Legislative Tracking

Stages for transitioning employment contracts into electronic document by employers have been defined

Decision of the Cabinet of Ministers dated September 17, 2024, outlines the following stages (deadlines) for transitioning existing employment contracts concluded before 12 August 2024 into electronic document (by adding full information about main and additional terms):

• By January 1, 2025 - for state bodies, state owned legal entities and public legal entities;
• By July 1, 2025 - for private sector;
• By January 1, 2026 - for family farms and family businesses.

The detailed content of the Decision can be accessed via the following link:

https://nk.gov.az/az/senedler/qerarlar/isegoturenler-terefinden-emek-muqavilelerinin-elek-8331

Changes were made to the Code of Administrative Offenses of the Republic of Azerbaijan

On May 31, 2024, the law of the Republic of Azerbaijan "On Amendments to the Code of Administrative Offenses of the Republic of Azerbaijan" entered into force and brought innovations to the Code. According to the mentioned law, a new Article was added 405-1 to the Code of Administrative Offenses. According to this Article, a fine will be imposed for failure to fully pay the charter capital of a limited liability company, and for failure to provide information on the paid charter capital. Thus, officials are fined in the amount of 1,000 manats and legal entities in the amount of 2,000 manats for non-payment of the charter capital of a limited liability company within the period stipulated in the Civil Code of the Republic of Azerbaijan. According to Article 90 of the Civil Code, if the term is not specified in the charter, the charter capital must be paid until the company is duly registered in the state registry. If the period is specified, it cannot exceed 3 months.

In addition, Article 405-1.2 states that if the information regarding the payment of the charter capital of a limited liability company is not submitted to the state registry within 5 (five) business days, the officials shall be fined in the amount of 500 manats, while legal entities shall be fined in the amount of 1,000 manats.

The full text of the Law can be accessed through the following link:
https://e-qanun.az/framework/57448
 

New obligation regarding workplace safety has been enacted

The Law on Amendments to the Labor Code of the Republic of Azerbaijan dated 23 June 2023 has been approved (the “Law”). Thus, according to the Law, the employer must conduct the attestation of workplace and ensure the submission of its results to the State Labor Inspectorate under the Ministry of Labour and Social Protection of Population within 10 working days.

The full text of the Law can be accessed through the following links:
https://president.az/az/articles/view/60482
https://president.az/az/articles/view/60485

 

Amendments have been made to the Civil Code.

The Law of the Republic of Azerbaijan No. 822-VIQD "On Amendments to the Civil Code of the Republic of Azerbaijan" ("Law") was adopted on February 24, 2023.

The changes encompass such topics as regulation of agreements concluded electronically, regulation of relations under a loan agreement, and enhancement of the mechanisms for protecting the rights of borrowers.

Thus, according to the new clause added to Article 331.1 of the Civil Code, an agreement is considered concluded in writing when it is concluded by electronic or other technical means allowing reflection of its content unchanged on a tangible carrier, and in this case, if any method making possible to properly identify the person expressing his/her will has been used, the signature requirement will be considered as met.

The main part of the Law narrates about changes made to Chapter 37 of the Civil Code called "Loan".  According to the new edition of the chapter, it has been divided into 3 major parts: "Loan agreement", "Credit agreement" and "Consumer credit agreement".  In addition, each type of agreement and the relations arising from them (definitions, subject of the agreement, content, procedure of conclusion, execution, characteristics, termination, and other issues) are regulated by separate articles of the relevant paragraphs.

Article 746, added to the Civil Code, defines the concept of a consumer credit,
and Article 746-6 defines the concept of a related credit agreement, as well as the relevant terms of such agreements. Thus, according to a consumer credit
agreement, a lender undertakes to lend money to the borrower, who is an individual, for the purposes not related to business or professional activity, and the individual (consumer) undertakes to repay back the loan along with the interest and (or) other payments specified in the agreement.  A related credit agreement is determined as a consumer credit agreement concluded to finance a contract for the purchase and sale of certain goods or provision of services, and which has an economic relationship with that agreement.

The changes will come into force on October 1, 2023 (6 months after the date of publication).  

The list can be obtained from the official website of the Cabinet of Ministers: https://nk.gov.az/az/document/6809/

 

The list of applicable restrictions and special requirements in relation to high-risk jurisdictions was approved.

According to the Resolution of the Cabinet of Ministers of the Republic of Azerbaijan dated 20 February 2023 No. 64 (the “Resolution”), the list of applicable restrictions and special requirements in relation to high-risk jurisdictions (the “List”) was approved. The mentioned measures shall be applied within the framework of the Law of the Republic of Azerbaijan dated December 30, 2022 “On combatting against the legalization of property obtained through crime and the financing of terrorism”.

According to the Resolution, Financial Monitoring Service of the Republic of Azerbaijan shall ensure that financial institutions are informed about countries that do not have adequate systems for fighting against money laundering and terrorist financing to be identified according to the results of country and sectoral risk assessments.

The list can be obtained from the official website of the Cabinet of Ministers: https://nk.gov.az/az/document/6809/

Several changes were made to the Law of the Republic of Azerbaijan "On Customs Tariff" and the Customs Code of the Republic of Azerbaijan

Thus, import of machinery, technological equipment and devices, as well as raw materials and materials by the residents of territories liberated from occupation and registered there for VAT purposes has been exempted from customs duties based on a confirmation document to be obtained from the Ministry of Economy.  Such exemption is granted for a period of 10 years. This amendment is effective from January 1, 2023.

 

The duration of suspension of inspections in the field of entrepreneurship has been extended

Thus, according to the Law of the Republic of Azerbaijan “On Amendments to the Law of the Republic of Azerbaijan "On Suspension of Inspections in the Field of Entrepreneurship"” dated February 01, 2023, the said inspections were suspended until January 1, 2024. This law entered into force on January 1, 2023.

