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This Legal Guide provides a detailed explanation of e-commerce laws in Azerbaijan, covering practical insights to the legal framework governing e-commerce, including online sales regulation, VAT, data protection, consumer rights, and related compliance requirements.
With the contribution of the global pandemic and globalization, online trade has become more popular all over the world, including Azerbaijan. Azerbaijani consumers are being exposed to and engaging with more and more foreign and transnational online shopping platforms, which in turn raises new questions regarding the rights and obligations of these platforms under Azerbaijani legislation. This article elaborates on the regulation of e-commerce under Azerbaijan’s legislation and outlines key points that should be kept in mind for foreign commerce platforms and businesses that target and/or have an Azerbaijani customer base.
It will first address the general legal framework for e-commerce in Azerbaijan and then touch upon the main obligations of the businesses/platforms engaged in e-trade under specific laws, including consumer protection, advertising and tax legislation.
Azerbaijan’s e-commerce legal framework may be divided into two legal sub-categories:
The general provisions regarding contract law are enshrined in Azerbaijan’s Civil Code, so any aspects that are not regulated by more specific laws shall conform to the Civil Code’s provisions regarding contract and civil law in general, covering the Azerbaijan e-commerce legal framework. Bearing this in mind, there are more specific laws regulating e-trade in Azerbaijan.
The main law governing e-commerce in Azerbaijan is the law “On electronic commerce” (hereinafter referred to as “E-commerce Law”), which enshrines the rules pertaining to the organization and realization of e-commerce, rights and duties of the parties and the liability for its breach.
Under the E-commerce Law, “electronic commerce” is defined as the “activities carried out through the use of information systems involving the sale and purchase of goods, the provision of services, and the performance of works (including, via the Internet, the downloading of electronic books, music, audio-visual materials, graphic images, virtual games, software, the placement of advertisements, and other similar works and services)”.
The definition provided above is wide, covering electronic services and digital goods, so not all of the requirements of the E-commerce Law are going to be applicable to the sale of physical goods (not consumed online) via the internet due to the nature of the business. Except for such specific provision, the E-commerce Law will cover foreign e-commerce service providers or foreign online sales platforms.
Moreover, e-commerce in certain fields, namely, financial, insurance and securities markets, has explicitly been excluded from the scope of application of the E-commerce Law. The E-commerce Law is also not applicable to the e-commerce that is organized and implemented in the Alat Free Economic Zone.
The E-commerce Law determines 3 parties to e-commerce relations, namely, seller (performer), buyer (customer), and electronic data interchange (EDI) service provider.
Any legal entity or individual entrepreneur duly registered in the state registry has the right to engage in e-commerce in Azerbaijan. If the activity of the entity/entrepreneur is a licensed activity in Azerbaijan, it will be required to obtain a license for operation in addition to the state registration of its business. All the information presented by the seller (performer) must either be in Azerbaijani or in another language agreed between the parties, also being clear and unambiguous.
The following types of information must be made available by the seller (performer) for the buyer (customer) and for the relevant state bodies:
The relevant authorities have the right to restrict the activity and operation of the seller (performer) in Azerbaijan’s territory if the seller does not make the above-given information accessible to the buyers (customers) and the relevant state authorities.
The main element of the online sales regulation is the contract for online sales, which shall be concluded in an e-document form. General requirements regarding the contract are that the contractual terms must be accurate and unambiguous in a way that a buyer (customer) without any specific knowledge can understand them; that the contract’s form must allow for familiarization and retention; and that the contract may include references to other e-documents, but all those documents must also be accessible during the validity period of the contract.
More specific requirements pertain to the information to be provided by the seller (performer) to the buyer (customer), such as:
When placing an order, the seller (performer) must immediately notify the buyer (customer) of receipt of the order. For one-time sales, the confirmation notification must include information on the address where the buyer (customer) can file a complaint.
For repeated sales, however, confirmation notification must include the following information:
The order is considered accepted when the buyer (customer) receives information about the confirmation of the order.
Regarding the buyer's cancellation right, the general rule is that the buyer has the right to cancel the contract within 7 (seven) business days without any fine or giving any reason for its cancellation, and the seller must return any payment made by the buyer within 7 (seven) days. However, E-commerce Law defines a certain category of contracts where the buyer does not have the right of cancellation:
Nevertheless, the seller (performer) may choose to stipulate a cancellation right for the buyer (customer) even in these contracts.
