Located between Asia and Europe and with important neighbors like Russia, Turkey, Armenia and Georgia, and sea exits to the Caspian Sea, Azerbaijan is a democratic republic, with a well-known and rich history, culture, legacy, natural resources like petroleum and gas, a state-recognized as one of the oldest in the world. The inheritance and the fast development made Azerbaijan a country with high potential and a stable economy which attracts investors worldwide interested in discovering forceful industries to generate money.
|Types of companies
Limited liability company
Joint stock company
Closed stock company
General or limited partnership
Minimum share capital for IBC
|No minimum share capital
Minimum number of shareholders for IBC
|Time frame for the incorporation (approx.)
|Corporate tax rate
|Dividend tax rate
|Number of double taxation treaties (approx.)
|Do you supply a registered address?
|Local director required
|Annual meeting required
|Is accounting/annual return required?
|Any tax exemptions available?
– for small and medium enterprise members and companies;
– for startups classified as a micro or small entreprises.
– small and medium enterprise members and companies enjoy several tax exemptions for seven years;
– startups classified as a micro or small enterprise are exempt from certain taxes for three years.
Among sectors with full growth potential, we mention agriculture, tourism, the petroleum industry, energy, and manufacturing, where entrepreneurs can establish their companies and activities. The main entities an investor, who wants to start a business in Azerbaijan, can choose from are limited liability companies (LLC), joint stock companies, or closed joint stock companies for which varied rules and regulations apply. The company formation process in Azerbaijan can be easily done and fully understood with suitable help from our specialists in company incorporation in Azerbaijan who are at your disposal with recommendations and support when drafting the documents for companyregistration.
Types of companies in Azerbaijan
Foreign investors who want to start a business in Azerbaijan can choose between the following legal entities:
- sole proprietorships which are suitable for small operations conducted by a single person;
- partnerships which can be general or limited and are also suitable for small business operations;
- private and public companies which are the most popular business forms in Azerbaijan;
- subsidiaries and branch offices which are the best way to set up operations as a foreign company in Azerbaijan.
Choosing the type of entity should be considered before starting the incorporation procedure. Our company formation agents in Azerbaijan can assist foreign entrepreneurs who want to set up businesses here and want to choose an appropriate business form.
The sole proprietorship in Azerbaijan
The sole trader or proprietorship is the simplest non-corporate legal entity that can be created by those who want to start a business in Azerbaijan. Its main characteristics are:
- it can be set up by a single entrepreneur;
- it is not subject to any share capital requirements;
- the person creating it will be responsible for the business’ obligations without limitations on his/her personal assets;
- it can complete specific activities, usually related to crafting or professional ones, such as accounting, consulting, etc.
Foreign citizens who want to start a business in Azerbaijan under this legal form must first obtain a residence permit.
Partnerships in Azerbaijan
The partnership is another non-corporate legal entity that can be used for conducting small operations in Azerbaijan. There are two types of partnerships that can be established here: the general and the limited one. The main resemblance between them is that they require a minimum number of two participants called partners.
In the case of the general partnership, both participants will have the same rights and obligations towards the business. In the case of the limited one, it must have at least one general partner and several limited ones. It must be noted that limited partners will only have specific rights and obligations connected to the activity of the business.
There are no share capital requirements when it comes to setting up a partnership in Azerbaijan, while its creation will rely on a partnership deed.
The partnership is not often employed by those who start a business in Azerbaijan, but for foreign investors, it can provide the great benefit of partnering with local entrepreneurs and thus getting to know the local market much faster.
Limited liability company in Azerbaijan
A limited liability company (LLC) in Azerbaijan is a preferred entity for businessmen who want to start a business in Azerbaijan and develop their activities. This form of company can be registered by at least one individual and it is suitable for small and medium-sized firms, where there is no need for a minimum share capital. We mention that the shares are not transferable in a free manner in a limited liability company in Azerbaijan.
Joint stock company in Azerbaijan
Investors can direct their attention to joint stock companies, available entities for larger businesses in Azerbaijan. This body can be incorporated by one or several persons and shares can be transferred freely and traded on the public market. The stockholders of a joint stock company in Azerbaijan are responsible for the level of their contributions regarding the firm’s commitments and also debts. A board of directors and a supervisory council must be established when starting a business in Azerbaijan and a joint stock company is registered.
Closed joint stock company in Azerbaijan
In a closed joint stock company in Azerbaijan, the stockholders have limited liability, but the capital divided into shares is common. It is good to know that a closed joint stock company in Azerbaijan cannot hand out transferable shares, compared to the open JSC where this procedure is available. Besides the types of entities mentioned above, foreign investors can also establish branches and subsidiaries in Azerbaijan, as extensions of the parent companies.
The subsidiary and the branch for foreign companies operating in Azerbaijan
Foreign companies seeking to set up operations in Azerbaijan can choose between a branch office and a subsidiary. Both business forms have their own advantages.
The subsidiary is treated as any other domestic company as in most cases it will take the form of a private limited liability company. Also, it will be allowed to complete the same activities as the parent company, additionally to the ones that suit the Azeri market the most.
The branch office will be limited to completing the same activities as the parent company as it is treated as a satellite business. This is one of the main reasons it is usually employed by financial companies operating in Azerbaijan.
For detailed information on how to start a business in Azerbaijan as a foreign company, you can rely on our local representatives.