 

The Migration Code of the Republic of Azerbaijan was amended

According to the Law of the Republic of Azerbaijan on Amendments to the Migration Code and the Law of the Republic of Azerbaijan "On Alat Free Economic Zone" dated December 23, 2022, individuals engaged to works by the authorized institution of Alat free economic zone, administrative enterprises and legal entities in the territory of Alat free economic zone are not required to obtain a work permit. In addition, these individuals and their family members are granted a temporary residence permit in the territory of the Republic of Azerbaijan based on the application of the authorized institution or administrative enterprise of Alat free economic zone.

 

The Regulation on providing loans with the state guarantees and subsidizing loan interest to business entities operating in the territories liberated from occupation ("Regulation") was approved by the Decree of the President of the Republic of Azerbaijan dated January 9, 2023

This Regulation defines the requirements, application procedure, terms of payment of guarantees and subsidizing interest on loans received by businesses operating in territories liberated from occupation (legal entities and individuals, whose main purpose is to earn profit (income) from the independent use of property, production and (or) sale of goods, performance of works or provision of services and operating in territories liberated from occupation) in AZN, including the state guarantee and subsidizing part of the interest accrued on these loans, from the authorized credit institutions (a credit organization determined by the fund (Azerbaijan Business Development Fund) and concluding a cooperation agreement with the Fund). The state guarantee for loans is provided by the Ministry of Finance of the Republic of Azerbaijan.

Some of the requirements for guarantees and interest subsidies are as follows:

• the total amount of state-guaranteed loans of one entrepreneur received from all authorized credit organizations should not exceed AZN 5,000,000;
• the annual loan interest rate should not exceed 15%;
• the term of the loan should not exceed 7 years;
• subsidies are provided in the amount of 10% of the annual interest rate and for a period not exceeding 36 months. If the annual interest rate of the loan is lower than 10%, the subsidy is provided in the amount of annual interest rate of the loan.

 

The new Law "On development of micro, small and medium enterprises" was adopted

The Law of the Republic of Azerbaijan "On Development of Micro, Small and Medium Enterprises" (the “Law") entered into force on January 26, 2023, and thus the Law of the Republic of Azerbaijan "On State Aid to Small Enterprises" dated June 4, 1999 was abolished.

The Law, in addition to clarifying a number of concepts such as "unified register of micro, small and medium-sized enterprises", "institutions forming the support infrastructure for micro, small and medium enterprises", "business incubator", determines the main goals of the state policy in the field of development of micro, small and medium-sized entrepreneurship (creating favorable conditions for development of MSMEs; increasing competitiveness of MSME subjects, stimulating innovation activity and assisting the products they produce to enter domestic and foreign markets, etc.).

The new Law "On Combatting legalization of property obtained through crime and financing of terrorism” was adopted

The Law of the Republic of Azerbaijan "On Combatting legalization of property obtained through crime and financing of terrorism" (the "New Law") entered into force on February 1, 2023, and, thereby, the Law of the Republic of Azerbaijan "On combatting legalization of criminally obtained funds or other property and financing of terrorism" dated February 10, 2009 was abolished.

According to the New Law, local politically exposed persons (“PEPs”) have now been covered by the definition of politically exposed persons, the scope of measures to be applied with regard to them has been expanded, and these measures shall now be also applied to persons who have close relations with politically exposed persons (e.g. those who are beneficial owners at the same legal entity as a PEPs or have any other close business relationship with them).

It should also be noted that new definitions and concepts were added to the New Law, including, but not limited to foreign legal institution, virtual assets, virtual asset service providers, financial group (holding), etc.

At the same time, the limit for the application of compliance measures for one-time transactions by monitoring entities has been increased from AZN 15,000 to AZN 20,000.  In addition, monitoring entities must apply customer due diligence measures prior to one-time wire transfers and one-time VA transactions.

The New Law determined the responsibility of monitoring entities to comply with the requirements of FATF on additional measures for high-risk zones. The text of the relevant measures will be published on the official internet resource of the financial monitoring authority and sent directly or through the relevant regulatory authorities to the monitoring entities.

Under the New Law, monitoring entities may rely on customer due diligence measures conducted by other monitoring entities (provided that relevant information and documentation is obtained from such other monitoring entity). However, in this case, the liability for compliance with the requirements of the New Law remains with the relying monitoring entity.

Additionally, high and low risk factors in terms of the characteristics of customers, products, services, operations, delivery channels and geographical location, the procedure for assigning a customer profile to a high, medium or low risk group, as well as requirements for enhanced customer due diligence measures are expected to be determined by the financial monitoring authority. 

 

The new Law "On Targeted Financial Sanctions" came into force

The Law of the Republic of Azerbaijan "On Targeted Financial Sanctions" (the "Law") entered into force on February 1, 2023.The Law regulates the rules for the implementation of targeted financial sanctions in order to prevent terrorism, its financing, proliferation of weapons of mass destruction and financing of proliferation of weapons of mass destruction.

According to the Law, targeted financial sanctions mean (i) prohibitions preventing direct or indirect benefiting from the assets of individuals and institutions to be sanctioned, or (ii) measures to freeze the assets of those individuals and institutions.

Several changes were made to the Law of the Republic of Azerbaijan "On Customs Tariff" and the Customs Code of the Republic of Azerbaijan

Thus, import of machinery, technological equipment and devices, as well as raw materials and materials by the residents of territories liberated from occupation and registered there for VAT purposes has been exempted from customs duties based on a confirmation document to be obtained from the Ministry of Economy.  Such exemption is granted for a period of 10 years. This amendment is effective from January 1, 2023.

From January 1, 2023, legal entities and individual entrepreneurs who are residents of industrial or technology parks will be exempted from paying customs duties for import of machinery, technological equipment and devices within 10 years starting from the date of registration of the residents in an industrial or technological park.

Now, if the customs declaration submitted by the declarant to the customs authority is not approved by the customs authority within 1 (one) day from the date of submission due to the need to adjust the customs value of the declared goods, the declarant may apply to the customs authority regarding the release of the goods in writing and electronically. 

