How to Open an Office in Azerbaijan
March 2005
Inside this report:
- Steps to Establishing an Office (JSC, GP, LP, LLC, ALC)
- The List of Documents for Submission to the Ministry of Justice
- Selling Factors/Techniques
- Advertising and Trade Promotion
- Pricing Product
- Price Construct to Baku and Customs Clearance
- Sales Service/Customer Support
- Selected Cellular Operators in Azerbaijan
- Need for a Local Attorney
- Selected List of Consulting Companies and Law Firms with Offices in Azerbaijan
- Selected List of Internet Providers in Azerbaijan
Prepared by Bakhtiyar I. Mamedov, BISNIS Representative in Azerbaijan
According to the Law on Protection of Foreign Investments, foreign investors may establish the following legal entities:
- An enterprise with participation of foreign investors on a shared basis (joint ventures);
- A wholly foreign-owned enterprise (foreign enterprises);
- A representative office.
Once a U.S. firm has decided to open an office in Azerbaijan, it needs to choose between establishment of a limited presence, a joint venture or a wholly foreign-owned enterprise for entrepreneurial activity. A limited presence is possible in the form of a representative office or a branch office. A representative office and a branch office that are subdivisions of a foreign legal entity are not considered to be Azerbaijani legal entities, but both are still subject to taxation. A full legal presence as an Azerbaijani legal entity may be achieved through establishing the following forms of legal entities:
- Joint Stock Company (JSC)
- General Partnership (GP)
- Limited Partnership (LP)
- Limited Liability Company (LLC)
- Additional Liability Company (ALC)
The Registration Department of the Ministry of Justice of the Azerbaijan Republic (MoJAz) is authorized to register all types of legal entities. It is important to understand the steps to be undertaken by the foreign investor in order to establish a legal entity in Azerbaijan.
- A letter from the founder or another authorized person requesting registration of the legal entity (one copy).
- Charter of the legal entity (5 notarized copies).
- Resolution or foundation agreement stating its intent to establish a legal entity in Azerbaijan (2 copies).
- A receipt showing payment of the state registration fee in manat (payment should be made to the State Budget Fund at the National Bank of Azerbaijan, Account 30100062, code 501004).
- A copy of a lease agreement or other document certifying the entity’s legal address in Azerbaijan.
- If the foreign founder is a legal entity, a document verifying that the entity is duly registered in the U.S. must be submitted. If the founder is an individual, then documents identifying his character and entrepreneurial activity are to be acquired. Both documents first must be certified by the consular section of the Azerbaijani Embassy in the United States and then presented to the MoJAz (two copies).
- For joint ventures, the MoJAz also requires two copies of the founding contract.
The list of documents to register a company branch or representative office (CB/RO) of a foreign legal entity (FLE) differs from the one described above. Along with the documents necessary for the registration of a wholly owned subsidiary listed above under points 1, 4, 5, and 6, the following are to be additionally collected for the registration of a CB/RO:
- 1. The FLE’s company charter and certificate of incorporation or equivalent. Both sets of documents must be notarized and then certified by the consular section of the Azerbaijani Embassy in the United States (two copies).
- A statement of credit-worthiness from the FLE’s bank (one copy).
- A notarized power of attorney issued by FLE to the head of the CB/RO (two copies).
- A resolution from the FLE’s authorized body stating its intent to open an office in Azerbaijan (2 copies).
- The CB/RO regulations signed and sealed by an authorized body of the FLE stating the purpose and objectives of the CB/RO and setting the operating principles of the organization, including the responsibility and power of the CB/RO chief executive/head (5 copies).
The registration fee for a branch office is approximately $180 and for a representative office is $2000, to be remitted in manat, to the account noted above.
The MoJAz may also request additional documents indicated below while registering either a company branch or representative office:
- 1. Two copies of the representative’s identification documents/passport and three photos.
- Sample of the FLE’s seal and/or stamp (2 copies).
- The FLE’s tax identification number in the United States.
