlements
– the date of the discharge or
settlement of an obligation
• In the case of accounts receivable
– the date of the expiration of the
recovery period
• In the case of in-kind and barter
transactions – the date of the
alienation of assets
• In the case of alienation without
consideration – the actual date of such
alienation
• In the case of the assignment of
a claim – the actual date of such
assignment.
Where a purchaser does not pay
for goods or services received from
a supplier, but grants a loan to the
supplier, a taxable transaction is
deemed to have occurred:
• On the date of the supply if the loan
was granted before the supply was
made
• On the date of the loan if the loan was
granted after the supply was made
Where payment for goods or services
supplied is made in installments, each
installment is considered as a separate
taxable transaction.
Electronic Delivery Notes
Effective from 1 January 2017, an
electronic delivery note is defined as a
primary accounting document prepared
in electronic format that is issued by
a person supplying goods, services or
works to individual entrepreneurs and
legal entities. As from 1 January 2020,
electronic VAT invoices have been
abolished and electronic delivery notes
are the only documents required to be
issued by suppliers to their customers
when selling goods or providing
services or works. Electronic delivery
notes issued by the supplier suffice for
a transaction to be recognized and for
input VAT to be reclaimed.
Electronic delivery notes for supplies
of goods (services, work) must
be provided to legal entities and
individuals engaged in entrepreneurial
activities within 5 days, while electronic
delivery notes for returns of goods
(services, work) must be provided
within 3 days. Movements of goods
include movements between a principal
and an agent.
The general format and content of
electronic delivery notes and the
procedures for their issue, amendment
and cancellation are laid down in the
Regulations on Electronic Delivery
Notes approved by a Resolution of the
Cabinet of Ministers.
Other taxes and fees
Excise tax
Excise taxes range from 3% to 72% for
domestically produced hydrocarbon
products and from AZN 0.2 to AZN 4
per liter for alcoholic beverages and
non-alcoholic energy drinks. The rate
for tobacco products is AZN 38.5 -
43 per 1,000 units. Excise tax and
VAT are not included in the taxable
base. Imported automobiles, yachts,
platinum, gold, and diamonds are also
subject to excise taxes.
Excise tax for platinum is AZN 4 per
gram; for gold it varies from AZN 1.5
to AZN 6 per gram depending on the
amount of gold in a thousand weight
units; for diamonds it is AZN 400 per
carat, but the calculation may differ
depending on the diamond’s size.
Where excisable goods are produced
from excisable supplies, any excise tax
paid on the supplies may be deducted
from the excise tax due on the finished
product.
Declarations must be filed and payment
must be made monthly by the 20th
of the following month. Excise tax is
deductible for profit tax purposes.
Property tax
Property tax is levied at the rate of
1% of the average annual net book
value of fixed assets, including
19Doing Business in Azerbaijan
buildings, machinery and equipment.
The taxable base is calculated as the
average of the values at the beginning
and end of the year. If property of an
enterprise is insured for an amount
exceeding its residual value, property
tax is calculated at the rate of 1% of its
market price. Property tax is deductible
for profit tax purposes. The following
are exempt from property tax:
• Facilities that are used for
environmental protection, fire safety
or civil defense purposes
• Product pipelines, railways and
motorways, communication and
power transmission lines, irrigation
facilities, satellite and other aerospace
assets
• Property of educational, health, sport
and cultural institutions used only for
officially designated purposes
Taxpayers are expected to submit their
declarations no later than 31 March of
the following year. Tax due is payable
in quarterly installments by the 15th
of the second month of the calendar
quarter in the amount of 20% of the
property tax due for the previous year.
Road tax
Non-resident owners of vehicles
entering the territory of Azerbaijan to
transport passengers or cargo must
pay road tax. The road tax payable by
such non-resident owners is collected
by the customs authorities at rates
depending on the engine volume and
weight of the vehicle, the period of stay
in Azerbaijan, the number of seats, the
axle load and the nature of imported
products.
Tax is also indirectly applicable to
vehicles used locally through the taxation
of automobile gasoline, diesel fuel and
liquid gas producers and importers.
Specifically, AZN 0.02 is added to the
wholesale price per liter of automobile
gasoline, diesel fuel and liquid gas
produced for local consumption or
imported into Azerbaijan.
