Invest in Azerbaijan

20-Oct-2013

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Mr. Guliyev is specialized in international relations / business, global governance and investments areas. He is committed to be successful.







Azeribaijan located at the crossroad of Europe and Asia is the gateway to the Eastern Europe and Middle Eastregion. It has one of the world’s fastest growing economies that is developing continuously to be one of the rapidly developing emerging economies. Azerbaijan is improving investment environment with new opportunities for business every day. With much more underway Azerbaijan continues to make it easier to do business. World Bank and IFC have ranked Azerbaijan as a leading reformer country for improving business environment. Azerbaijan be there, see it rise.

Overview of Azerbaijan & Azerbaijan in figures

Investment Climate

Legislation

General social, economic and legal conditions of investment activity (capital investment) in the territory of the Republic of Azerbaijan and legal, economic principles of foreign investment are determined by the Laws of the Republic of Azerbaijan on “Investment activity” and on “Protection of foreign investments”, relevantly.

“Single window” system

The President of Azerbaijan Republic issued the Order on “Ensuring measures of organization of entrepreneurship subjects’ activity on “single window” principle” dated October 25, 2007, for taking necessary measures to accelerate development of entrepreneurship, to simplify starting procedures of business and to increase suitableness of business climate. Pursuant to the Order, the Ministry of Taxes of Azerbaijan Republic was appointed as single state registration body on “one window” principle and the application of this system was started on January 1, 2008. After applying “one window” system, entrepreneurs desiring to register their businesses required number of procedures has been reduced from 15 to 1 and time for this reduced from 30 days to 3.

Privatization

Foreign investors can participate in privatization process. In order to participate in privatization, foreign investors must obtain privatization option while privatization checks are in circulation. (Privatization options – is type of securities that gives legal permission to foreign investors to purchase necessary checks for privatization).

Currency regulation

Azerbaijan Central Bank has been authorized to determine exchange policy on currency regulation and to accept instructions.
Unless a special license issued by the Central Bank, all payments will be carried out with AZN. Central Bank abolished money restrictions on advances sent by residents and non-residents due to import of goods and services to Azerbaijan. Despite of the cancellation of restrictions, goods must be carried to Azerbaijan within 180 days after paying the advance.

Real estate

Legislation of Azerbaijan provides following rights on real estate:
– property
– lease
– use
Entrepreneurship concept considers property right, use and making profit and transferring land to the third party. The Republic of Azerbaijan, municipalities and individuals or legal entities of Azerbaijan can act in the capacity of landowner. Foreigners (individuals and legal entities) and persons without citizenship can’t be landowners. Foreigners must handover property rights to 3rd party within 1 year, if land is obtained through collateral loan, gift or inheritance.
Otherwise, land will pass to the property of state or relevant municipality. However, foreigners can lease land for a long term.

Taxation

There are following changes in the tax system in order to increase economic activity and dynamic development of entrepreneurship:
– Income tax of enterprises and organizations to transit from progressive system to proportional system, and gradually to decrease tax rates from 35% to 20%, VAT rate from 28% to 18%, cancel number of taxes, to reduce maximum limit of income tax rate from 55% to 35%.

Customs regime

Legislation of Azerbaijan applies number of customs regimes to imported goods Followings are necessary for foreign investors:
-transit, customs storage, customs storehouse, temporary import, entrance and exit to customs zone.
-Duties are taken from goods imported to Azerbaijan (ad valorem duties – 0-15% corresponds to unit and measurement duty). Excise tax is applied to some types of goods (tobacco and alcohol products). Azerbaijan has adopted purposely VAT principle (currently 18%), that is taken from customs value of any goods (depending on applied customs regime, as well as import duty and excise tax). Certain categories and types of goods are not applied VAT or 0% rate is applied. Exports are exempt from state tax (except metal exporting).
Contractors, subcontractors and their agents can re-export and import oil and gas industry goods to Azerbaijan without obstacles and paying import duty within the framework of agreements and projects on pipeline and Production Sharing Agreements (PSA). Imported goods under PSA regime is applied 0% VAT. Simultaneously, pursuant to the Law on “Application of special economic regime to export targeted oil and gas activity” export targeted activity of the contractors and subcontractors in the oil and gas sectors is applied 0% VAT rate.

State Registration

State register on legal entities engaged in non-entrepreneurship activity includes general information about legal persons and their founders. According to the provisions of Civil Code, state register on legal entities was declared open and every interested party can obtain copy of the documents submitted for registration.
State registration is carried out within 5 days.
Legal entities engaged in commercial activity have to be registered at the Ministry of Taxes in accordance with “single window” system.