Ministry of Justice
Address: 1 Inshaatchilar Avenue / Baku AZ1000, Azerbaijan
Tel: (994 12) 4300169, 4300116, 4300977, 4300972 / Fax: (994 12) 4300981
E-mail: contact@justice.gov.az / Web: www.justice.gov.az
Contacts: Mr. Fikret Mamedov, Minister
Mr. Zaver Gafarov, Head, International Legal Cooperation Department
Although the MoJAz has decentralized and opened district offices, FLE’s must continue to submit their registration documentation to the Ministry’s central office. In compliance with the Law on State Registration of Legal Entities, the Ministry of Justice must complete the registration procedure within 10 days after all required documents are presented. In case of any problem with a company’s submitted documents, the MoJAz must issue a letter within five working days describing the problem. Otherwise, the company’s registration application goes directly to the Ministry Collegium and should be approved at the next registration board meeting. Following board approval, the Ministry will issue a registration certificate. The U.S. Embassy Baku understands that the registration process often takes much longer and is less than transparent. Delays are common and sometimes unexplained. As of Summer 2003, the MoJAz was considering some improvements to speed the registration process. U.S. firms that experience registration problems are advised to contact the U.S. Embassy in Baku.
Once a registration certificate is obtained, there are certain post-registration procedures to be carried out by the newly registered legal entity:
- Obtain an official seal;
- Register at the Ministry of Tax;
- Register at the State Committee for Statistics;
- Register at the State Social Protection Fund;
- Register at the Employment Fund;
- Register at the Fund of Social Protection of Invalids; and
- Open a bank account in AJ manat and U.S. dollars.
U.S. firms should remember that all documents from the FLE must be notarized and legalized in the United States. It is also important to know that according to the constitution and the Law on the State Language, Azeri is the official language of administration, legislation, record keeping in all state bodies, enterprises and organizations in Azerbaijan. Therefore it is compulsory to accompany any document written in English with its notarized translation into the Azeri language.
The above information is provided solely as general advice. Laws and regulations including registration are subject to change. For detailed registration, legal, and tax counseling, U.S. firms are advised to contact tax and legal professionals resident in Azerbaijan to receive expert advice (see contact information part below).
Selling Factors/Techniques
Azerbaijan is primarily a trading country, with the retail business largely unregulated and of the "street" variety. There are three primary market segments: (1) the largest share of the population earning the average monthly wage of $65 or less; (2) a small but growing middle class with occasional disposable income; and (3) "new Azeris" noted for conspicuous consumption of top-priced items. The first two segments primarily focus on the unregulated bazaars, yarmarki (street trade fairs) for cheap goods. U.S. consumer products firms should focus on the higher end of the market through retail outlets in Baku given the small but growing number of consumers with money to spend and interest in higher quality goods and services. Azeri shoppers are price-sensitive but extremely brand conscious. U.S. goods and services are lesser known than their Turkish or European competitors but are generally well regarded and thought to be reliable – a key factor in the Azeri shopping mentality. Counterfeiting of consumer goods is a problem. Well-heeled Azeri shoppers are known for their impatience and desire to buy immediately and in cash rather than wait weeks for shipments from warehouses in nearby countries.
Advertising and Trade Promotion
Advertising is still in its infancy in Azerbaijan and is largely confined to newspapers, television and billboards. Outdoor billboards and lightboxes are widely used in Baku for advertising and trade promotions. Outdoor advertising for tobacco and alcohol products is prohibited. Newspapers in Azeri and Russian are published daily, except Sunday. English-language papers are published weekly. Newspapers are widely sold and read and represent a good channel to reach Azeri consumers who have disposable income. Television advertising is possible on Azerbaijan’s two state-run and four private TV networks. In addition, Baku receives two Russian and three Turkish TV channels. There are seven private FM radio stations in Azeri and Russian. For alcoholic products, advertising is allowed on local TV and radio stations after 10:00 p.m. with some restrictions. A number of Baku-based trade shows also provide an excellent opportunity to market U.S. goods and services.
Pricing Product
Prices may be quoted in U.S. dollars. However, in accordance with Azerbaijani law, actual sales are officially quoted in manat. In practice, U.S. dollars are widely accepted. Azeris expect to bargain over prices. With the exception of goods such as gasoline and certain other products, the government does not set retail prices. Prices include the 18 percent value added tax (VAT).