Land tax
Companies using land are generally
subject to land tax calculated at AZN
2 to AZN 20 per 100 square meters,
depending on location. Land tax is
deductible for profit tax purposes.
Taxpayers are required to submit their
declarations annually by 15 May. The
tax is payable twice a year, no later
than 15 August and 15 November.
Social Insurance Fund employer
contributions
Employers in the oil and gas sector and
the public sector are required to make
contributions to the Fund amounting to
22% of the gross payroll for both local
and foreign employees.
Effective from 1 January 2019,
employers other than those operating
in the oil and gas and public sectors are
required to make Fund contributions
amounting to 22% of the gross taxable
monthly income of both local and
foreign employees if their gross taxable
monthly income is below AZN 200,
and 15% of the amount exceeding AZN
200 plus AZN 44 if their gross taxable
monthly income is above AZN 200, for
a period of 7 years.
These contributions are made at the
expense of the employer and are
deductible for profit tax purposes.
Relevant reports must be filed quarterly
by the 20th of the following month.
Fund contributions do not have to be
made in relation to foreign employees
employed under PSA-related contracts.
In addition, effective from 1 January
2018, employers contribute 0.5%
to the Unemployment Fund as an
unemployment insurance premium.
Mining tax
All companies and individuals engaged
in extracting mineral resources are
subject to mining tax at the appropriate
rate in addition to any land tax due.
Mining tax is deductible for profit tax
purposes. The tax is applied to the
wholesale price of oil, natural gas and
all types of metals at rates ranging from
3% to 26%. For all other taxable mineral
resources, the rates range from AZN 1
to AZN 10 per cubic meter. Taxpayers
are required to submit their declarations
monthly by the 20th of the following
month. The tax is payable monthly by
the 20th of the following month.
Simplified taxation system
• Legal entities and individual
entrepreneurs that are not required
to register for VAT purposes
in Azerbaijan are eligible to be
registered as payers of simplified tax,
which is generally levied at 2%. The
taxable base is gross income received
from sales of goods, works and
services, except for income subject to
withholding tax.
Doing Business in Azerbaijan20
• Persons engaged in public catering
activities with a taxable turnover
exceeding AZN 200,000 in any
month(s) over a period of 12
consecutive months are also entitled
to register as payers of simplified tax.
The tax rate in such cases is 8%.
• Special simplified tax rates are
established for taxpayers engaged
in certain activities (the list below is
non-exhaustive):
• Persons engaged in the provision
of their own residential and non-
residential premises – AZN 15
multiplied by the location zone rate,
varying from 1.2 to 4.0 per square
meter
• Alienation of land – taxation depends
on the location and purpose of use.
Agricultural land is subject to tax
calculated at AZN 0.5 per square
meter, while for other types of land
tax is calculated at AZN 0.5 per
square meter and multiplied by the
appropriate location coefficient
specified in the Tax Code
Legal entities operating under the
simplified tax regime do not pay VAT or
profit tax.
Any taxpayer whose business
is transporting passengers or
cargo (except for international
transportation) is liable to pay a
fixed amount of simplified tax and is
required to obtain what is referred
to as a “distinguishing license plate”.
Taxpayers who are not involved in
a local transportation business and
own vehicles for the transportation of
their own cargo and employees must
obtain a “special distinguishing license
plate” to differentiate themselves
from simplified taxpayers. Both
distinguishing license plates and special
distinguishing license plates are issued
by the State Road Transport Service
attached to the Ministry of Digital
Development and Transport of the
Republic of Azerbaijan at no cost
within two and five days respectively.
Taxpayers under the simplified tax
regime must submit their declarations
quarterly by the 20th of the following
month. The tax is payable quarterly by
the 20th of the following month.
Persons who do not have the right to
become simplified taxpayers include:
• Persons engaged in trading activities
for whom the volume of taxable
transactions in any month (months)
during a period of 12 consecutive
months exceeds AZN 200,000
• Persons who provide services other
than services rendered to persons
not registered as taxpayers (except
for persons who pay fixed amounts of
simplified tax)
• Persons engaged in the production of
goods that are excisable and subject
to mandatory labeling
• Persons engaged in production
activities that have more than 10
employees
• Persons engaged in activities
requiring a license, except for persons
providing services under compulsory
insurance contracts
• Persons engaged in wholesale
activities
• Credit organizations, professional
participants in the insurance market
(other than insurance agents
providing services relating to
compulsory insurance agreements),
investment funds and managers of
such funds, persons licensed in the
securities market, and pawnshops
Import tax
The maximum rate of import tax is
currently 15%. There are certain import
tax exemptions.