Unless otherwise agreed between the parties, the order must be fulfilled by the seller (performer) no later than 30 days from the date of its submission by the buyer (customer). If the seller (performer) cannot provide the ordered goods (works, services) due to their absence (lack of opportunity to provide them), he must inform the buyer (customer) about this and return the amount paid by him within 7 days. If the delivery of goods and services requires costs, it is prohibited to provide them without the buyer's (customer's) order.
Rules on Trade, Public Catering, Household and Other Types of Services in the Republic of Azerbaijan (2014) is a more specific regulation adopted by the Cabinet of Ministers under the Law on the Protection of Consumer Rights. These rules specify detailed provisions regarding various types of trade, services, household and public catering. Article 17 of the Rules specifically regulates the organization of the sale of goods from a distance or by samples, which applies to the sale of goods via the internet and equally to internet platforms servicing such purposes.
According to these Rules, a retail sale contract may be concluded on the basis of the consumer’s familiarity with a sample of the goods offered by the seller (including its description, booklet, catalogue of goods, etc.).
A contract for the sale and purchase of goods based on samples (distant sales) may be concluded through the direct expression of the parties’ will by means of mail, telegraph, teletype, telephone, electronic, or other forms of communication for the purchase of goods.
Under the Rules, in a contract for the sale and purchase of goods based on samples (regardless of the form in which it is concluded), the following shall be specified:
A contract for the sale of goods in such manner shall be deemed concluded from the moment the consumer is issued a cash receipt, sales receipt (or other document) confirming payment for the goods at the place of sale, or from the moment the consumer communicates, by any means of communication, their intention to purchase the goods on the terms proposed by the seller.
The E-commerce Law allows the use of promotional notifications to promote the business and boost sales. Nevertheless, there is a specific format that sellers (performers) need to conform to in using these notifications, namely that:
A more specific law - Law “On Advertisement” (hereinafter referred to as “Advertisement Law”) regulates order, production, advertising and consumption of the advertisement in Azerbaijan and applies to digital platform advertisements directed at Azerbaijani consumers.
Advertising should stimulate the choice of consumers of goods, not deceive them, not create a feeling of confusion, and not damage the market reputation of other goods produced by competitors that are identical to or substitute for the advertised goods. Advertising should be presented in the Azerbaijani language, and any foreign language text used in advertising should come after the text in Azerbaijani. Advertising should use only units of measurement permitted for use in the territory of the Republic of Azerbaijan, and the price of goods should be indicated in the currency of the Republic of Azerbaijan.
Specifically, goods that are subject to mandatory licensing or certification for their production (sale) may be advertised only if there are appropriate supporting documents. In this case, the number of the license and/or certificate, the date of issue and the name of the issuing body should be indicated in the advertisement.
There are also some prohibitions on the content of advertisements. Advertising must not incite open calls against the state, treason, terrorism, violence, aggression, actions that may harm national moral values, life and health of people, honour and dignity, religious and political beliefs, public security, or the environment. Distortion of state symbols and attributes of the Republic of Azerbaijan, cases contrary to ethical norms, should not be allowed in advertising. Moreover, advertising of narcotic drugs, psychotropic substances, pornography, tobacco and tobacco products is not allowed.
The Advertisement Law also establishes some requirements for advertisements of goods sold by the distance selling method, more specifically. Thus, the following information about the seller must be provided in advertisements for such products:
Another important element of the legal framework of e-commerce in Azerbaijan pertains to consumer protection. Consumers in Azerbaijan are granted certain rights and privileges by the Law on Protection of Consumer Rights (hereinafter “Consumer Rights Law”).
The seller (manufacturer) must provide the consumer with goods, the quality of which corresponds to the regulatory documents, the terms of the contract, as well as the information provided by the manufacturer (executor) about the goods (work, service). The manufacturer must guarantee the use of the goods for the intended purpose during the service life of the goods stipulated in the regulatory document or on the basis of the contract with the consumer, and in the absence of such a period, for 10 years.
If the consumer discovers a defect or counterfeit in the goods during the warranty period, he may demand that the seller:
The consumer's request to exchange goods must be fulfilled immediately if the goods are available, and if necessary, their quality must be checked within 14 days from the moment of the relevant request or replaced within a period agreed upon between the parties.