Price Construct to Baku and Customs Clearance
U.S. exporters should consider the following when doing a price construct for the Azeri market: customs and import duties are generally about 10-15%, plus 18% VAT. To avoid unnecessary customs delays, let the Azeri importer handle the customs clearance. A 20-foot container of general, non-hazardous cargo from Baltimore to Baku is on average $4,000 per container. Transit time is approximately 40 days, via Port of Poti, Georgia.
Sales Service/Customer Support
Customer service is still developing and more local firms are developing a Western-style customer service approach. Cellular operators and information technology firms in Azerbaijan are known for their high-quality service and customer support. Product guarantees are generally still rare, but are becoming more common.
Selected Cellular Operators in Azerbaijan:
Azercell Telecom
Address: 61A Tbilisi Avenue / Baku, Azerbaijan
Tel: (994 12) 4967007 / Fax: (994 12) 4300568
E-mail: corporatesegment@azercell.com / Web: www.azercell.com
Bakcell
Address: 24 Uzeir Gadjibekov Street / Baku AZ1000, Azerbaijan
Tel: (994 12) 4989444 / Fax: (994 12) 4989255
E-mail: bakcell@bakcell.com / Web: www.bakcell.com
CATEL - (Caspian American Telecommunications, L.L.C.)
Description: Azerbaijan American JV, telephone services, facsimile & conference communication
Address: 54 Suleyman Rustam Street / Baku AZ1007, Azerbaijan
Tel: (994 12) 4484800, 4484900 / Fax: (994 12) 4474600
E-mail: catel@catel-az.com / Web: www.catel-az.com
Sadig Humbatov, COO, Member of the Board - hsadiq@catel-az.com
Customer Service Center in Baku:
Address: 53 Suleyman Rustam Street / Baku AZ1007, Azerbaijan
Tel: (994 12) 4471999 / Fax: (994 12) 4470999
Customer Service Center in Sumgayit:
Address: 2-nd yard, 102 S. Vurgun Street / Sumgayit, Azerbaijan
Tel: (994 12) 4481999
Omni Communications, Inc.
504 Cathedral Street, Suite 100 / Baltimore, MD 21201
Tel: (410) 962 8010 / Fax: (410) 962 8070
E-mail: derya.yavalar@omni-inc.net / Web: www.omni-inc.net
Contact: Derya Yavalar, President and CEO
Need for a Local Attorney
Given the challenges of doing business in Azerbaijan, U.S. clients are advised to retain strong, in-country legal counsel. This especially includes at the outset of any transaction involving investment, structuring of joint ventures, and the like. The Azerbaijani legal system does not yet contain a transparent body of commercial law, and implementation of court decisions is haphazard at best. A new civil code was adopted in September 2000 and has, to a certain extent, improved the legal environment for commercial activity. Please see Selected List of Consulting Companies with Offices in Azerbaijan on the left side of our website.
For more information on doing business in Azerbaijan, please contact:
US Embassy, Baku, Azerbaijan
Address: 83 Azadlig Avenue / Baku AZ1007, Azerbaijan
Tel: (994 12) 4980335 / Direct Fax: (994 12) 4986117
E-mail: Bakhtiyar.Mamedov@mail.doc.gov
Contact: Bakhtiyar I. Mamedov, BISNIS Representative
U.S. Department of Commerce, R-BISNIS
Address: Washington, DC 20230
Tel: (202) 482-4199 / Fax: (202) 482-2293
E-mail: bisnis@ita.doc.gov / Web: www.bisnis.doc.gov
Contact: Chang Suh, BISNIS Trade Specialist for Azerbaijan - Chang_Suh@ita.doc.gov
This report was prepared by Bakhtiyar I. Mamedov, BISNIS Representative, U.S. Embassy Baku, Azerbaijan.
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INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF COMMERCE, 2005. ALL RIGHTS RESERVED FOR USE OUTSIDE OF THE UNITED STATES.
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