Customs processing fees are payable
on imported goods in amounts ranging
from AZN 10 to AZN 550 (depending
on the value of the goods declared and
whether customs clearance takes place
within or outside regular working hours
and within or outside the customs
territory).
Export tax
Most goods are exempt from export
tax.
Interest and penalties
Interest and penalties are applied for
non-compliance with tax legislation.
For example, interest is charged on
outstanding tax liabilities at the rate of
0.1% per day.
21Doing Business in Azerbaijan
Offence Penalty
Failure to file declarations AZN 40
Understatement of tax liability 50% of understated tax
Payments from petty cash while bank accounts are under tax sanctions or penalties
imposed by the tax authorities
50% of expenses paid from petty cash
Failure to register a foreign bank account with the tax authorities 100% of the revenue collected on such accounts
Delay in paying VAT on supplier/service provider invoices in accordance with the rules
on the payment of VAT using a designated bank account
50% of VAT paid in violation of the special rules
Failure to submit financial statements at the request of the tax authority (only medium-
sized and large businesses)
AZN 1,000
Failure to provide or provision of misstated information on imported goods to the tax
authorities (except for taxpayers in the public and oil and gas sectors)
2% of the value of the imported goods or the misstated
portion thereof for micro-enterprises
5% of the value of the imported goods or the misstated
portion thereof for other persons
Failure to provide information on payables and receivables to the tax authorities AZN 100
Failure to register a business entity (facility) with a tax authority in accordance with the
prescribed rules or submission of misstated information on an entity (facility)
AZN 40 — for micro-enterprises, non-profit
organizations and persons engaged in non-
entrepreneurial activities
AZN 400 — for other persons
Failure to provide or misstatement of information in a payment order AZN 100 for each such payment order
Failure to record income and expenses in the manner prescribed by the Tax Code 20% of unrecorded expenses
Carrying out cash settlements in violation of the rules on cases where cash settlements
are prohibited
1st time in a calendar year – 10% of the total transaction
amount
2nd time – 20%
3rd time or more – 40%
Purchasing goods without receiving a delivery note or electronic delivery note 1st time in a calendar year – 10% of the value of the
goods purchased
2nd time – 20%
3rd time or more – 40%
Supplying goods without issuing an electronic delivery note required to be issued
under the Tax Code
1st time in a calendar year – 10% of the value of the
goods supplied
2nd time – 20%
3rd time or more – 40%
The statute of limitations for a tax violation is three years.
The following is a non-exhaustive list of penalties that may be applied for non-compliance with tax legislation:
Doing Business in Azerbaijan22
Withholding tax
Scope
Withholding tax is applicable to the repatriation of profit and other cross-border
payments to foreign companies not related to a PE in Azerbaijan. The tax is payable
at the following rates:
Nature of payment Rate of withholding
tax (%)
Insurance premiums 4%
Fees for international communication and freight services 6%
Dividends and interest, including the interest element of financial lease
payments
10%
Management fees and fees for other services performed or deemed to
be performed in the territory of Azerbaijan but not connected with an
Azerbaijani PE
10%
Rents and royalties 14%
Licenses 14%
Branch remittance tax – for the remittance of profit derived from a
permanent establishment in Azerbaijan to the head office
10%
Payments to countries with a favorable tax regime* 10%
* The list of countries with preferential tax regimes
is approved by the President of the Republic of