The manufactured goods must have a production, trademark, or geographical indication. The production mark indicates the name, affiliation, location of the manufacturer and the mark of standards (normative documents). The manufactured goods must comply with the production mark. The goods manufactured by a person engaged in entrepreneurial activity must have a label. The label must contain information about the number of the document granting the right to engage in entrepreneurial activity, the name of the body approving it, and, if necessary, its certification, and, for goods that meet special requirements, the number of state standards.
If non-food goods of the required quality are not suitable for the consumer due to their shape, size, design, colour, or cannot be used for their intended purpose for other reasons, the consumer has the right to exchange them for suitable goods at the place of purchase. The consumer may exercise this right if the goods of the required quality have not been used and their appearance, consumer properties, seal, label, as well as the goods or the cash receipt or other documents issued to them together with the goods, have been preserved.
Azerbaijan’s e-commerce legal framework is heavily affected by the consumer protectionism principles, conferring various rights for the consumers, such as:
No specific e-commerce-focused data protection regulations are applicable in Azerbaijan. General laws and provisions about the regulation and protection of information, and particularly the Law on the Protection of Personal Data apply to e-commerce operations, as well.
The main principle of personal data protection is the consent of persons (data subjects), which must be obtained in a verifiable way. Where the law requires mandatory collection, storage or registration of data, then no such consent is required. E.g. hotels and hospitality facilities shall register tourists at the state Registry. The Resolution No. 86 of the Cabinet of Ministers of the Republic of Azerbaijan, dated 17 March 2023, establishes the Regulations Governing the Electronic Registration of Individuals Using Accommodation Services in Hotels and other Lodging facilities, pursuant to Article 9.2 of the Law of the Republic of Azerbaijan “On Tourism.”
The said Regulation introduces a centralized digital registration mechanism through the Guest Registration Program administered by the State Tourism Agency of the Republic of Azerbaijan, requiring designated responsible persons within accommodation facilities to record and verify guest information at check-in and update such information at check-out. This Regulation emphasizes compliance with the Laws of the Republic of Azerbaijan “On Personal Data” and “On Commercial Secrets,” thereby imposing confidentiality and data protection obligations upon accommodation providers, public authorities, and other entities with access to the collected information.
Tax liabilities are always among the top concerns when it comes to the legal regulation of e-commerce in Azerbaijan.
It is important to determine when online businesses are subject to the Azerbaijani Tax Code when consumers are from Azerbaijan. For this purpose, the type of tax in question shall be clarified because taxation of e-commerce in Azerbaijan may imply different taxes at different instances.
Non-resident persons who do not have a permanent establishment in the Republic of Azerbaijan and who engage in the sale of goods, performance of works, or provision of services through electronic commerce for commercial purposes are subject to VAT in respect of those activities.
Such non-resident persons may operate either with VAT registration or without VAT registration in the Republic of Azerbaijan.
If a non-resident operates without VAT registration, taxation is carried out in accordance with Article 169 of the Tax Code.
Pursuant to Article 169.1 of the Tax Code, except for services related to booking hotel services and airline tickets outside the borders of the Republic of Azerbaijan, the provision of works and services in the form of electronic commerce by a non-resident who is not registered for VAT purposes shall be subject to VAT in the Republic of Azerbaijan. In relation to the sale of goods from a non-resident without VAT registration, VAT is deducted only during the import of the purchased goods by the buyer.
In the abovementioned cases, any person registered for VAT purposes shall be deemed a tax agent who is responsible for deducting VAT. Where the recipient of works or services supplied through electronic commerce is a person not registered with the tax authorities, the VAT calculated by the local payment service provider or by branches of foreign payment service providers operating in the Republic of Azerbaijan shall be paid to the state budget at the expense of the recipient’s funds.
On the other hand, if the tax agent is registered for VAT purposes, the calculated tax shall be paid upon submission of the VAT return for the month in which the transaction was carried out.
The time of the taxable transaction shall be considered the time when the payment is made.
An important point mentioned in Article 169 is that in cases where non-residents that do not have a permanent establishment in the Republic of Azerbaijan are registered for VAT purposes, the provisions of this article do not apply and registered non-residents pay VAT under the general procedure.
The general rule is that the supply of goods, performance of works, or provision of services for entrepreneurial purposes can only be considered taxable transactions for VAT purposes when they are conducted within the territory of the Republic of Azerbaijan.
