Investment guide

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Investment climate

Azerbaijan’s average annual economic growth rate was about 10% over the past few years. In 2009, despite the global financial crisis, Azerbaijan’s rapidly developing economy grew by 9.4% and has continued its rapid expansion. As of 2014, almost 80% of the economy had been privatized. In 2015, the stock of foreign direct investment (FDI) in the Azerbaijani economy amounted from $7-7.5 billion with investment in the oil and natural gas sector constituting 88.5% of the total amount. The World Bank reports on per capita FDI inflows rank Azerbaijan near the top among CIS and Eastern European countries. According to the WB, in 2004, private sector investments were accounting for 90.7% of total investments, and foreign investment accounted for 73.1%. However, since 2005 domestic public investments have gained pace, while private and foreign investments have been decreasing.

Foreign investment

Definition of a foreign investor According to the Law on Protection of Foreign Investment, the following entities and individuals are considered as foreign investors in Azerbaijan:

• Foreign legal persons;

• Foreign citizens, stateless persons, and citizens of Azerbaijan with a permanent residence abroad subject to registration in their country of residence for engaging in economic activity;

• Foreign states;

• International organizations.

The General regime for foreign investments Foreign investments are generally defined as all types of tangible and intangible rights, including intellectual property rights, contributed by foreign investors to entrepreneurial and other types of activities for the purpose of making a profit. They include, among other things, participation interest and shareholding in Azerbaijani companies, acquisition of immovable property (except land plot), acquisition of securities and other assets liable for purchase by foreign investors under Azerbaijani law, and contractual agreements with Azerbaijani individuals and legal entities that provide for other forms of foreign investments. Azerbaijani law is evolving in accordance with the government’s strategic goal of creating a welcoming environment for foreign businesses. Foreign investments are thus protected by guarantees provided under law. These include:

• Guarantee against deterioration of legislation: a foreign investor is assured that the laws governing its investment will remain in force for a period of 10 years from the initial investment.

• Guarantee against nationalization and requisition: foreign investors are guaranteed immediate, adequate and effective compensation in a case of nationalization and requisition. Compensation should be commensurate to the amount of the investment at the time of nationalization or requisition, payable in foreign currency and freely transferable abroad.

• Guarantee of compensation of damages: foreign investors are entitled to compensation for damages, including compensations for lost profits resulting illegal acts of state authorities;

• Guarantee of profit repatriation: foreign investors are entitled to repatriate profits derived from foreign investments subject to applicable taxes and duties.

In the light of above, the President signed an order dated 18.01.2018 on promoting investment activities and protection of rights of foreign investors in Azerbaijan. The very point of the order is to pass a new law on investment activity covering state guarantee to investor's rights, rules on alternative dispute resolution and indemnifying damage. The government is expected to continue its policy of supporting privately held enterprises, including those with foreign capital and owned or operated by foreign nationals. There are no general trade barriers or embargos for the import of goods to Azerbaijan. Exports are not subject to customs duties or restrictions. Regulations exist only for the export of strategic commodities such as electricity, petrol, cotton and non- ferrous metals.

Registration of foreign investors in Azerbaijan

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, etc.). As a part of the ongoing business law reforms, a “One Stop Shop” principle was introduced effective 1 January 2008. The registration procedures involving several governmental bodies (Ministry of Justice, Ministry of Taxes, Social Insurance Fund and Statistics Committee) have been eliminated, obligating businesses to register only with the Ministry of Taxes. The established period for state registration with the Ministry is officially set at not later than two days for commercial legal entities. Registration of non-commercial legal organizations (e.s public associations) is conducted by the Ministry of Justice.