Azerbaijan. In addition, there is a list of cases
where payments to a country or territory with a
preferential tax regime are not treated as income
from an Azerbaijani source. These include:
• repayment of the principal amount of a debt
(excluding interest)
• transfers made by resident banks to correspondent
accounts of those banks
• payments made by individuals not registered with
the tax authorities for the purchase of goods (work,
services) for personal consumption from countries
and territories with preferential tax regimes, or for
the purchase of movable and immovable property
• payments for the acquisition of bonds
• payments of dividends derived from investments
in Azerbaijan and interest on deposits held in
Azerbaijani financial institutions
• payments of salaries and pensions to residents
of countries and territories with preferential tax
regimes
• payments of duties and other fees to competent
authorities, and payments made in order to receive
permits and certificates
• the return of a payment made to a country or
territory with a preferential tax regime back to the
payer’s
23Doing Business in Azerbaijan
Payee resident in
Dividends (%) Interest (%) Royalties (%)
Austria 5/10/15 0/10 5/10
Belarus 15 0/10 10
Belgium 5/10/15 0/10 5/10
Bosnia and Herzegovina
10 0/10 10
Bulgaria 8 0/7 5/10
Canada 10/15 0/10 5/10
China 10 0/10 10
Croatia 5/10 0/10 10
Czech Republic 8 0/5/10 10
Denmark 5/15 0/8 5/10
Estonia 5/10 0/10 10
Finland 5/10 0/10 5/10
France 10 0/10 5/10
Georgia 10 0/10 10
Germany 5/15 0/10 5/10
Greece 8 0/8 8
Hungary 8 0/8 8
Iran 10 0/10 10
Israel 15 0/10 5/10
Italy 10 0/10 5/10
Japan 15 0/10 10
Jordan 8 0/8 10
Kazakhstan 10 0/10 10
Kuwait 5/10 0/7 10
Latvia 5/10 0/10 5/10
Lithuania 5/10 0/10 10
Luxembourg 5/10 0/10 5/10
Macedonia 8 0/8 8
Payee resident in
Dividends (%) Interest (%) Royalties (%)
Malta 8 0/8 8
Moldova 8/15 0/10 10
Montenegro 10 0/10 10
Netherlands 5/10 0/10 5/10
Norway 10/15 0/10 10
Pakistan 10 10 10
Poland 10 0/10 10
Qatar 7 0/7 5
Romania 5/10 0/8 10
Russian Federation 10 0/10 10
San Marino 5/10 0/10 5/10
Saudi Arabia 5/7 0/7 10
Serbia 10 0/10 10
Slovenia 8 0/8 5/10
Spain 5/10 0/8 5/10
South Korea 7 0/10 5/10
Sweden 5/15 0/8 5/10
Switzerland 5/15 0/5/10 5/10
Tajikistan 10 0/10 10
Turkey 12 0/10 10
Turkmenistan 10 0/10 10
UAE 5/10 0/7 5/10
Ukraine 10 0/10 10
United Kingdom 10/15 0/10 5/10
Uzbekistan 10 0/10 10
Vietnam 10 0/10 10
No treaty country 10 10 14
Double tax treaties
The rate of withholding tax under existing double tax treaties varies depending on the content of a particular treaty.
The maximum rates of withholding tax under current double tax treaties are shown in the table below.
Doing Business in Azerbaijan24
5
Accounting
and reporting
25Doing Business in Azerbaijan
All entities registered in Azerbaijan
(Azerbaijani legal entities,
representative offices and branches)
are required to maintain their books
and records in the territory of
Azerbaijan in accordance with the
appropriate standards.
The Law on Accounting stipulates
that all public interest entities,
including credit institutions,
insurance companies, investment
funds and managers of such funds,
non-public (private) social funds,
licensed participants in the securities
market, listed entities, commercial
organizations meeting certain criteria
and, subject to certain exceptions,
public legal entities, must maintain
their records in accordance with
International Financial Reporting
Standards (“IFRS”). At the same time,
large and medium-sized enterprises
and medical and educational
institutions must follow IFRS for Small
and Medium-Sized Entities (“IFRS for
SME”) if their charters allow them to
engage in entrepreneurial activities.
All other large and medium-sized
enterprises may also use IFRS. Micro
and small enterprises may either use
the bookkeeping rules for micro and
small enterprises set by the Ministry of
Finance of Azerbaijan, or follow IFRS
for SME.
