Autumn 1995 (3.3)
Doing Business in Azerbaijan
The Most Frequently Asked Questions
by Zaur Nazarly of Ernst & Young
Do you need a registered presence in order to import or export goods from Azerbaijan? What are the relevant laws regulating import and export? What banking and insurance facilities are available for foreign investors? Here are the answers to some of the most frequently asked questions about trade in Azerbaijan.
Do I need a registered presence in order to import goods?
It depends on how you plan to distribute them in Azerbaijan. If, for example, you are selling goods to an enterprise with a representation in Azerbaijan, then that enterprise can arrange to take delivery of the goods in Azerbaijan. The key is whether ownership is transferred outside Azerbaijan.
If your company is planning to sell or buy goods in Azerbaijan, however, you must have some form of registered presence. The tax law requires that you register a "permanent representation" within one month of commencing economic activity. You will also need a registered presence of some kind if you plan to open a bank account and import goods in your own name.
What are the relevant laws regulating imports and exports?
There have been several laws issued quite recently which seek to regulate import and export of goods to and from Azerbaijan. One of the most important is the decree of the Cabinet of Ministers No. 222: "On The Organization Of Foreign Trade in the Azerbaijan Republic" and the associated Statute which followed the Presidential Decree, "On The Liberalization Of Foreign Trade in the Azerbaijan Republic" (April 5,1994). The law "On Export Duty" took effect on April 1,1995, and sets export duties on strategic goods.
The Law, "On Amendments to th Law on Value Added Tax (VAT)", (February 2, 1995) empowered the Cabinet of Ministers to produce a list of good exempted from VAT on import. The Decree of the Cabinet of Ministers on April 24, 1995, concerns rates of customs duties on imports and exports, and the Decree of April 6, 1995, deals with VAT exemptions on import. Bonded warehouses are dealt with by the Statute: "On Bonded Warehouses" (November 16, 1994).
What are some typical rates of import and export duties?
Added value import duties range from 0% to 130%. Goods which are, in general, free of duty include meat, fish, milk and dairy products, edible fats and oils. However, packed tea (65/130%), coffee and other beverages, and vegetables (basically, 25/50%) are in general subject to import duties. Raw tobacco (10/20%), leather products (10/20%), and some garments, electrical appliances and cosmetics are also generally subject to duties. (The lower rates above apply to goods from countries with favorable bilateral trade agreements with Azerbaijan.)
Imports as contributions to the charter fund of a joint venture are exempt from import duty. Similarly, foreign employees of an enterprise with foreign investment may bring goods for their own use into Azerbaijan free of duty. An export duty of 70% is levied on certain strategic goods including petroleum, steel pipes, rolled aluminium, raw cotton and caviar.
Are barter transactions possible?
Yes. Goods which are not strategic commodities may be bartered and exported upon making a Customs Declaration after registration of the agreement at an authorized bank. However, in general, contracts for goods sold beyond the former Soviet Union countries must be registered in the Ministry of Foreign Economic Relations. The export of goods which are strategic commodities may only be carried out, in exceptional cases, with permission of the State Commission for the Supervision of Foreign Economic Relations.
Are there any free trade zones or bonded warehouses in Azerbaijan?
Not yet. However, the Cabinet of Ministers allows for the establishment of bonded warehouses with the consent of customs. Cargo may, in general, be stored for up to six months. A law on free trade zones is being prepared.
What banking facilities are available for letters of credit, guarantees, etc.?
A few Azeri banks offer facilities for transactions in foreign currency as well as issuing letters of credit and issuing guarantees. However, the amounts that banks deal with may be relatively small.
What insurance facilities are available?
In theory, there are about 40 types of insurance facilities provided by Azeri state and private insurance agencies. But few of these may be capable of handling significant risk. The State insurance company is Gosstrakh.
Which documents do I need to clear goods for import?
Importers are required to provide the customs authorities with a signed contract; a customs declaration specifying what is being imported; an invoice for the goods imported; permission from the relevant ministry or organization for the import of pesticides or medicines; permission from the Cabinet of Ministers for the import of nuclear materials; weapons and ammunition; a bill of lading; a certificate of origin; and a certificate of quality.
Please note that the above article is of a general nature and specific advice should be sought in all instances. Zaur Nazarly specializes in trade-related issues and company registration questions at Ernst & Young in Baku, which is located at 11 Mardanov Qardashlari Street (formerly Gogol Street), Apt. 32 (near the Visa and Registration Office). Tel: (99412) 98-33-85; 94-14-13. Fax: (99412) 98-33-85; 93-73-12; 98-64-82. e-mail: <firstname.lastname@example.org>.
Ernst & Young is the largest firm of professional advisers for all business needs in the CIS. The Baku office produces a regular Newsletter which is available free of charge to all clients.
From Azerbaijan International (3.3) Autumn 1995.
© Azerbaijan International 1995. All rights reserved.