Such application for release of goods conditioned with payment of customs duties or provision of guarantee will be considered within 1 day from the moment of receipt of the declarant's application and the customs authority will release such goods immediately after determining compliance with the following requirements: 

• customs duties calculated based on the initial declaration submitted by the declarant to the customs authority shall be paid; 
• a security must be provided for additional customs debt, which may arise due to adjustments to the customs value of the goods; 
• other requirements determined in accordance with the Customs Code must be met for the release of the declared goods.

Some notifications and information from the customs authorities will now be received electronically:

• Notifications for making appropriate adjustments to the customs value of the goods. The notice on making appropriate adjustments to the customs value of the goods that have not been released will be submitted to the declarant within 24 hours from the moment the customs declaration for those goods is submitted to the customs authority.
• Notifications on the fact that the buyer’s and the seller’s being related parties affects the price actually paid or to be paid for the goods;
• Information on the customs value and the method used to determine this value.

A new law was adopted in the field of public-private partnership (“PPP”)

The Law of the Republic of Azerbaijan “On Public-Private Partnership” (“New Law”) entered into force on December 27, 2022, and by that, the Law of the Republic of Azerbaijan “On implementation of investment projects related to construction and infrastructure facilities since special financing” was annulled.

It is worth noting that, the previous law applied only to attracting investments under the “Build-Operate-Transfer” model regarding construction and infrastructure facilities. The New Law regulates public-private partnership (“PPP”) on provision of public services, as well as creation and operation of infrastructure related to the provision of those services.

Main specifics of the New Law

• PPP projects are developed either by the state or based on the initiative of individuals and legal entities (claimants) meeting certain requirements. The maximum duration of projects is 49 years.
• The Ministry of Economy of the Republic of Azerbaijan (“Ministry”) acts as an authorized body defined by the New Law and, along with other authorities and responsibilities, prepares and publishes the list of PPP projects on an annual basis.
• Private partners are selected based on competition or direct negotiations.A PPP agreement is concluded with the winner of a competition or a directly involved private partner. In case a project is financed by a creditor, to provide additional guarantees, a PPP agreement may be concluded directly with the creditor.
• The form and methods of state participation in PPP projects are determined by the Ministry based on technical and economic justification of the PPP project.
• To ensure implementation of a PPP project, the applicant (private partner) may create a project company.
• The Ministry may decide on participation of the state partner in the project company (provided that such participation does not exceed 49% of the charter capital).

Exceptions

• The New Law does not apply to activities in oil and gas field.
  
• The laws of the Republic of Azerbaijan “On State Procurement” and “On Privatization of State Property” do not apply to PPP relations.
• Relations in the field of use of renewable energy sources in electricity production and PPP in Alat free economic zone are regulated in accordance with the requirements of the relevant laws.

State support and guarantees

• In order to implement PPP projects private partners may be provided with goods, materials, raw materials, equipment, manufactured products, guarantees for the purchase of a certain volume of provided services and completed works, subsidies and loans, capital investment, guarantees for the level of regulated prices, temporary exclusive rights for the provision of services, works and sale of the product, as well as incentive measures, exemptions or benefits on tax and other state duties, additional financial support, guarantees, exemptions and compensations.
• The state-owned land plot can be provided for lease and use or shared with a private partner for the duration of the project.
• Private partners will be entitled to compensations in case changes are made in the legislation of Azerbaijan after the date of conclusion of a PPP agreement ad where such changes result in increase of costs or decrease of income to be generated by a private partner under the agreement.
• PPP projects are also subject to incentive measures provided for in the Law of the Republic of Azerbaijan “On Investment Activities”, as well as tax and other state duties benefits and exemptions, additional financial support, guarantees, exemptions and compensations.
  
  

Areas of economic activity, territories, zones, and the minimum amount of investment was changed

Thus, according to the Decree of the President of the Republic of Azerbaijan dated December 20, 2022, starting from January 1, 2023, the investment incentive document is issued within a period of 3 years to legal entities and individual entrepreneurs for strategic investment projects to be implemented in industrial districts and agricultural parks, tourism and recreation zones, as well as in directions determined by the President of the Republic of Azerbaijan, cities and regions other than Baku, Sumgayit, Ganja, Absheron district and liberated areas. 

The minimum investment amount for the projects to be implemented in Baku (excluding Rasulzade settlement of Binagadi district, Narimanov, Nasimi districts, Keshla settlement of Nizami district, Badamdar and Bibiheybat settlements of Sabail district, Ahmedli settlement of Khatai district and Yasamal district), Sumgayit, Ganja cities and Absheron district was defined as AZN 5 million, and AZN 3 million – for projects to be implemented in other areas.

The investment incentive document for the mentioned projects is not issued to the legal entities with the shares of 30% or more directly or indirectly owned by the state and public legal entities established by the state.

 

A unified information system on currency transactions was created

Pursuant to the Law of the Republic of Azerbaijan on Amendments to the Law of the Republic of Azerbaijan “On Currency Regulation” published on December 30, 2022, to ensure implementation of currency control, the Central Bank of the Republic of Azerbaijan is creating a unified information system to collect information on currency transactions of residents and non-residents.

Currency control agents (i.e., authorized banks and persons licensed for currency exchange activities) should enter the information on their foreign exchange transactions into this information system and use this system for currency control purposes.

It is important to note that, according to the amendment to the Code of Administrative Offenses of the Republic of Azerbaijan, officials will be fined from AZN 1,500 to AZN 2,000, and legal entities will be subject to penalty in the amount from AZN 10,000 to AZN 12,000 for failure to submit or for improper submission of the information on currency transactions conducted by the currency control agents to that unified information system.

 

Changes were made to the Labor Code regarding specialists working in the liberated territories of the Republic of Azerbaijan

According to the Law of the Republic of Azerbaijan on Amendments to the Labor Code of the Republic of Azerbaijan (“Law”) published on December 28, 2022, a definition of a specialist working in the territories of the Republic of Azerbaijan liberated from occupation was added to the Labor Code along with the characteristics of the work of those specialists.