Company formation steps in Azerbaijan
Just like in any other country, the company setup process in Azerbaijan must be completed by following a few simple steps. These are:
- choosing and reserving the company name which is subject to a few requirements;
- drafting the company’s statutory documents (for sole traders this step does not apply);
- filing the documents with the local office of the Trade Register in Azerbaijan;
- registering for taxation, VAT and social security contributions with the relevant authorities;
- applying for the necessary business licenses in accordance with the activities to be completed.
If you want to start a business in Azerbaijan it is quite simple to incorporate the selected legal entity with the help of our specialists who can prepare all documents necessary.
Documents for starting a business in Azerbaijan
When starting a company in Azerbaijan, an investor must prepare the following documents and requirements:
• articles of association;
• details about the name and the business address of the company;
• a notarized lease contract if any;
• a bank contract which provides details about the account;
• VAT certificate.
The registration certificate of a company in Azerbaijan can be issued in about one week, and then the special licenses and permits applications must be submitted before starting the activities. A company seal is also necessary for all sorts of contracts and agreements, in order to make them reliable and legal. Please consider that if you want to incorporate a company in Azerbaijan from overseas, a representative with a power of attorney must be appointed before drafting the documents for registration.
Credit rating for Azerbaijan
Generally, a credit rating is utilized by sovereign wealth funds, pension funds, and other investment vehicles to measure the creditworthiness of Azerbaijan, this way exercising a great impact on the borrowing expenses of the country. Standard & Poor’s credit rating for Azerbaijan was set at BB+; Moody’s credit rating for the country was established at Ba2 with a stable outlook and Fitch’s credit rating for Azerbaijan was last declared at BB+.
The international rating agency Standard & Poor’s has last set the long-term and short-term sovereign credit rating of Azerbaijan in foreign and domestic currency at BB+/BB. The sovereign credit rating of the country remained the same because of the strong fiscal position of Azerbaijan and mainly because of the availability of foreign currency reserves of the State Oil Fund, as declared by the Finance Ministry in July of 2017. Our company registration consultants in Azerbaijan can offer further details on this subject.
Moody’s Investors Service last rated Azerbaijan at Ba2. This stable viewpoint mirrors Moody’s projection that the additional direct debt growth and the contingent obligations will level off by 2020. The stable viewpoint also presumes that, in time, the local authorities will manage the fiscal policy and its balance sheet, as well as the assets of its sovereign wealth fund in a manner which will develop the flexibility and capability to buffer efficiently the impact of lower-for-longer oil costs and the current decline of oil production. Our Azerbaijan company formation agents can provide further details on this credit rating.
Fitch Ratings has set Azerbaijan’s long-term foreign and local currency issuer default ratings (IDR) at BB+. The issue rating on the country’s senior unsecured foreign and local currency debt was also established at BB+. The country’s BB+ ratings mirror a strong external balance sheet and a low government debt, curtailing from accumulated surpluses of high oil profit, with great dependence on hydrocarbons.
Foreign direct investments (FDIs) in Azerbaijan
According to recent statistics:
- FDI inflows in Azerbaijan reached 1,5 billion USD in 2019;
- the FDI inward stock for 2019 was assessed at 32,2 billion USD;
- Azerbaijan ranks 34th in the World Bank’s 2020 Doing Business Report;
- recently, a new free trade zone located 65 km from Baku and meant to improve foreign trade was created.
If you want to start a business in Azerbaijan and need guidance you can rely on our company formation services in Baku and other large cities of the country.
Frequently asked questions
Azerbaijan represents a country with a rising economy that attracts many foreign investors who are looking to diversify their businesses. As follows, our company formation consultants in Azerbaijan present the most frequently asked questions on the company formation procedures in this country.
1. Why invest in Azerbaijan?
The local government has made important efforts to attract foreign investments in Azerbaijan oil and gas sector, which has increased since 1995. The total foreign trade in 2014 was around USD 31 billion, out of which the imports stood at approximately USD 9.2 billion and the exports at USD 21.8 billion.
2. How do you set up a company in Azerbaijan?
It is a frequently asked question received by our Azerbaijan company formation agents. To start doing business in this country, it is not necessary to have a joint partner, even though there are certain financial and business benefits that such a partner can bring.
3. What are the legal entities that can be opened in this country?
The legal entities which can be opened in Azerbaijan are:
• the joint venture;
• the entirely owned local subsidiary;
• the representative office of a foreign parent company.
Our company registration advisors in Azerbaijan can assist you to open these types of companies in this country.
4. Can I open a branch in Azerbaijan?
Branch offices in which the local company effectuates activities on its own are allowed, however, the branch is mainly treated as a local subsidiary.
5. What needs to be done before registering a legal entity here?
In Azerbaijan, the following procedures have to be effectuated before starting a company:
• set up a legal address and obtain the legal confirmation of the lease;
• notarizing the company documents;
• acquitting the minimum required capital.
6. How to get a legal address in Azerbaijan?
According to the local legislation, the location of the company is recognized as the address of its permanent office. The data about the location is then entered in the Unified State Register of Companies.
7. Who can be a director of a company?
The director of a legal entity in Azerbaijan can be a local citizen or a foreigner.
8. Are work permits necessary in Azerbaijan?
If a legal entity intends to hire foreign specialists, it will need permission for them to work in the country.
9. How long does it take for a work permit to be issued?
A work permit in Azerbaijan can be issued in around 20 days and a state fee has to be acquitted.
10. What happens after the company is set up?
After a company is being set up, a few months after the company registration in Azerbaijan, it is required to get in touch with the Fiscal Administration bodies to declare the profits of the entity.
Our specialists in company formation in Azerbaijan are at your disposal with information and guidance in each step of the company incorporation, therefore, we invite you to contact our team.