Favorable legal framework
The Laws of the Republic of Azerbaijan “On Investment Activity” and “On Protection of Foreign Investments” providing the legal and economic basis for the activities of foreign investors have been adopted and are currently in force.
According to the legislation, state guarantees for investment activities:
- The national regime is applied to foreign investors, ie the regime applied to local investors applies to them without discrimination;
- Free transfer of funds related to foreign investment is guaranteed.
- Foreign investment is not nationalized, except in exceptional cases that harm the people of Azerbaijan and the interests of the state. It is not requisitioned, except for natural disasters, accidents, epidemics and other emergencies. In exchange for nationalization and requisition, the investor is paid adequate and effective compensation without delay.
- Compensation for damage is provided;
- Foreign investments are fully and unconditionally protected;
- Foreign investors can apply to local courts, arbitration tribunals, including international arbitration.
- Simplification of the procedure for obtaining licenses and permits
- The number of activities requiring a license was reduced from 59 to 37, and the number of permits was reduced from 330 to 86.;
- Licenses are issued indefinitely by the Ministry of Economy in “ASAN Service” centers on the basis of “one window” principle;
- The amount of state duty on licenses was reduced by about 2 times, by regions by 4 times;
- The number of state licensing bodies has been reduced from 23 to 4, and the period for issuing licenses has been reduced from 15 to 10 working days;
The “Licenses and Permits Portal” was established to provide electronic procedures for issuing, re-issuing, duplicating, suspending, renewing, revoking licenses and permits, and a single register of licenses and permits.
Tax and customs benefits
- Investors operating in priority sectors of the economy (agriculture, industry, tourism, alternative and renewable energy) are provided with an investment promotion document that provides significant benefits. Investors are exempt from VAT and customs duties, as well as land and property taxes on equipment and facilities imported for a period of 7 years from the date of receipt of the investment promotion document, and have the right to tax 50 percent of their income or profits;
- In order to ensure favorable investment conditions, 5 industries, 2 high-tech parks, as well as 5 industrial districts were established. Investors, individuals and legal entities who have received the status of residents of industrial and technology parks, are subject to VAT, income (excluding labor income tax), profit, land and property tax, 7 years for equipment and facilities imported for a period of 10 years from the date of registration. exempted from payment of customs duty for imported equipment and facilities;
- Individuals and legal entities engaged in the production of agricultural products (including by industrial methods) are exempt from VAT, income, profit, property and simplified tax until January 1, 2024, except for land tax;
- 75% of the income or profit of entrepreneurs engaged in micro-entrepreneurship is exempt from tax, as well as rapid depreciation rates are applied to fixed assets on the balance of micro and small businesses
- Income or profit from innovation activities from the date of receipt of the Startup certificate by startups with micro or small entrepreneurship is exempt from tax for a period of 3 years;
- SMB cluster company is exempted from VAT, as well as profit, property and land tax for equipment and facilities imported for 7 years from the date of inclusion in the register of SMB cluster companies;
- The process of establishing the “Alat Free Economic Zone” continues in order to create a more favorable environment for entrepreneurship and investment activities in the country.
Institutional mechanisms and structural reforms
- “Azerbaijan Investment Company” CJSC carries out co-financing of large-scale investment projects in priority areas of the non-oil sector;
- The Azerbaijan Export and Investment Promotion Fund provides services and support to foreign investors interested in investing in the country on the basis of the “single window” function;
- Entrepreneurship Development Fund carries out preferential financing of investment projects for the establishment of new production, processing and infrastructure enterprises based on innovative technologies in the non-oil sector;
- The Small and Medium Business (SMB) Development Agency of the Republic of Azerbaijan aims to increase the role and competitiveness of micro, small and medium enterprises in the country's economy, expand their access to financial resources and improve institutional support mechanisms, strengthen the legal support of entrepreneurship and create favorable conditions to attract local and foreign investments;
- National development priorities based on the creation of sources of sustainable and inclusive economic growth, especially private investment, including foreign direct investment, expansion of non-oil exports, active integration into the global value chain, radical improvement of the investment climate, quality of human capital through modern health and education policies The Economic Council of the Republic of Azerbaijan was established to further develop, formulate a socio-economic development strategy reflecting issues related to more effective protection of property rights, create a new strategic management framework for economic policy that can ensure its implementation, as well as implement effective regulation and law enforcement practices.
Agreements on promotion and mutual protection of investments were signed with 49 countries, agreements on elimination of double taxation were signed with 55 countries.