Thus, a specialist working in the territories liberated from occupation is defined as a person possessing a state document on profession, secondary qualification and higher education and has at least 24 months of work experience within the last 60 months, works based on an employment agreement in territories liberated from occupation. Such specialists are granted additional leave for a period of 5 calendar days, regardless of the duration of the main and additional leave.

This and other privileges and benefits provided in the legislation apply to the mentioned specialists only if the following circumstances exist:

• if an employer is tax registered in the territories liberated from occupation;if a place of work under an employment agreement is located in the territories liberated from occupation;
• if specialists are residing in the liberated territories.
• It is important to note that the above provisions do not apply to persons of special rank.

The Law will be in force from January 1, 2023, till January 1, 2028.Changes were made to the Migration Code of the Republic of Azerbaijan

 

The Laws of the Republic of Azerbaijan dated December 9, 2022, and December 27, 2022, on amending the Migration Code of the Republic of Azerbaijan were approved and entered into force on January 1, 2023.

According to the Law dated December 27, 2022, a new provision was added to the list of cases where a work permit is not required.

Thus, residents of technology parks are no longer required to obtain work permits in relation to those holding the position of head and his/her deputies in a legal entity as well as specialists with experience in the field of information and communication technologies who are involved in labor activities in the territory of the Republic of Azerbaijan by such residents. Such individuals may obtain temporary residence permits without obtaining work permits.

According to the Law dated December 9, 2022, the labor migration quota applied for issuance of work permits does not apply to foreigners involved in labor activities in the liberated territories of the Republic of Azerbaijan. Moreover, an employer may extend work permits of these foreigners each time for not more than 2 years.

The said Law will remain in force from January 1, 2023, till January 1, 2028.

Suspension of inspections in the field of entrepreneurship has been extended 

The President of the Republic of Azerbaijan approved the Law On Amendments to the Law “On Suspension of Entrepreneurial Inspections” (the “Law”) on 9 February 2022.

According to the Law, inspections in the field of entrepreneurship in the territory of the Republic of Azerbaijan are suspended for another year, i.e. until 1 January 2023. 

Nevertheless, it shall be noted that certain areas necessitating constant control and monitoring of the state authorities due to potential threat to people health, environment and national security can be subject to the inspections during the suspension term. Those areas include:

• taxes;
• financial markets;
• customs;
• medicine quality and safety;
• food safety;
• fire safety;
• construction;
• safe exploitation of hazardous facilities, radioactive substances and mining fields.

The Law is effective from 1 January 2022.

The full text of the Law in Azerbaijani can be accessed through the following link:  http://www.e-qanun.az/framework/31093

Production calendar and working time rate for 2022 have been approved

According to the Resolution of the Board of the Ministry of Labor and Social Protection of Population of the Republic of Azerbaijan dated 17 December 2021 (the “Resolution”), the production calendar and working time rate for 2022 have been approved. 

The production calendar can be accessed through the following link of the Ministry of Labor and Social Protection of Population of the Republic of Azerbaijan: https://www.sosial.gov.az/istehsalat-t%C9%99qvimi-2022.

The following dates within 2022 have been determined as non-working days:

I. January 1, 2 – New Year;

II. January 20 - National Day of Mourning;

III. March 8 – Women’s day;

IV. March 20-24  - Novruz holidays;

V. May 9 - Victory Day on Fascism; 

VI. May 2-3 – Ramadan holidays;

VII. May 28 - Independence Day;

VIII. June 15 - National Salvation Day of Azerbaijan;

IX. June 26 - Day of the Armed Forces of the Republic of Azerbaijan;

X. July 9-10 – Gurban holidays;

XI. November 8 – Victory Day;

XII. November 9 - Day of State Flag of the Republic of Azerbaijan;

XIII. December 31 - World Azerbaijanis Solidarity Day.

In accordance with the Resolution, working days for 2022 are set at 241 days.

The annual rate of working time in 2022 will constitute 1921 hours for 40 hours weekly work and will be applicable with respect to both five-day and six-day working weeks. 

According to the Resolution, the following days will be considered as rest days due to coincidence of holidays with the weekends:

• 3, 4 January, 25 March, 30 May, 27 June, 11, 12 July with respect to five-day working week; 
• 3 January, 25 March, 27 June, 11 July with respect to six-day working week.

The amount of minimum salary in the country has been increased

According to the Decree of the President of the Republic of Azerbaijan dated 17 December 2021, the amount of minimum salary in the country has been determined as AZN 300 effective as of 01 January 2022.

Rules “On sale of goods with an export mark" have been approved

On 14 November 2020, the Rules “On sale of goods with an export mark” ("Rules") have been approved by the Decree of the Cabinet of Ministers of the Republic of Azerbaijan No. 448.

According to Article 165.1.9 of the Tax Code of the Republic of Azerbaijan, zero (0) VAT rate is applicable for the sale of goods with an export mark.   

By virtue of the Rules, those selling goods with an export mark (manufacturers) and those exporting the goods purchased with the export mark (exporters) shall meet certain requirements set under the Rules. Thus, the Rules shall apply only to manufacturers of non-oil products in the territory of the Republic of Azerbaijan and/or exporters who have already carried out import-export operations for at least 1 (one) year period.   

It should be noted that, excluding manufacturers and exporters meeting the above requirements, other manufacturers or exporters would not be eligible to benefit from the Rules should they fall under the list of manufacturers, exporters or transactions not related to the sale of goods with export mark. As an example, the sale of goods with export mark does not apply to contractors or operating companies under the production sharing agreements, taxpayers with overdue debt to the state budget regarding taxes, contributions for compulsory state social insurance, unemployment insurance and medical insurance, legal entities with at least 51% of the shares directly or indirectly belonging to the state, export of goods produced in free zones, special economic zones as well as other persons or transactions listed under the Rules.

In order to export goods purchased with an export mark, the manufacturer shall submit an “Invoice on sale of goods with export mark” to the exporter in the form specified in Annex 1 to the Rules. The exporter shall submit “Information on the export of goods sold with export mark” to the manufacturer and the State Tax Service within 1 (one) working day upon completion of the customs clearance of goods.