Licensing

It was necessary to obtain special licenses from various state agencies for some commercial activities till 2002. According to decree of the President of Azerbaijan Republic dated September 3, 2002, licensing for most commercial activities was abolished. License is required for activities on banking, insurance, audit, deliveries, and securities and other. Extension period of the license is 5 years.

Azerbaijan investment climate in the reports of international organizations

Azerbaijan was declared most reformer country in the field of improving of the business climate in the “Doing Business 2009” report prepared by the World Bank and the International Finance Corporation. Our country preserved its position in the “Doing Business 2010” report, implemented measures in the direction of improving the business environment in Azerbaijan are appreciated as positive. Azerbaijan increased by 18 stages and figured out in the 51st place among the 133 countries and 1st place among CIS countries in the “Global competitiveness report” prepared for 2009-2010.

Sovereign Ratings

Fitch Ratings (as of 06.09.2011)
Sovereign foreign currency ratings (LT/Outlook/ST) BBB-/Positive/F3
Sovereign local currency ratings (LT/Outlook) BBB-/Positive
Standard & Poor’s (as of 23.12.2011)
Sovereign local currency ratings (LT/Outlook/ST) BBB-/Stable/A3
Sovereign foreign currency ratings (LT/Outlook/ST) BBB-/Stable/A3
Transfer and convertibility assessment BBB-

Advantages of Azerbaijan for foreign investors:

1. Favorable condition for foreign investments:
– the highest per capita direct foreign investment indicator in the region.
– Legal guarantees for investors.
2. Developing rapidly and open economy:
– 26.4 %s annual growth of the GDP
– Annual growth of 19.8 %s of the turnover of foreign trade.
– Average import tariff degree: 5. 7%
3. Wide opportunities in non-oil sector:
– High growth in 5 last years in the areas of most economical activities: Industry – 7.5 times, construction – 3.8 times, trade – 3.5 times, transport and communication – 2.9 times, social services – 2.8 times, agriculture – 2.1 times.
– Tax concessions to producer of agriculture products
4. Natural reserves: Minerals and fertile soil:
5. Suitable strategical position:
– Direct access to the Central Asian and Caspian region.
– Participation in international trade initiatives (Silk Road, North-South corridor)
– Expanding Europe factor and joining to the policy of the New neighborhood.
1. Competitive local worker force

Speedy socio-economic development of Azerbaijan, measures implemented for the purposes to improve the business environment in the country etc achievements are always highly evaluated by authoritative international organizations.
In the “Doing business, 2012” report of the World Bank and International Finance Corporation Azerbaijan has taken the 66th place among 183 countries. Azerbaijan, as well has entered the leaders group among countries of world on parameters to begin to business, simplicity of registering of the property. The country was in one line with developed states in areas of getting credit, carrying out of the works and in some other areas, too.
According to “Doing business, 2012” report the best indicator in Azerbaijan is in the registration of the property. So, according to prepared report among 183 countries Azerbaijan is in the 9th place on 10 different parameters because of the registration of the real estates. At the same time 4 procedures are required in Azerbaijan for transferring of the property, which takes 11 days with expenses of 0.2 percentages of the value of the property. It is one of the best indicators in the region. Let us inform for comparison that in the Eastern Europe and Central Asian, where Azerbaijan is related, the average indicator on transfer of the property is 37, in neighboring Turkey – 44 days, in Russia- 45 days, in Bulgaria- 66 days, in Romania- 70 days, in Iran – 163 days, in Ukraine- 166 days.
According to the rating to begin business Azerbaijan is 18th among 183 countries. The country requires 6 procedures to begin the business. The number of the days is 8, expense demanded for beginning to business makes 2.7% of the per capita capital. Minimum capital is not being required at that. This indicator of Azerbaijan is better in comparison with Central and Eastern European countries . Because 11 days are required to begin business in these countries. As well these is less number of the procedures demanded to begin the business in Azerbaijan in comparison with countries.
The state of Azerbaijan economy has been valued by international rating agencies, too. So, “Standart & Poor’s” rating agency had raised long-term sovereign credit of Azerbaijan in the foreign and local currency in December 2011 to “BBB-” level and so investment rating has been given to Azerbaijan. Agency, also had raised for one step the rating of short-term sovereign credit of Azerbaijan to “A-3” level in the foreign and local currency from (the) “B” level. At the same time “Fitch Ratings” agency has kept the rating of long-term sovereign investment of Azerbaijan with “positive” prognosis in the local and foreign currency at the “BBB-” level. But “Moody’s” agency has changed prognosis on (the) sovereign rating in the level of “Ba1″ from “stable” to “positive” concerning to Azerbaijan.
All of these show once again that Azerbaijan is always in the focus of attention of leading investors of the world as developed country.

Sources- azpromo.az http://www.azerbaijans.com/content_1614_en.html


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