Incentives for Foreign Investment
in Azerbaijan
5 November 2013
TEAS Azerbaijan Business
Forum London
James E Hogan
Managing Partner
Salans FMC SNR Denton
Baku Office
Azerbaijan Investment Policy
• Very open to foreign investment 1992 to date
• Overall an excellent track record for respecting the stability and sanctity
of contracts
• Avoiding disputes, distractions, costly delays
• Recent trends include the implementation of special economic zones
• Focus is on diversifying the economy away from oil and gas exploration
and production, while exploiting the competitive advantages inherent in
the Azerbaijani economy
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2
Law on Special Economic Zones, 14 April 2009
• Provides a legal basis and framework for the establishment and
operation of territorial zones
• To accelerate development of entrepreneurial activity in connection with
the production of highly competitive goods and the rendering of highly
competitive services using modern technology
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Simplified customs regime
Customs duties exemptions
Simplified income tax
Exemption from most other taxes
• Ineligible Activities:
• Extraction, production, processing of oil, petroleum production, natural gas,
precious metals and mineral resources
• Television-radio broadcasting activity
• Production of alcoholic beverages and tobacco products
• Production, storage and sale of goods prohibited or restricted for civil turnover
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Special Economic Zones - Benefits
• Customs
• Simplified customs regime
• Indefinite exemption from import duties upon import into and
export from zone (unless imported into the customs territory of
Azerbaijan)
• Exception: excised goods
• Possibility of duty free temporary import for finishing, repair,
display for goods produced with within the zone
• No time limits for re-export from SEZ
• Tax
• A simplified tax regime applies
• Profits Tax assessed on basis of 0.5% of gross turnover, payable
quarterly
• No reductions in personal income tax, social contributions
• Employment Law/Currency Regulation
• No special benefits
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4
Recent Presidential Decrees
Industrial Parks
• Presidential Decree No. 548 of 21 December 2011 On
the Establishment of the Sumgait Chemical Industrial
Park
• Presidential Decree of 28 December 2011 On the
Establishment of the Balakhani Industrial Park in Baku
• Exemption from import VAT for technical equipment for 7
years
• Exemption from property tax for 7 years
• Exemption from a land tax for 7 years
• Exemption from income tax for 7 years
• Not yet known whether OGPC will have a similar tax and
customs regime established
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5
Information and Communication Technologies
2013 was declared the Year of Information and Communication
Technologies in Azerbaijan (Presidential Order No. 2815 of 2013)
• The State Fund for the Development of Information Technologies
(Presidential Decree No. 2095 of 2012)
• invests in the charter capital of companies involved in ICT (both local and
foreign owned);
• provides subsidised loans via local banks;
• providing grants for startups
• A High Technology Park was established in Sumgait by Presidential
Decree No. 736 (2013)
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High Technology Park - Benefits
For a period of 7 years following registration as a resident of a
technological park, legal entities and entrepreneurs benefit from:
• no income tax on any income (other than income from employment)
generated from activities in the technological park (Article 102.1.21, Tax
Code)
• no profits tax on any income generated from activities in the technology
park (Article 106.1.13, Tax Code)
• no import VAT upon importation of machinery, technological equipment
and plants for the construction of production facilities within such parks or
for research and development work (Article 164.1.16, Tax Code)
• no property tax in respect of property located in the technology park
(Article 199.7, Tax Code)
• no land tax in respect of on land in the technology park (Article 207.2,
Tax Code).
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Thank you
James E. Hogan
Managing Partner
Salans FMC SNR Denton
Hyatt International Center
Hyatt Tower 2, 8 Izmir Street
Baku AZ1065, Azerbaijan
T +994 12 490 7565
F +994 12 497 1057
james.hogan@dentons.com
dentons.com
© 2013 Dentons
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