It should also be noted that in case the goods purchased under the export mark are not exported within the specified or extended periods, the sale with the export mark would be considered as the intercountry sale of goods.  In such case, payment (for taxes payable to the budget and interest accrued for each day of delay) shall be made to the manufacturer based on the security (bank guarantee or deposit) provided in advance by the exporter in order to ensure the fulfillment of obligations towards the budget.

The details of the Rules can be obtained by following the link below: https://nk.gov.az/en/document/4911/

Change of working and non-working days 

In order to ensure sequence of working and non-working days, on May 15, 2020 the Cabinet of Ministers of the Republic of Azerbaijan adopted the Decree No. 177 “On the change of working and non-working days and defining non-working days during special quarantine regime” (“Decree”)”.The Decree declared May 27 as a non-working day and 31 May 2020 as a working day.

At the same time, pursuant to the Decree, during special quarantine period under the special labor regime 29 May 2020 has been defined as a non-working day with maintenance of the employees’ salary (for those who work based on six-days’ working week 23 and 30 May 2020 as well). 

Hence, 23-30 May 2020 (both dates are inclusive) have been announced as non-working days.

Pursuant to the Decree, application of the special labor regime shall not affect production calendar and norm of working hours for 2020 shall remain unchanged.  In view of this, it appears that employment during 27 May 2020 shall be treated as working during non-working day.  At the same time, works during 29 May 2020 (for those who work based on six-days’ working week 23 and 30 May 2020 as well) shall be considered as working during normal working time and shall not lead to additional payment or day off.

The Cabinet of Ministers of the Republic of Azerbaijan has adopted the Decree “On the regulation of the working regime in the territory of the Republic of Azerbaijan during the special quarantine period”

On 31 March 2020, the Cabinet of Ministers of the Republic of Azerbaijan adopted a Decree “On the regulation of the working regime during the special quarantine period in the territory of the Republic of Azerbaijan” (“Decree”).

Thus, the Decree has determined the following:

• provision of additional days off during the year to the employees who have been engaged in works within the state bodies and structures,

• retention of salaries of employees not engaged in works within the state bodies and structures,

• strict recommendations to employers to maintain the salaries of the employees not engaged in works within the areas other than those permitted by the Decree,

• where possible, ensuring work from home in the form of remote work or telework, and

• production calendar remains unchanged during the special working regime.

Furthermore, according to the Decree, the Decree of the Cabinet of Ministers of the Republic of Azerbaijan No. 113 dated 25 March 2020 “On establishment of non-working days as a special labor regime in the territory of the Republic of Azerbaijan” (“Decree No 113”) has been abolished.

According to the Decree No 113 due to a special labor regime in the territory of the Republic of Azerbaijan, 

• for those working within the five-days working week: 29 March 29 – 3 April 2020 and 

• for those working within the six-days working week: 26-28 March and 30 March – 4 April 2020 shall be considered as non-working days.

Thus, due to abolishment of the Decree No 113 the above mentioned dates shall be treated as working days and the production norm for March 2020 shall be set at 127 hours.

Decree on additional measures to prevent the spread of coronavirus (COVID-19) infection in the territory of the Republic of Azerbaijan has been adopted

On 2 April 2020, the Cabinet of Ministers of the Republic of Azerbaijan adopted a Decree “On additional measures to prevent the spread of coronavirus (COVID-19) infection in the territory of the Republic of Azerbaijan” (“Decree”).

The Decree has introduced new rules and restrictions for movement of individuals within the country from 5 April 2020 to 20 April 2020.

To the attention of employers

Employees of legal entities as well as individual entrepreneurs and their employees, carrying out activity in the areas, operations within which have been allowed under the Decree of the Cabinet of Ministers of the Republic of Azerbaijan #120 dated 30 March 2020, will be eligible to visit their workplaces once the information on such employees and individuals is entered into the portal “icaze.e-gov.az” (“Portal”). 

Such areas include the following:

• production of medical equipment, medicines and medical devices;

• cargo transportation by air, sea, railway and road;

• railway, maritime, port and highway services;• logistics services;

• public transport and taxi services;

• telecommunications and communication services;

• production of oil equipment and facilities;

• oil and gas transmission through pipelines;

• production of food products and raw materials for them, supply, storage and wholesale of food products;

• production of daily care and hygiene products;

• production of chemical products;

• production, refining, storage and sale of oil and gas;

• banking services, insurance, services provided by non-bank credit organizations;

• food outlets;

• pharmacies;

• translation services;

• advocacy; etc.

Information can be entered into the Portal starting from 3 April 2020, 10.00 a.m.

For entities operating in the areas within which activities have not been allowed, only employees required to ensure the protection and technical safety of such entities may be allowed to visit their workplaces once information on them is entered into the Portal.

Employees of state bodies as well as state owned enterprises and public legal entities established by the state may also visit their workplaces once information on them is entered into the Portal.

The Decree also determines the list of individuals who can visit their workplaces based on service cards or certificates from workplaces. 

To the attention of individuals

Other individuals are allowed to leave their places of stay in the following cases: 

• urgent medical necessity and receiving scheduled treatment (index number - 1);

• purchase of food and other daily necessities, as well as medicines, usage of banking and postal services (index number – 2);

• attending the funeral of a close relative (index number - 3).

Thus, in order to obtain a permit to leave the place of stay based on any of the above grounds, the SMS shall be sent to “8103” containing the serial number of the ID card or temporary or permanent residence permit and the relevant index.  An individual may leave the place of stay only upon receiving a positive response.

In addition, it is not required to send the SMS in cases of imminent danger to life and health, and if summoned to court or law enforcement agencies.

The State Migration Service of the Republic of Azerbaijan has temporarily waived the requirement on notarial certification of the documents submitted during electronic applications

According to the information provided by the State Migration Service of the Republic of Azerbaijan on 31 March 2020, considering the special quarantine regime applied within the country due to coronavirus (COVID-19) outbreak, electronic application for foreigners and stateless persons has been simplified.

Thus, until 30 April 2020, during electronic applications with the State Migration Service on obtaining/extension of work, temporary and permanent residence permits, documents of the applicants who are unable to arrange for notarial or equivalent certification will be accepted without such certification.

