Business Environment

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In this page: Accounting Rules | Tax Rates | Intellectual Property | Legal Framework | Standards | Business Practices

 

Accounting Rules

Tax Year
The financial year begins on the 1st of January and ends on 31st December of the same year.
Accounting Standards
The Azerbaijani accounting norms respect the norms by the International Accounting Standards Board.
For more information, visit the website of the Ministry of Finance of the Republic of Azerbaijan  (in English and Russian).
Accounting Regulation Bodies
Ministry of Finance of the Republic of Azerbaijan
Accounting Reports
Certain companies have to use the IFRS norms : financial institutions, big companies, Investment Funds and credit institutions. Other companies have the choice between IFRS and national (NAS) norms. Small companies (whose annual sales turnover is less than 2.5 billion AZM or whose assets value is less than 5 billion AZM) will have the choice between NAS and a simplified method of accounting.

The accounting structure includes the balance sheet, the profit and loss account and the notes to the accounts.

Publication Requirements
With the exception of companies operating under a Production Sharing Agreement (PSA), annual accounts should be in Azeri and in the local currency (manat). The Production Sharing Agreement (PSA) exempts certain foreign companies from the form of their accounts. In practice, the majority amongst them use the IFRS norms.
Professional Accountancy Bodies
The Chamber of Auditors of Azerbaijan Republic
Association of Accountants of the Republic of Azerbaijan
Certification and Auditing
Audit is obligatory for companies having foreign capital, for Private Limited companies and companies whose annual turnover is more than 2.5 billion AZM or whose assets value is more than 5 billion AZM.The auditor should be certified by the Chamber of Auditors of Azerbaijan.
The Auditing Services Law 1995 governs the audit rules in Azerbaijan. These are based on the international norms (ISAs).
You can contact an external auditor: Ernst & Young, PricewaterhouseCoopers.
Accounting News

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Tax Rates

Consumption Taxes

Nature of the Tax
Əlavə Dəyər Vergisi (ƏDV) - VAT (Value Added Tax).
Tax Rate
18%
Reduced Tax Rate
Exports of goods and services, the supply of gold and other valuables to the Central Bank of Azerbaijan, as well as international and transit cargo and passenger transportation, are zero-rated.
Certain items are exempt, including entertainment expenses; meal expenses; accommodation expenses; other expenses of a social nature; expenses not related to commercial activities; advertising expenses; rental expenses; telecommunication expenses; and purchase of goods/materials.
Other Consumption Taxes
Excise duties are levied on alcohol, tobacco products, oil products, energy drinks, electronic cigarettes, light vehicles, leisure and sport yachts and certain floating transports, imported platinum, gold, jewellery, diamonds, leather goods.
A road tax is also levied.