For VAT purposes, the supply of goods shall be deemed to take place at the location where the goods are delivered. Where the terms of shipment provide for the dispatch or transportation of the goods, the place of supply shall be deemed to be the place where the dispatch or transportation of the goods commences.
However, where the supplier installs or assembles the goods, the place of supply shall be deemed to be the place where such goods are installed or assembled.
In relation to performance of works and provision of services, Article 168.1.5 of the Tax Code states that when works and services are supplied by electronic commerce sellers (suppliers), as well as when electronically organized lotteries (including virtual lotteries), sports betting games, other competitions and contests are conducted, the place where the works are performed or services are rendered shall be considered the place where the purchaser is located or registered. If the purchaser has a permanent establishment and the supplied works or services are directly related to such permanent establishment, then the location of the permanent establishment shall be considered the place where the service is rendered.
Consequently, non-residents registered for VAT purposes that supply goods through electronic commerce within the territory of the Republic of Azerbaijan, or that perform works or provide services to customers located in the Republic of Azerbaijan, are required to account for and pay VAT at the standard rate of 18 percent in accordance with the general VAT rules.
A separate registration procedure applies to non-residents deriving income from electronic commerce, which differs from the registration system applicable to residents. This is a newly introduced mechanism for the taxation of e-commerce in Azerbaijan, directed towards non-residents that have no legal presence (therefore, no tax identification number) in Azerbaijan.
The registration of such non-residents is carried out in accordance with the Rules approved by Resolution No. 387 of the Cabinet of Ministers dated 30 October 2023, titled “Rules on the electronic tax registration, re-registration and deregistration of a non-resident carrying out electronic commerce via an Internet information resource, registration as a VAT payer, submission of VAT returns and payment of VAT.” (E-tax registration Rules)
E-tax Registration Rules do not apply to non-residents operating through a permanent establishment in the Republic of Azerbaijan (Clause 1.2 of the Rule). Furthermore, their scope covers only non-residents acting as sellers (suppliers) in electronic commerce (Clause 1.4).
A non-resident must submit a tax declaration if any of the following conditions are met:
Pursuant to Clause 1.3 of the E-tax Registration Rules, non-residents carrying out electronic commerce are electronically registered with the tax authorities for VAT purposes. The VAT registration of the non-resident in the Republic of Azerbaijan becomes effective from the date of tax registration. From the date a non-resident commences activities as a person registered with the tax authorities in the Republic of Azerbaijan, it shall submit a VAT return through the Platform and shall pay the VAT to the state budget.
A non-resident, for the purpose of tax registration, shall submit the following information and documents through the Electronic Commerce Tax Administration Platform established within the Internet Tax Office of the State Tax Service (the Platform).
When registering the non-resident for tax purposes, the following information is entered into the platform (Clause 2.7):
In case any changes take place in the information specified in this clause, the taxpayer shall inform the tax authority within 20 working days.
In addition, electronic copies of the following supporting documents are attached via the Platform (Clause 2.8):
The E-tax Registration Rules also establish grounds for refusal of tax registration. Thus:
The non-resident has the right to pay tax in the currency selected in accordance with the information entered in the Platform (Azerbaijani manat, US dollar, euro, or pound sterling). Payments made in foreign currency are calculated in Azerbaijani manats at the official exchange rate of the Central Bank of the Republic of Azerbaijan on the day the payment is made.
A non-resident shall be deregistered in the following cases:
Except where the non-resident’s activities have been terminated, a non-resident deregistered on other grounds may be re-registered in the same manner, provided that it fulfills its previous obligations after re-registration.
It must be noted that the e-commerce framework in Azerbaijan is still developing, with no detailed case-law being available. A general Civil Code framework applies alongside specific laws on various aspects of e-commerce, such as the organization of e-commerce, distant sales, consumer protection, data protection and privacy rights, advertisement and taxation of e-commerce. Such rules and requirements apply with regard to specific elements of e-commerce and online sales, breach of which may lead to tax liabilities with sanctions and delay penalties, heavy administrative fines, in addition to the potential claims by consumers, consumer organizations and administrative authorities. Administrative penalties may be characterized as covering wide offences such as the “breach of law” (naming the law), together with more specific administrative offences that exist addressing a particular obligation under a specific law.
Certain breaches may lead to criminal offences, such as tax evasion, illegal entrepreneurship and consumer fraud.
Nothing in this publication shall be deemed as legal opinion or advice. For professional support, please contact us via [email protected]; +994 50 289 89 73
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