The documents in the required format may be requested later, where necessary.

Payment of compulsory medical insurance premiums has been postponed until January 2021

According to the Law of the Republic of Azerbaijan “On Amendments to the Law of the Republic of Azerbaijan On Medical Insurance” dated 30 March 2020 (“Law”), the completion of implementation of compulsory medical insurance has been extended until 2021.  Also, according to the Law, the payment of compulsory medical insurance premiums for the following groups has been postponed until 1 January 2021:

- individuals working based on employment agreements, military servants, individuals appointed by the National Parliament of the Republic of Azerbaijan or the relevant executive authority and individuals holding elected paid positions;

- individuals registered as taxpayers (individual entrepreneurs, private notaries, members of the bar); 

- individuals performing works (services) on the basis of civil-law contracts;

- each liter of motor gasoline, diesel fuel and liquefied gas produced in the territory of the Republic of Azerbaijan and directed to domestic consumption (wholesale) as well as imported to the territory of the Republic of Azerbaijan;

- co-financing related payments.

Provisions on compulsory medical insurance for insured persons other than the ones listed above shall enter into force on 1 January 2023.

According to the Law, application of 50 percent discount on the amount of insurance premiums to be paid from the salaries up to AZN 8,000 in the non-oil/gas sector and the private sector will be extended until 1 January 2022.

Decision on concluding the General Collective Agreement for 2020-2022 between the Cabinet of Ministers of the Republic of Azerbaijan, the Confederation of Trade Unions of the Republic of Azerbaijan and the National Confederation of Entrepreneurs (Employers) of the Republic of Azerbaijan has been adopted

On 19 March 2020, in accordance with Article 36 of the Labor Code of the Republic of Azerbaijan, the Cabinet of Ministers of the Republic of Azerbaijan, the Confederation of Trade Unions of the Republic of Azerbaijan and the National Confederation of Entrepreneurs (Employers) of the Republic of Azerbaijan have signed the General Collective Agreement (the “Agreement”) defining the agreed positions and joint activities on socio-economic and labor relations for 2020-2022.   

The priority objectives of the Agreement are to ensure employment, create new jobs, increase income and improve the material well-being of citizens, strengthen the social protection of socially vulnerable groups.

The Agreement is an integral part of the social partnership system and forms the basis for the development and conclusion of specific field agreements.

According to the Agreement, the following are defined among the obligations of the Parties:

•  to prevent the conclusion of unjustified fixed-term contracts in order to ensure the labor rights of employees on an ongoing basis, and to establish appropriate measures in the legislation on penalties for employers who commit such acts  taking into account the requirements of the laws of the Republic of Azerbaijan "On regulation of inspections in the field of entrepreneurship and protection of the interests of entrepreneurs" and "On the suspension of inspections in the field of entrepreneurship";
•  to strengthen control over the use of the right on annual leave by employees in enterprises, organizations and departments;
•  to strengthen joint control over the timely and full transfer of social insurance contributions by employers;
•  to ensure initial and periodic medical examinations of employees in cases stipulated by the legislation and to strengthen control in this direction;
•  to make changes in the relevant legislation in order to include the period of partial paid social leave for a childcare up to the age of three into the labor and insurance seniority of the employee;
•  expanding the list of persons to be covered by the compulsory state social insurance system;
•  strengthening joint control over the development of physical education and sports;
•  preparation of proposals on improvement of the Law of the Republic of Azerbaijan “On Social Insurance”;
•  to take appropriate measures to increase the allowance for the childcare under the age of three; 
•  to ensure the recruitment of persons with special needs for social protection and difficulties in finding job through the referral of employment entities or "DOST" centres, as well as taking measures to create social enterprises and jobs in addition to quotas in accordance with the Law of the Republic of Azerbaijan "On Employment";
•  to impose liability to the employers who fail to recruit individuals with disabilities referred by the employment entities or “DOST” centres as specified in the quota;
•  to prepare the draft Law of the Republic of Azerbaijan “On labor protection”;
•  to ensure the continuous participation of employees in cultural, social, tourism-excursion and sports events for the effective organization of leisure time;
•  to establish  commissions with the participation of representatives of the trade unions in order to ensure the compliance of enterprises with the labor protection, technical and environmental safety regulations; etc.

The provisions included in the Agreement shall apply to all enterprises operating in the territory of the Republic of Azerbaijan, regardless of the form of ownership, unless otherwise is provided by international agreements to which the Republic of Azerbaijan is a party.

Non-working days have been extended within the territory of Azerbaijan Republic

According to the Decree of the Cabinet of Ministers of the Republic of Azerbaijan dated 25 March 2020 (“Decree”), due to a special labor regime in the territory of the Republic of Azerbaijan, 

- for those working within the five-days working week: 29 March 29 – 3 April 2020 and 

- for those working within the six-days working week: 26-28 March and 30 March – 4 April 2020 shall be considered as non-working days.

The Decree does not apply to publicly important, life-support facilities, as well as banks, supermarkets, grocery stores, pharmaceutical companies, pharmacies, food production enterprises and senior officials, and where necessary, other employees of state bodies and institutions listed in the Annex to the Decree.

The mentioned employees who worked within the period specified under the Decree shall have the right to receive additional days off in accordance with paragraph 2 of Article 164 of the Labor Code of the Republic of Azerbaijan and their salaries shall be maintained.

The need for foreigners to apply for registration at the place of stay has been eliminated

According to the information provided by the State Migration Service of the Republic of Azerbaijan dated 26 March 2020, applications of foreigners on registration upon place of stay, whose current registration expires within March 16-24 and who are not able to leave the country shall be considered accepted by the State Migration Service.

