Last updated: 24 Sep 2013

Taxation

Azerbaijan has adopted a ‘Destination VAT principle’ and VAT (currently set between 16 and 21 per cent, depending on the products) is payable 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.

Since July 1997, all goods have been subject to an entry fee of 15 per cent. A limited number of goods are, however, exempted from the entrance fee (five per cent preferential tariff).

Exise duties are 90 per cent on wine and beer, 65 per cent on other alcoholic beverages and 50 per cent on tobacco.

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^st of 178 countries for the overall ease of dealing with its taxation system. 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 necessary to comply with Azeri taxation requirements. After accounting for various deductions and exemptions, the World Bank estimates that 40 per cent of commercial profit is payable as tax by a company during a second year of operation.

(Sources: The Federation of International Trade Associations | PricewaterhouseCoopers)

Top Business Risks

• Bribery of Foreign Officials
• Tariffs and regulations
• Doing business in Azerbaijan

OECD Guidelines for Multinational Enterprises

Multinational Enterprises should be aware of the OECD Guidelines for Multinational Enterprises that provide voluntary principles and standards for responsible business behaviour in a variety of areas, consistent with applicable domestic laws. These Guidelines are endorsed and promoted by the Australian Government. For more information, go to the AusNCP website.

Extractive Industries Transparency Initiative

The Extractive Industries Transparency Initiative (EITI) is a voluntary mechanism which promotes and supports improved governance in resource-rich countries through the full publication and verification of company payments and government revenues from oil, gas, and mining.

The EITI is supported by governments, industry, and non-government organisations around the world. The Australian Government supports the EITI and encourages Australian companies operating internationally to comply with its recommendations.