Starting a Business in Azerbaijan

Azerbaijan is becoming known as a new centre for business and investment in the Caucasus region. It is located at the crossroads of Europe and Asia, which makes it a good place to do business. The country has a lot of natural resources, modern infrastructure, and a government that is friendly to business. This makes it a great place for entrepreneurs who want to get into growing local and regional markets.

 

Why Start a Business In Azerbaijan?

 

Azerbaijan’s economy has changed a lot in the last ten years. It used to be mostly based on oil and gas. The government is helping to grow sectors like agriculture, tourism, logistics, ICT, and renewable energy by giving them incentives and making improvements to infrastructure. There are many reasons to think about Azerbaijan like the fact that Azerbaijan has a strategic location that connects Europe, Central Asia, and the Middle East. Azerbaijan also has a stable macroeconomic environment with ongoing investment in infrastructure, a young, educated workforce that can speak more than one language, and a growing startup ecosystem, especially in Baku.

 

Choosing the Right Business Structure

When starting a business in Azerbaijan, one of the first steps is selecting a legal structure. The most common options are:

• Limited Liability Company:  The most common form for small and medium-sized businesses (SMEs). It only needs one shareholder and one director, and it protects against limited liability.
• Joint Stock Company: Good for bigger businesses or projects that want to raise money by selling shares to the public or private investors.
• Branch or Representative Office: For foreign businesses that want to set up shop without starting a new legal entity.

 

What Are The Steps to Starting a Business in Azerbaijan?

 

This fast-changing country is becoming a popular place for business people who want to get into new markets at the crossroads of Europe and Asia. But before you start, you need to know the important steps for legally starting a business.

 

The Business Registration Process

 

Setting up a business in Azerbaijan is pretty easy and can usually be done in a few days. Here’s a simple outline:

1. Pick a name for your business and get the State Tax Service’s approval.
2. Write your charter (articles of association) and other founding papers.
3. If you need to, open a temporary bank account to get the money you need.
4. The State Tax Service is in charge of registering businesses, so you need to do that.
5. If you need one, get a Taxpayer Identification Number (TIN) and register for VAT.
6. If you want to hire people, you need to sign up for social insurance.

You can do most of these things online or with a local notary.

 

Banking and Taxation

 

It is necessary to open a business bank account in order to run your business. Azerbaijan has a number of local and international banks, and many of them offer services in English for business owners from other countries. Key taxes to know: 

• Corporate income tax: 20%
• Value Added Tax (VAT): 18% – If your annual turnover is above a certain level, you must register
• Personal income tax: If a natural person makes less than 2500 AZN (Azerbaijani Manat), they pay 14% tax on their income. If they make more than 2500 AZN, they pay 25% tax on the part of their income that is more than 2500 AZN.
• Social security contributions: Paid by both employer and employee

For small businesses with a lower turnover, there are also more simplified tax systems.

Hiring and Employment

 

There is an extremely competitive job market in Azerbaijan, especially in Baku, where you can find a lot of young professionals who speak English, Russian, and Turkish. Employment requirements include that written contracts of employment are required, the government sets the minimum wage, 40 hours a week is the standard work week and employers have to pay into the State Social Protection Fund. Foreigners need work permits, but some special economic zones and innovation hubs may not require them or may speed up the process.

 

Challenges to Consider

 

Azerbaijan is a great place to do business, but there are some things to keep in mind. Bureaucracy and rules can still be a problem, especially for people who are new and don’t know how things work. There might be a language barrier – even though English is becoming more popular, Azerbaijani and Russian are still the main languages used in business.  You navigate these problems more easily if you work with a local partner, consultant, or lawyer.

 

Government Support and Incentives

 

The government of Azerbaijan has worked hard to get both foreign and local investors to come to the country. This includes tax breaks and other benefits for businesses in certain technology and industrial parks, startup support programs, and programs to promote exports in sectors other than oil. Joining local chambers of commerce and trade groups can also help entrepreneurs by giving them a place to network and get help.