The need for foreigners to apply for an extension of their temporary stay in the country has been eliminated

According to the information published by the Public Relations Department of the State Migration Service of the Republic of Azerbaijan on 24 March 2020, the need to apply for an extension of the temporary stay of foreigners currently remaining in the country and unable to leave the country has been eliminated.  Applications of foreigners whose stay in the country expires within the period from 24 March 2020 to 30 April 2020 are considered accepted by the State Migration Service and the validity of their stay in the country will be subject to payment of the state duty as provided under the Law of the Republic of Azerbaijan “On State Duty”: 

- extension for 30 days – AZN 15 for minors, AZN 30 for others, 

- extension for 60 days – AZN 30 for minors, AZN 60 for others.

In order to extend the period of temporary stay in the country, it is necessary to pay a state fee. Payment can be made electronically through the Government Payment Portal, the "ASAN payment" system and through Expresspay terminals by obtaining a payment number through the "Follow the application" section on the website of the State Migration Service. Payment numbers will be posted on the website of the State Migration Service within two days. 

There is no need to collect physical decisions on extension of the stay. In this regard, foreigners are advised not to approach the reception offices of the State Migration Service.

Administrative or criminal liability will be imposed for violation of anti-epidemic, sanitary-hygienic and quarantine regimes

According to the Law of the Republic of Azerbaijan “On Amendments to the Code of Administrative Offenses of the Republic of Azerbaijan”, dated 17 March 2020, new articles have been added to the Code of Administrative Offenses for violation of anti-epidemic, sanitary-hygienic and quarantine regimes. Thus, according to Article 211 of the Code of Administrative Offenses, for violation of the anti-epidemic regime, sanitary-hygienic and quarantine regimes:

- individuals will be fined in the amount from one hundred up to two hundred manats, officials in the amount from one thousand five hundred up to two thousand manats, or depending on the circumstances of the case, taking into account the identity of the violator, administrative detention for up to one month may be applied,

- legal entities will be fined in the amount from two thousand up to five thousand manats.

Also, according to Article 388-1 of the Code of Administrative Offenses, for placement of information or failure to prevent publication of information the dissemination of which is prohibited, in particular:

- for allowing placement in the information resources or information-telecommunications network of the information the dissemination of which is prohibited by the Law of the Republic of Azerbaijan "On information, informatization and protection of information",

- for failure to take measures established by the Law of the Republic of Azerbaijan "On information, informatization and protection of information" in connection with the seizure of information, the dissemination of which is prohibited in the internet information resources,

owners of the internet information resources and domain names along with users of the information-telecommunications network will bear liability in the following form:

- individuals shall be fined in the amount from five hundred up to one thousand manats, officials in the amount of one thousand to one thousand five hundred manats, or administrative detention for a period of up to one month shall be applied depending on the circumstances of the case, 

- legal entities shall be fined in the amount of one thousand five hundred to two thousand manats.

It should be noted that the following information has been added to the list of information prohibited for dissemination on the internet information resources or information-telecommunications network in accordance with the Law of the Republic of Azerbaijan “On Amendments to the Law of the Republic of Azerbaijan “On Information, Informatization and Information Protection”, dated 17 March 2020:

- false information threatening to harm human life and health, causing significant property damage, mass violation of public safety, disruption of life support facilities, financial, transport, communications, industrial, energy and social infrastructure facilities or leading to other socially dangerous consequences.

According to the Law of the Republic of Azerbaijan “On Amendments to the Criminal Code of the Republic of Azerbaijan” dated 17 March 2020, where the violation of anti-epidemic, sanitary-hygienic or quarantine regimes causes the spread of diseases or poses a real threat to the spread of diseases, such violation

- is punished by the penalty at the rate from two thousand five hundred up to five thousand manats or restriction of freedom for the term up to three years or imprisonment for the term up to three years.

Where the same actions cause death or other serious consequences due to negligence, such violation

- is punished by imprisonment for the term from three up to five years.

Dates of Novruz, Ramadan and Gurban holidays for 2020 have been announced 

On 16 December 2019, the  Ministry of Labor and Social Protection of Population of the Republic of Azerbaijan has announced the dates of  Novruz, Ramadan and Gurban holidays for 2020, which shall be non-working days:

i.  March 20-24 - Novruz holidays;

ii. May 24-25 – Ramadan holidays; and

iii.July 31 and August 1 – Gurban holidays.

 

The Production Calendar for 2020 has been approved

According to the Decision of the Ministry of Labor and Social Protection of Population of the Republic of Azerbaijan dated 16 December 2019, the standard working hours and production calendar for 2020 have been approved. 

The production calendar can be accessed through the following link of the Ministry of Labor and Social Protection of Population of the Republic of Azerbaijan http://sosial.gov.az/istehsalat-tqvimi

The following dates within 2020 have been determined as non-working days due to holidays:

i.   January 1, 2 – New Year;

ii.  March 8 –Women’s day;

iii. March 20-24  - Novruz holidays;

iv.  May 9 - Victory Day on Fascism; 

v.   May 24-25 – Ramadan holidays;

vi.  May 28 - Republic Day;

vii. June 15 - National Salvation Day of Azerbaijan;

viii.June 26 - Day of the Armed Forces of the Republic of Azerbaijan;

ix.  July 31 and August 1 – Gurban holidays;

x.   November 9 - Day of State Flag of the Republic of Azerbaijan;

xi.  December 31 - World Azerbaijanis Solidarity Day.

January 20 - National Day of Mourning has also been determined as a non-working day.

The living minimum for 2020 has been determined

According to the Law “On living minimum in the Republic of Azerbaijan” adopted on 16 December 2019 (“Law”), the amount of living minimum for 2020 in Azerbaijan has been determined as follows:

i.  AZN 190 within the country;

ii. AZN 201 for employment capable population;

iii. AZN 157 for pensioners; and

iv. AZN 170 for children.

The Law enters into force on January 1st, 2020.

 

Law on the limit of a need criteria for 2020 has been adopted

According to the Law “On the limit of a need criteria for 2020 in the Republic of Azerbaijan” adopted on 16 December 2019 (“Law”), the limit of a need criteria for the purpose of determination of the targeted social assistance for 2020 in Azerbaijan has been established in the amount of AZN 160.

The Law enters into force on January 1st, 2020.

