AZERBAIJAN Law and Practice Contributed by: Ismail Askerov and Amil Jafarguliyev, MGB Law Offices
8. Other Review/Approvals 8.1 Other Regimes
7.2 Criteria for National Security Review Azerbaijani legislation does not establish a foreign investment or national security review regime. In general, foreign investments are treated equally with national entities. Therefore, (i) no statutory criteria, (ii) no sector-specific triggers, (iii) no differentiated analy - sis for partnerships or joint ventures, (iv) no special rules for acquisitions by foreign governments or sov - ereign entities, and (v) no separate treatment for non- controlling minority investments are prescribed under Azerbaijani law. All investors are subject solely to the general legal framework governing business activities and the AML/ CFT rules noted in the foregoing. 7.3 Remedies and Commitments Because Azerbaijan does not operate a foreign invest - ment or national security review regime, no remedies, conditions or commitments may be imposed specifi - cally on foreign investors in connection with FDI. Any obligations imposed on investors arise under gen - eral legislative frameworks, including sector-specific licensing laws, AML/CFT compliance and other gener - ally applicable regulatory requirements. 7.4 National Security Review Enforcement There is no authority in Azerbaijan tasked with super - vising foreign investments or conducting national security reviews of FDI. No regulator has the statutory power to block, suspend or unwind a foreign invest - ment specifically on national security grounds. Generally, the Ministry of Economy acts as the co- ordinating authority for the development of trade and foreign investment initiatives, but it does not super - vise or review FDI transactions, nor does it exercise approval or enforcement powers in this context. As Azerbaijan does not require prior approval for foreign investments, there are no consequences for making an investment without prior governmental clearance. Foreign investors remain subject only to the ordinary regulatory framework, including general commercial law, tax law, licensing rules where appli - cable and AML/CFT oversight.
As Azerbaijan does not operate a dedicated FDI regime, foreign investors are subject only to the gen - erally applicable legal frameworks already outlined in the preceding sections, and no additional FDI-specific laws or screening mechanisms apply.
9. Tax 9.1 Taxation of Business Activities
Taxation in Azerbaijan is governed by the Tax Code of the Republic of Azerbaijan, in force since 1 January 2001. Under the Tax Code, non-resident legal enti - ties are required to establish a permanent establish - ment (PE) if they carry out entrepreneurial activities in Azerbaijan for at least 90 consecutive days within any 12-month period. Companies operating through a PE – as well as domestic companies – are subject to 20% profit tax, regardless of organisational form. Non-residents that do not create a PE are taxed through withholding at source at a rate of 10% on income derived from Azerbaijani sources, without deduction of expenses. VAT applies at a standard rate of 18% for individuals and entities that are voluntarily or mandatorily regis - tered. Mandatory VAT registration applies where tax - able transactions exceed AZN200,000 (approximately USD117,647) in any month of a 12-month period, or where the value of a single contract exceeds this threshold. 9.2 Withholding Taxes on Dividends, Interest, Etc Dividends and interest received by a foreign investor from Azerbaijani sources are subject to withholding tax. A non-resident operating in Azerbaijan is taxed at source at 5% of net profit transferred from its PE. The standard withholding tax rates are: • 5% on dividends; and • 10% on interest.
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