Azerbaijan - Openness to and Restriction on Foreign InvestmentAzerbaijan - Foreign Investment
Attitude toward Foreign Direct Investment
Over the past few years, the Government of Azerbaijan has worked to integrate the country more fully into the global economic marketplace, attract increased foreign investment, diversify its economy, and maintain positive growth. Attracting foreign direct investment to support economic diversification continues to be the stated goal of President Aliyev and his government. Less than expected oil production over the past several years coupled with continued low world oil prices – and their concomitant impact on budget revenues – prompted the Azerbaijani government to pursue more comprehensive reforms. In February 2016, the government introduced amendments to the Tax Code, which provides tax benefits to legal and physical entities engaged in certain investment activities. With these amendments, these physical and legal entities can be exempt from paying taxes for 50 percent of their revenues and incomes, respectively, for up to seven years. Moreover, the government approved amendments to the law On Customs Tariff, under which legal and physical entities can be exempted from customs duties and value-added tax (VAT) on import of capital equipment for up to seven years. In addition, any organization or industrial or technology park operator who plans to import capital equipment in certain sectors may apply for permission to construct production facilities, or conduct research, test, and development activities.
Other Investment Policy Reviews
Azerbaijan has not conducted an Organization for Economic Cooperation and Development (OECD) investment policy review in the past three years. Over the past few years, Azerbaijan has made gradual progress in the World Bank’s, Doing Business Report: http://www.doingbusiness.org/data/exploreeconomies/azerbaijan
Laws/Regulations on Foreign Direct Investment
Foreign investment in Azerbaijan is regulated by a number of international treaties and agreements, as well as by domestic legislation. These include the Bilateral Investment Treaty (BIT) between the United States and the Government of the Republic of Azerbaijan, which encourages the reciprocal protection of investment, dated August 1, 1997; the Azerbaijan-EC Cooperation Agreement dated April 22, 1996; Law on Protection of Foreign Investment dated January 15, 1992 (the Foreign Investment Law); the Law on Investment Activity dated January 13, 1995 (the Investment Activity Law); the Law on Investment Funds dated October 22, 2010 (the Investment Funds Law); the Law On Privatization of State Property dated May 16, 2000 (the Privatization Law); and the Second Program for Privatization of State Property of the Republic of Azerbaijan dated August 10, 2002 (the Second Privatization Program), as well as laws regulating specific sectors of the Azerbaijani economy. This legislation permits foreign direct investment in any activity in which a national investor may also invest, unless otherwise prohibited by law. Azerbaijani law is evolving in accordance with the government’s strategic goal of creating a welcoming environment for foreign businesses; as such, foreign investments are protected by guarantees provided under Azerbaijani law. The website of Azerbaijan’s National Council, http://meclis.gov.az/, lists all laws of the Republic of Azerbaijan, but it is only available in Azerbaijani.
All companies operating in Azerbaijan are required to be registered. Without formal registration, a company may not do business in Azerbaijan (e.g., maintain a bank account, clear goods through customs). As part of the ongoing business law reforms, a “One Window” principle was introduced on January 1, 2008. The registration procedures involving several governmental bodies (Ministry of Justice, Social Insurance Fund, and State Statistics Committee) have been eliminated; therefore businesses only have to register with the Ministry of Taxes. The established period for state registration with the Ministry of Taxes is officially set at three days for commercial organizations. Online registration is available at http://taxes.gov.az/modul.php?lang=_eng&name=birpencere&bolme=registration and works adequately.
Azerbaijan ranks 63rd in Ease of Doing Business and 7th in Starting a Business out of 189 countries in The World Bank’s Doing Business Report for 2015 (rankings are available at: http://www.doingbusiness.org/rankings).
President Aliyev has targeted the following sectors for attracting investment to help diversify the economy away from oil and gas production: agriculture, transportation, tourism, and information/communication technology.
The Azerbaijan Export and Investment Promotion Foundation (AZPROMO) is a joint public-private-initiative, established by the Ministry of Economy of Azerbaijan in 2003 with the goal of contributing to economic development and diversification by attracting foreign investment in non-oil sectors of the economy and stimulating expansion of Azerbaijan's exports of non-oil goods to overseas markets. AZPROMO has been involved in a number of business forums and training events both in Azerbaijan and internationally. According to a Cabinet of Ministers decision, small enterprises in Azerbaijan are defined as those with less than 25 employees and medium enterprises as those with less than 125 employees.
Azerbaijan Economic Development and Investment Law