Investment Incentive
Certificates
An investment incentive certificate
(“Certificate”) entitles its holder to tax
and customs benefits. The Certificate
is granted by the Ministry of Economy
of Azerbaijan to entrepreneurs who
have submitted investment projects
that meet criteria approved by the
Cabinet of Ministers regarding the field
of economic activity, the minimum
investment amount and the region in
which the investment project is to be
carried out. Accordingly, the Tax Code
and the Law on Customs Tariffs set out
the applicable tax and customs duty
exemptions for entrepreneurs. The
following exemptions from taxes apply
for a period of 7 years from the date
the Certificate is obtained:
• Personal income tax — 50% of an
individual entrepreneur’s income
• Profit tax — 50% of a legal entity’s
income
• VAT — full exemption for the
import of machinery, production
equipment and devices by individual
entrepreneurs and legal entities
• Property tax — full exemption for
relevant property of individual
entrepreneurs and legal entities
• Land tax — full exemption for relevant
land parcels owned or used by
individual entrepreneurs and legal
entities
Doing Business in Azerbaijan26
6
EY Azerbaijan
27Doing Business in Azerbaijan
Introduction
EY has led projects in Azerbaijan
continuously since 1993. We were
the first international accounting and
tax consulting network to establish a
member firm in Azerbaijan. Our office
in Baku opened in 1994. Currently we
have a team of over 200 professionals,
led by Assurance Partner Ilgar Veliyev,
a member of the American Institute of
CPAs.
Services
EY Azerbaijan, in conjunction with
partners and staff in other EY offices,
provides Assurance, Tax & Law, Advisory
and Transaction Advisory Services to
both international and local clients.
We have undertaken a number of major
assignments in the country relating to
inbound investment, enterprise and
sector restructuring, and public policy.
Assurance
EY has been licensed to conduct audits
in Azerbaijan since 1994. We have
gained unprecedented experience in
that time.
Many of the auditors at our Baku office
are certified public accountants (US)
and/or ACCA members.
We provide audit services to numerous
companies operating in Azerbaijan
under PSAs. We audit the cost recovery
reports and profit tax returns of all PSAs
and perform profit tax return audits for
numerous contracting parties owning
interests in various PSAs.
We also provide accounting advice and
other Assurance services to foreign
and Azerbaijani companies preparing
accounts in accordance with IFRS, US
GAAP and UK GAAP.
Tax & Law
EY is recognized as the leading tax
and legal advisor in Azerbaijan. The
Tax and Law service line is headed by
Partner Arzu Hajiyeva. Through its
team of tax and legal consultants, EY
advises on all aspects of corporate and
personal tax planning and compliance
and licensing, corporate, insurance,
business, migration, contract and labor
law. We have provided advice on local
and international tax and legal issues
to numerous international entities that
have already made or are considering
making investments in Azerbaijan.
Our areas of expertise include
international tax planning, transaction
structuring, expatriate tax affairs,
local tax compliance, currency and
foreign exchange planning and legal
advisory and due diligence, as well as
litigation support, representing clients
in disputes, including in proceedings
before courts and other adjudicatory
bodies.
Doing Business in Azerbaijan28
Our impressive client base speaks for
itself. The firm has established good
working relationships with key state
bodies and government agencies and
is in a position to facilitate negotiations
between potential investors and the
authorities.
This continues to be a key service
in a legislative environment that
is constantly evolving and open to
interpretation.
The firm’s tax practice receives technical
support and a wider perspective on tax
affairs in the CIS through its links with
the rest of the EY network.
Consulting
EY’s Business Consulting practice
comprises professionals with extensive
experience in addressing a broad
spectrum of business goals. We are
experts in delivering performance
improvements and business value to
our clients, reducing costs, managing
risks, operating efficient IT systems,
and successfully accomplishing
operational and strategic objectives.
A dedicated team develops each
project based on the specific
features of the industry and the client.
Our clients in Baku are major private
holdings and state-owned entities. As
part of a global network, we are able
to team up with professionals from
all over the world to help our clients
overcome market challenges and
address unique business risks.
We combine our international
perspective and experience with
knowledge of the local market and
realities to provide unsurpassed
consulting services, ensuring our
clients’ businesses grow.
Our major services include:
• Performance Improvement
• Finance Consulting Services
Strategy and
Transactions
EY’s Strategy and Transactions
team provides assistance in finance
raising (including project finance,
infrastructure financing and public-
private partnerships), mergers and
acquisitions, infrastructure and real
estate transactions. We are experienced
independent financial advisors
who have participated in numerous
transactions regionally and locally.
We provide a full range of hands-
on, operationally focused support
and advice across the transaction
life cycle, on both buy-side and sell-
side. We also put together the most
effective restructuring plans, improving
transactions to achieve clients’
strategic goals.
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