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Corporate Taxes

Company Tax
20%
Tax Rate For Foreign Companies
Azerbaijan resident companies are subject to a profit tax on their worldwide income. Foreign companies are taxed uniquely on their Azerbaijan-source income.
In addition to the profit tax paid by a permanent establishment of a non-resident company, the amount repatriated from the net profit of such PE to the non-resident entity is taxed at the source of payment at a rate of 10%.
Capital Gains Taxation
Capital gains are included in taxable income and taxed at the standard corporate tax rate of 20%.
Main Allowable Deductions and Tax Credits
In general, expenses incurred to generate income are tax-deductible.
Depreciation of tangible and intangible assets are tax-deductible at rates varying between 7% (building and premises) and 25% (technological material, expenses incurred for geological works and exploitation of natural resources, means of transportation). The Azerbaijani tax legislation does not define nor provide for any tax deduction for goodwill.
Interest expenses may be deducted, but up to the limit of the interest rate on loans with similar currency and maturity at the interbank credit auction. If there is no such auction, the deduction is limited to 125% of the interbank auction credit rates published by the Central Bank of Azerbaijan.
Bad debts are considered tax-deductible (double debt deduction is possible if the debt is written off as worthless in the taxpayer's books).
Other deductible expenses include business trip costs (with varying limits) and repair expenses (for buildings and premises, the limit is 2%; for machinery and equipment, the limit is 5%; and for other fixed assets, the limit is 3%. Any amount exceeding the abovementioned limits shall be taken as an increase of the residual balance value of the fixed assets in the appropriate category).
Fines and penalties are not deductible. As of January 1, 2021, contributions transferred to the funds created for public and social purposes shall be tax-exempt for an 8-year period (capped at 10% of the reporting year's profit).
Net operating losses can be carried forward for up to five years. Carryback of losses is not permitted.
Other Corporate Taxes
Real property tax is levied at a 1% rate on the average annual book value of the property (imposed on legal entities, natural persons are liable for property tax that is calculated by square metre). Land tax is levied on Azerbaijan’s land resources that are in the possession of or used by individuals or companies (legal entities holding an investment promotion certificate are exempt from land tax for seven years from the date of obtaining the certificate). The tax is calculated per square metre at varying rates depending on the type of land (agricultural, commercial, industrial). Azerbaijan does not levy transfer tax, but transferring property may incur notary fees. Similarly, there are no stamp duties except for certain notary fees.
Social security contributions payable by the employer amount to 3% of the employee's gross salary up to first AZN 200 and 10% on the excess. Employers are also liable for unemployment insurance contributions amounting to 0.5% of the gross salary of the employee. Employers (and employees) are required to make monthly medical insurance contributions calculated at 2% of monthly income up to AZN 8,000, and 0.5% on the excess.
Mining activity is subject to a separate tax on the final product's wholesale price (crude oil: 26%; natural gas: 20%; all type of metals: 3%; non-metallic minerals: AZN 0.04 to AZN 10 per cubic metre, depending on the type of the mineral resources).
50% of income derived from the disposal of shares held for at least three years is exempt from income tax. Furthermore, the tax code provides for a 50% exemption from profit tax for legal entities holding an investment promotion
certificate.
Other Domestic Resources
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 

Country Comparison For Corporate Taxation

  Azerbaijan Eastern Europe & Central Asia United States Germany
Number of Payments of Taxes per Year 9.0 13.9 10.6 9.0
Time Taken For Administrative Formalities (Hours) 159.0 226.2 175.0 218.0
Total Share of Taxes (% of Profit) 40.7 36.5 36.6 48.8

Source: Doing Business - Latest available data.

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Individual Taxes

Tax Rate

Private employment (for private sector employees except for those in the gas and oil industry)
From AZN 0 to 8,000 per month 0%
Above AZN 8,000 per month AZN 350 + 14%
Oil and gas industry employment
From AZN 0 to 2,500 per month 14%
Above AZN 2,500 per month AZN 350 + 25%
Individual entrepreneurs 20%
Individuals who hold an investment promotion certificate 50% exemption from personal income tax for seven years from the date of obtaining the certificate
Entrepreneurs participating in micro enterprises, and income from innovative activities of entrepreneurs participating in micro or small enterprises 75% exemption for three years from the date a start-up certificate is obtained
Allowable Deductions and Tax Credits
In case of entrepreneurial activity, the portion of deductible expenses exceeding income may be carried forward for three years without limitations to offset future taxable income.
Some expenses are not included in the taxable income, such as one-time allowances to pay for medical treatment, including surgery within or outside Azerbaijan of up to AZN 10,000 and AZN 50,000, respectively, and financial aid of up to AZN 20,000 per calendar year to family members of servicemen and non-military personnel killed or disabled as a result of military operations.
Special Expatriate Tax Regime
Residents are taxed on their worldwide income, whereas non-residents are taxed on their Azerbaijani income (at the same rate as nationals).
An individual is considered to be tax resident if he/she is physically present in Azerbaijan for a period of more than 182 cumulative days in a calendar year.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
List of the fiscal conventions signed by the Republic of Azerbaijan
Withholding Taxes
Dividends: 10%, Interest: 10%, Royalties: 0 (paid to resident companies)/14%

