Additional measures are being taken to improve the investment promotion mechanism in Azerbaijan. As part of these measures, on December 20, 2022, the Decree of the President of the Republic of Azerbaijan on the improvement of the investment promotion mechanism was adopted. Thus, according to this Decree, new rules related to investment were defined, changes were made to the existing legislative acts and a new list was approved, reflecting the minimum amount of economic activities, areas, and zones where the investment is carried out, as well as the size of the investment project.
1) Firstly, it was determined by this Decree that the investment promotion certificate is issued to legal entities and individual entrepreneurs who present the following projects within 3 years from January 1, 2023:
- projects to be implemented in industrial districts and agricultural parks;
- projects to be implemented in tourism and recreation zones;
- Projects to be implemented in other cities and regions, except Baku, Sumgayit, Ganja cities, Absheron region, and territories freed from occupation;
- Strategic investment projects to be implemented in the directions determined by the President of the Republic of Azerbaijan;
However, legal entities and public legal entities created by the state in which 30 (thirty) percent or more of their shares (shares) directly or indirectly owned by the state are not issued investment promotion documents for the above-mentioned projects.
It should also be noted that the investment document is an incentive (also known as Investment Promotion Certificate) which provides the basis for obtaining the concessions and exemptions specified in the Tax Code of the Republic of Azerbaijan and the Law of the Republic of Azerbaijan "On Customs Tariff". Entrepreneurs who obtain this document pay profit and income tax with a 50% discount for 7 years and are exempted from property tax for the respective property, and land tax for the land for a period of 7 years, and the import of machinery, technological equipment, and devices are exempt from VAT based on the relevant confirmation document. and are exempted from customs duties for 7 years.
2) Secondly, by this Decree, the following changes were made in the "Rule of Issuance of Investment Promotion Document".
By adding part 3-1 to those Rules, additional criteria for receiving the investment promotion document were determined. First, according to those criteria, the minimum investment amount is Baku (except Rasulzade settlement of Binagadi district, Narimanov, Nasimi districts, Keshla settlement of Nizami district, Badamdar and Bibiheybat settlements of Sabail district, Ahmadli settlement of Khatai district and Yasamal district), Sumgait, Ganja cities and Absheron district. 5 (five) million manats for the projects to be implemented, and 3 (three) million manats for the projects to be implemented in other areas, and the second one should be by the directions determined by the President of the Republic of Azerbaijan.
In addition, part 5-1 of the mentioned Regulations was given a new edition, and the concept of "economic activity area for the construction of tourism service facilities included in the Master Development Plans within the limits of tourism and recreation zones" mentioned in the previous edition was further clarified and "On the organization of recreation and entertainment" activity", "Providing services in hotels and other means of accommodation", "Providing services in small cottages and other places for short stay", as well as "Providing services in camping sites, motorhomes, and motorhome parking lots" are defined as areas of economic activity. At the same time, in the previous edition, it was noted that the opinion of the State Tourism Agency of the Republic of Azerbaijan was received about the compliance of the zones with the General development plans, the classification of tourism services, and the proportional distribution of tourism services (variety of products) at the regional level by Articles 13.2.2 and 19.7 of the Law of the Republic of Azerbaijan "On Licenses and Permits" by the Ministry of Economy in these areas based on the "one-stop shop" principle. However, the new edition does not envisage regulation based on the one-stop-shop principle.
Finally, adding to the 7th part of the Rules, it is noted that, in addition to meeting the required criteria and correctly submitting the documents, the entrepreneur should not have overdue obligations for taxes and other state payments when considering the application for obtaining an investment incentive document.
3) Another amendment was made to paragraph 2.6 of the "Regulation on Issuance of a Confirmation Document for the Import of Machinery, Technological Equipment and Devices to Legal Entities and Individual Entrepreneurs Having Received an Investment Incentive". So, previously, when considering the application for the issuance of a confirmation document, the fact that the equipment, technological equipment, and devices intended to be imported were directly related to the organization of production, work and service, and the investment project (business plan) submitted to receive the investment promotion document, but according to the amendment, their compliance with the list of goods positions for which the certification document is examined.
4) Finally, Decree No. 878 dated April 20, 2016 "On the approval of the areas of economic activity in which the investment is carried out, the minimum amount related to the volume of the investment project and the administrative-territorial units in which it will be implemented" was terminated and the Decree of the President of the Republic of Azerbaijan on December 20, 2022, was adopted. By the above-mentioned Decree, the list of economic activity areas, territories, and zones in which investment is carried out and the minimum amount of the investment project volume was approved.
According to the previous list, the administrative-territorial units where the investment activity was carried out were defined as 5 regions. Each of these regions included cities and regions located in the Republic of Azerbaijan. In the new list, the places where the investment activity will be carried out are divided into 4 parts. These parts include industrial districts, agricultural parks, tourism and recreation areas, and relevant areas (Baku, Sumgait, Ganja cities, Absheron region, and other cities and regions except the liberated territories).
In addition, in the new list, relevant changes have been made in a minimal amount regarding the areas of economic activity in which the investment is carried out and the volume of the investment project. The updated Criteria for obtaining Investment Promotion Document in Azerbaijan is attached to this article and may be downloaded.
For obtaining investment promotion document (Investment Promotion Certificate) in Azerbaijan and utlizing tax exemptions benefits, please contact us via:
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