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(Last updated: 4 June 2008)
Business etiquette
Business tips
Azeribaijanis make extensive use of business cards, so bring plenty with you.
Azeris are very polite but also gregarious people who greet people with enthusiasm. Men use a handshake and kiss on the cheek, while women hug and kiss each other once on the left cheek, although many will shake hands with a foreigner. Males should wait and see if a woman extends her hand for a handshake.
Business dress is always conservative. Men generally wear suits or jackets and ties. Similarly, women should wear smart professional outfits. Shorts are not advisable at work or socially.
In formal situations, use the first name followed by an appropriate title: ‘hanum’ for women and ‘bey’ for men. It is polite to enquire about business, personal health, and family. Be prepared to accept tea and sweets before starting business proceedings.
Be aware that Azerbaijanis can be vague and noncommittal about specifics in business transactions, and may be reluctant to stick to tight schedules.
Most Azerbaijanis are bilingual (Russian and Azerbaijani) – it is recommended that you bring an interpreter.
In accordance with the new constitution. All legal documents and records will be in Azeri.
For Azeris the symbolic significance of a gift is more important than its monetary value. Gifts are appropriate for the most senior members of organisations and small gifts (eg. company pens, books, clocks) can be given to support staff and those who arrange meetings with key contacts. Whether at home or business, it is considered bad manners among Azeris to open a gift in the presence of the giver.
Please also note:
Bribery of foreign public officials is a crime. Australian individuals and companies can be prosecuted in Australia for bribing foreign officials when overseas. For more information, go to the Attorney General's Department on foreign bribery. |
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Tariffs and non-tariff barriers
Azerbaijan currently does not apply any import quotas. However, export of scrap metals has been prohibited since 2001 to ensure availability for domestic consumption. In addition, the Cabinet of Ministers’ special decision is required for the import and export of arms, nuclear materials, certain narcotics and psychotropic substances, chemical toxins, and certain scientific and technical information and technologies.
Azerbaijani licensing procedures are not in line with the GATT and the Agreement on Import Licensing Procedures. A Presidential Decree issued in 2002 significantly reduced a wide range of licensing requirements and introduced transparency in the licensing procedure, but many licensing requirements remain in place and in the context of the ongoing WTO accession negotiations new procedural rules for the issue of licenses must be introduced and the existing laws must be appropriately amended.
Government licensing is required for the import of tobacco, ethyl spirits and alcohol.
Import contracts concluded on chemicals, medicines and medical appliances must be registered with the Ministry of Health and Ministry of Agriculture. Export contracts must be registered if they relate to: wild animals and plants, medicine ingredients made from predatory animals and wild plants, information on energy, natural resources fields, and areas located within onshore and offshore; inventions, know-how, and results of scientific research, work of art and antiques; ozone depleting materials and goods.
(Source: www.adb.org)
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Setting up in Azerbaijan
Due to the changes by moving away from centralised state system, independent traders and small stores are prospering within the country. The activity has been developing until now through the intermediary of distributors, agents and new representation offices. The government is encouraging foreign investments.
Opening a Representative Office (RO)
An RO is the locally registered presence of a foreign company in Azerbaijan. As such it is considered for Azeri taxation, legal and currency purposes as ‘non-resident’. If an RO is to be strictly limited to providing representative services to its head office, the RO will not be subject to any profit taxes. However, the office will be expected to pay for all other applicable taxes such as personal income taxes and social fund payments on Azeri employees.
Opening a Branch
The branch form of business is not well developed in most countries of the former Soviet Union. Azerbaijan laws do not provide clear guidance on the registration and taxation requirements for branch offices. As a result, most foreign companies are currently operating as ROs.
(Source: PriceWaterhouseCoopers) |
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Taxation
Azerbaijan has adopted a ‘Destination VAT principle’ and VAT (currently set between 16 per cent and 21 per cent depending on the products) is payable subject to applicable customs regime on the declared value of the goods including assessed import duties and excise tax.
A 0.5 per cent customs clearance fee is applicable to all imports/exports with certain minor exceptions.
All the goods since July 1997, have been subject to an entry fee of 15 per cent. A limited number of goods is, however, exempted from the entrance fee (five per cent preferential tariff).
As for excise duties on wine and beer, the government levies 90 per cent excise duty, on other alcoholic drinks 65 per cent and on tobaccos 50 per cent.
Azerbaijan levies export duties at the rate of 70 per cent on certain products.
A wholly foreign owned Azeri legal entity (WOFOALE) is an Azeri legal entity with 100 per cent foreign ownership. For taxation, currency accounting, reporting, and other requirements, a WOFOALE is considered an Azeri legal entity.
The World Bank has ranked Azerbaijan 141/178 in terms of an overall ease of dealing with its taxation system, the Maldives followed by Singapore, Hong Kong, China and the UAE were the top ranked.
The Bank has estimated that it will take a company on average 952 hours per year to handle and to follow up on the 38 payments that are required of every company to comply with the Azeri taxation requirements. After accounting for various deductions and exemptions, the World Bank estimates at 40 per cent of commercial profit the amount of taxes payable by a company during a second year of operation.
Sources:
The Federation of International Trade Associations
PriceWaterhouseCoopers
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Banking and finance
Positive economic and social change in the Republic of Azerbaijan observed in recent years and the newly forming system of social relations has resulted in political stabilisation and economic growth. The state's bid to create a balanced market economy has promoted Azerbaijan's harmonious integration into 'the global economy' and significantly raised its international reputation.
A balanced monetary and credit policy and positive developments within the banking system should be particularly noted among the most important factors that have revived Azerbaijan's economy. Macro-economic financial stability and the steadiness of the national currency exchange rate have been achieved, inflation is optimal, and fruitful cooperation with the world's leading financial institutions has been embarked upon.
Reforming the banking sector has improved liquidity and profitability for the commercial banks and has repeatedly raised total banking assets in relation to GDP.
The considerable growth of the commercial banks' involvement in the domestic economy, substantial advances in banking reforms as well as other factors bear witness to the enormous economic improvement that has occurred in the country.
The International Bank of Azerbaijan (IBA) plays an important role in these processes. Transformed in 1992 into an independent finance and credit organisation from being the USSR's Foreign Economic Bank branch, the IBA's history tallies with that of Azerbaijan's independence. The IBA has successfully progressed as the national economy has developed and has become an effective financial institution, occupying a leading position.
(Source: GOLIATH Business Knowledge on Demand)
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