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Intellectual Property

National Organisations
After the declaration of independence of Azerbaijan from the USSR in 1991, the country created in 1993 the department of patents and trademarks under the aegis of the Committee of Technology and Sciences (Patent and License Department of the State Committee of Science and Technology). The country also founded the Copyright Agency of the Republic of Azerbaijan and the State Committee on Standardization, Metrology and Patents.
Regional Organisations
Azerbaijan is a member of the Eurasian Patent Organization.
International Membership
Member of the WIPO (World Intellectual Property Organization)
Signatory to the Paris Convention For the Protection of Intellectual Property
Membership to the TRIPS agreement - Trade-Related Aspects of Intellectual Property Rights (TRIPS)
 

National Regulation and International Agreements

 
Type of property and law Validity International Agreements Signed
Patent
 
Patent Law 1997 (Law on patents)
Valid for 20 years Patent Cooperation Treaty (PCT)
Trademark
 
Trademarks Law (law on registered trademarks) law in the process of being drawn up ; Paris Convention in force
10 years renewable Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks
Design
 
Patent Law 1997 (Law on Patents)
Initial validity period of 10 years  
Copyright
 
Law on the rights of authors
Upto 50 years after the death of the author Berne convention For the Protection of Literary and Artistic Works
Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms
Rome ConventionFor the Protection of Performers, Producers of Phonograms and Broadcasting Organizations
WIPO Copyright Treaty
WIPO Performances and Phonograms Treaty
Industrial Models
 
Patent Law (Law on Patents)
10 year period  

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Legal Framework

Independence of Justice
The judiciary in the country does not work independently and is corrupt and inefficient.
Equal Treatment of Nationals and Foreigners
The judiciary does not guarantee an impartial trial to a foreign national.
The Language of Justice
The judicial language of Azerbaijan is Azerbaijani.
Recourse to an Interpreter
It is possible to call for an interpreter.
Sources of the Law and Legal Similarities
The Constitution of 1995 is the main source of the law, with the country's legal system based on a civil law system.
For more information, visit the website of the Law University of New York (section dedicated to the Azerbaijani law).
Checking National Laws Online
Azerbaijan: website containing general information on the Republic of Azerbaijan, juridic section

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Standards

National Standards Organisations
National Agency for Standardization, (website in English under construction)
Integration in the International Standards Network
The institution responsible for laying down product standards and certification in Azerbaijan is The State Agency on Standardization, Metrology and Patents of Azerbaijan (AZSTAND). AZSTAND is a committee member of the International Organization for Standardization (ISO), member of the Interregional Association for Standardization (IRSA), and member of the Euro-Asian Council for Standardization, Metrology and Certification (EASC).
Classification of Standards
AZS. The National Agency for Standardization has a website on which one can consult the classifications and the procedure for classification (only in Russian, the English website is currently under construction).
Online Consultation of Standards
Consult the standards on the National Agency for Standardization (only in Russian, the English website is currently under construction).
Certification Organisations
Système “UKRSEPRO” (en anglais) Website in English.

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Business Practices

General Information
Kwintessential:, guide and advices for the Republic of Azerbaijan
Opening Hours and Days
Banks: from 9.30 am to 5.30 pm from Monday to Friday.
Companies : from 9 am to 6 pm from Monday to Friday.
Shops : from 9 am to 7 pm from Monday to Saturday.
Weekly off-days : Saturday and Sunday.
 

Public Holidays

New Year's Day 1st January
Extended holiday (the day after New Years) 2nd January
Martyrs Day 20th January
Womens Day March
Navroz (traditional Iranian festival celebrating the new year according to the Iranian calendar) from 20th March to 22nd March included
Orthodox Easter April
Victory Day 9th May
Proclamation of the first Democratic Republic 28th May
National Salvation Day 15th June
National Army and Navy Day June
Aid al-Fitr (Ramazan Bayrami) Varies each year
Independence Day 18th October
Aid al-Adha (Qurban Bayrami) Varies each year
Solidarity Day 31st December
 
 

Periods When Companies Usually Close

Summer vacations from mid-June to end of August
Winter vacations from the end of December to the beginning of January
 

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Latest Update: November 2022