Azerbaijan, a rapidly developing state in the South Caucasus, has been actively working in recent years to improve its investment climate. Company registration in Azerbaijan is available to both local citizens and foreign entrepreneurs.
Company Registration Procedure
Choosing a Legal Form
The most popular form is the LLC (Limited Liability Company), though JSCs (Joint Stock Companies), branches, and representative offices of foreign companies are also available.
Preparation of Founding Documents
The main document is the company charter. Founders’ resolutions, passport copies, legal address, and proof of share capital payment (if required) are also necessary.
Registration with the Ministry of Taxes of Azerbaijan
Registration is carried out through the online system or at ASAN xidmət centers. The process usually takes 1–3 business days.
Obtaining a Taxpayer Identification Number (VOEN)
This is the company’s unique ID number required for conducting business.
Opening a Bank Account
After Company registration in Azerbaijan, the Director opens a settlement account in one of Azerbaijan’s banks.
Registration with Statistics and Social Insurance Authorities
This is mandatory for accounting and paying social contributions for employees.
Corporate Taxation in Azerbaijan
The tax system in Azerbaijan is considered one of the strictest in the South Caucasus, with a strong focus on transparency and control, particularly in tax reporting and financial operations.
1. Corporate Income Tax – 20%
All legal entities registered in Azerbaijan must pay a flat income tax of 20% on net profit (income minus justified expenses).
Key points:
- Returns are filed quarterly, with an annual settlement.
- Loss-making companies must still file “zero” returns.
- Foreign entities with a permanent establishment in Azerbaijan are also subject to this tax.
2. Value Added Tax (VAT) – 18%
VAT is one of the main sources of revenue in Azerbaijan and applies to most goods and services, including imports.
Key features:
- Mandatory registration if annual turnover exceeds 200,000 AZN (approx. $117,000).
- Flat rate: 18%, with no reduced rates.
- Monthly VAT reporting is mandatory.
- Exports and certain services may qualify for 0% VAT, but require proper documentation and audits.
3. Personal Income Tax – 14% to 25%
Applies to salaries and other income of individuals:
- Income up to 2,500 AZN/month is taxed at 14%.
- Income above this threshold is taxed at 25%.
- Employers act as tax agents, withholding and remitting tax on employees’ behalf.
4. Social Contributions – Up to 25% from Employer + 3% from Employee
A significant burden lies on the payroll:
- Employers pay up to 25% depending on sector and type of contract.
- Employees pay 3% from their wages.
- Contributions go to the Social Insurance Fund, Mandatory Health Insurance Fund, and Pension Fund.
5. Other Taxes and Fees
In addition to the main taxes:
- Property Tax – on buildings, facilities, and equipment (from 1% and up).
- Road Tax – on vehicle owners, including commercial transport.
- Excise Duties – on alcohol, tobacco, fuel, etc.
- State Fees – for registration of rights, licenses, and permits.
6. Strict Tax Control and Penalties
The Azerbaijani tax authority has broad powers to conduct inspections. High scrutiny applies to:
- VAT reporting
- Payroll taxes
- Foreign transactions (to prevent profit shifting)
Violations can result in:
- Fines for late reporting
- Penalties for late payments
- Bank account freezes until issues are resolved
Companies are required to keep accounting records for at least 5 years, and transactions over 15,000 AZN must go through the banking system.
Incentives for IT Companies
Azerbaijan offers favorable conditions for tech businesses. Since January 1, 2023, residents of technology parks and companies engaged in system integration or software development benefit from:
- 10-year exemptions from profit tax, property tax, land tax, and dividend tax.
- 0% VAT on imported equipment and technologies used in R&D and innovation projects.
Comparison: Azerbaijan vs. Kyrgyzstan for Business Registration
Advantages of Registering a Company in Kyrgyzstan Compared to Azerbaijan
Now let’s compare with Kyrgyzstan based on key criteria — the registration process, taxes, and business environment.
1. Registration Procedure: Kyrgyzstan is Simpler and Faster
In Kyrgyzstan, company registration takes 1 day — it is one of the fastest processes in the region. Everything can be done through the Ministry of Justice’s online portal. Notarization of the founding documents is not required, and the charter is prepared in a standard format.
Conclusion: Kyrgyzstan wins in terms of speed and simplicity of registration.
2. Taxes: Kyrgyzstan is Significantly More Advantageous
| Indicator | Azerbaijan | Kyrgyzstan |
|---|---|---|
| Corporate income tax | 20% | 10% |
| VAT | 18% | 12% |
| Employer’s social contributions | Up to 25% | 17.25% (including health insurance fund) |
| Simplified taxation system | Only for microbusiness | Available for small and medium businesses — rates from 1% to 6% |
Kyrgyzstan also actively uses various tax regimes, including a patent-based system and unified tax, which allow small businesses to pay fixed or minimal taxes without burdensome reporting.
Conclusion: Registering a company in Azerbaijan may be beneficial for IT companies. Azerbaijan offers benefits that allow for a 0% rate, while in Kyrgyzstan, it is possible to obtain a 1% rate in the High Technology Park — but without turnover limits. In other areas, Kyrgyzstan is the undisputed leader in terms of tax burden. Small businesses here can pay less in taxes than in Uzbekistan and several times less than in Azerbaijan.
3. Conditions for Doing Business
There is no currency control in Kyrgyzstan, and the regulatory requirements are much more flexible. The state actively supports entrepreneurs — from startup grants to export support programs. The country also operates a “one-stop shop” system for investors.
Why Kyrgyzstan is the Best Choice for Business
Although Azerbaijan offers stability and more developed infrastructure, Kyrgyzstan wins in all key areas if you are a small or medium-sized entrepreneur:
- Registration is simpler and faster, one can open LLC in Kyrgyzstan remotely with no visit to country.
- Taxes are significantly lower — especially when using the simplified system
- The government creates more flexible and convenient conditions for starting and developing a business