Change of working days in December

In order to ensure the sequence of working and non-working days on December 2, 2019, the Cabinet of Ministers of the Republic of Azerbaijan adopted Resolution No. 461 “On the Change of Working and Non-working Days” which declared December 28-29 as working days and January 3 and 6, 2020 as public holidays.

Sample Form Of Internship Contract has been approved

On 16 September 2019, the Cabinet of Ministers of the Republic of Azerbaijan approved the "Sample Form of Internship Contract".

A sample contract form (the “Sample”) has been prepared in accordance with Article 11.3 and Article 11.4 of the Law of the Republic of Azerbaijan "On Vocational Education" (the “Law”). Thus, based on the employer’s proposal, those who undergo training and internships at enterprises and organizations conclude a tripartite labor contract with the participation of educational institution.  According to Article 11.6 of the Law, employers pay to interns who are involved in industrial training the amount not less than the minimum salary for their work and services.

The provisions of contract concluded between an employer and a trainee have also been included in the Sample. Thus, as stipulated in article 1.5 of the sample, a temporary labor contract is concluded between a trainee and an employer for the period of internship without a probation period.

According to article 1.3 of the Sample, at the end of the internship, the trainee will be issued a certificate of internship signed by the employer and vocational training institution.

The Sample also sets employer’s obligations during the internship, which shall be as follows:

• to appoint an expert to guide the internship;

• to instruct trainee on labor protection, sanitary and hygienic standards and rules, equipment operating and internal disciplinary rules;

• to make compulsory insurance against loss of professional ability for trainee in accordance with Article 4 of the Law of the Azerbaijan Republic “On compulsory insurance against industrial accidents and occupational diseases” and article 20.2 of the Law. 

Finally, please note that under the Sample, an employer does not have any obligation to employ an intern upon completion of the internship.

 

Rule and Form of Entering into Electronic Information System Information about New Workplace or Vacancy has been approved

On September 16, the Cabinet of Ministers of the Republic of Azerbaijan approved "Regulation and Form of Entering into Electronic Information System Information about New Workplace or Vacancy" (the "Rules").

The Rules define the procedure and form to enter information about new workplaces or vacancies into Employment Sub-system (the “ES”) of Centralized Electronic Information System (the “CEIS”) of the Ministry of Labor and Social Protection of the Population of the Republic of Azerbaijan (the “Ministry”).

Employers will enter such information (including salary information) into the ES using “e-government” or “e-social” internet portal of the Ministry within five working days from the date of availability of new workplace or vacancy. Annex 1 to the Rules contains the form for entering job related information.

Based on this, the ES will create a staffing schedule for each employer. If an employer terminates a vacant position, it will inform the Ministry within five working days with a formal report to be included in the staffing schedule.

The Mediation Process Rules have been approved

On 5 September 2019, the Cabinet of Ministers of the Republic of Azerbaijan approved the Mediation Process Rules (the “Rules”) in accordance with the Law of the Republic of Azerbaijan “On Mediation” (the “Law”).

According to the Law, mediation applies to civil cases and economic disputes (including those with a foreign element), as well as to the disputes arisen in the field of family, labor, and administrative law relationships. From 1 July 2020, it will be required to attend an initial mediation session before applying to the court in connection with the disputes arising in the field of economic disputes, as well as family and labor disputes.

Initial mediation session is conducted by a mediator or mediator organization, which is mutually agreed by the parties, and the failure to attend the initial mediation session for no good reason will result in liability prescribed by the Law.

The Rules define parties to mediation and mediator himself/herself. Thus, under the Rules, a mediator is an individual who meets the requirements of the Law, being attracted by the parties or appointed by mediation organization to carry out mediation process  professionally and on a fee basis.

The Rules outline the goals and stages of the mediation process. The party applying for mediation shall provide the mediation organization or mediator with brief information about the nature of the dispute, contact details of the parties to the dispute and, if applicable, the attorney or representative representing them.

After the commencement of mediation process, the parties determine the scope of controversial issues that need to be considered and agreed upon. The mediator, in his/her turn, allows each party to fully express their position on the issue without interference, and to express their views on the resolution of the dispute and the desired results.

It should also be noted that, the parties should submit their proposals on their positions and terms of dispute resolution in a written or oral form in order to resolve the dispute. If the parties achieve reconciliation as a result of mediation, the mediator may, at the request of the parties, assist in the preparation of the reconciliation agreement. The mediator determines the terms of the reconciliation agreement with the mutual consent of the parties and informs the parties.

The Rules also stipulate the termination of mediation process. Thus, in the event that reconciliation is reached during mediation process, such process is regarded as  termination.

 

Mediators’ Professional Ethics Rules have been approved

The “Mediators’  Professional Ethics Rules” (the “Rules”), were adopted by the Cabinet of Ministers of the Republic of Azerbaijan on 5 September 2019, with an aim to determine ethical rules and principles for professionals engaged in the mediation process, as well as the relations regarding the observance thereof.

According to the principles set out in the Rules, mediators shall not allow actions (or omissions) that violate the rights and freedoms of people and citizens, violate their dignity and business reputation, shall apply the respective laws during the performance of their duties, always protect their dignity and avoid during their professional activities any acts that might undermine the authority of mediation.

 

Rules on Training and Professional Development of Mediators have been approved

Under the “Rules on Training and Professional Development of Mediators” adopted by the Cabinet of Ministers of the Republic of Azerbaijan on 5 September 2019 (the “Rules”), initial training and professional development of mediators are carried out by mediation training institutions on a fee basis. Thus, training on mediators’ initial training and professional development can be conducted by a mediator who has conducted at least ten mediation cases within last two years, has relevant pedagogical experience in mediation, and has been certified by international mediation organizations. Mediator training programs include theoretical part (lectures), practical exercises, trainings and staged mediation games.

The Rules also set out the list of documents that individuals wishing to become mediators should submit to a mediation training institution for participation in the initial training.

Upon completion of mediators’ initial training and professional development training, their theoretical knowledge is tested by interview methods and practical skills through the simulation of mediation within five working days. A three-member commission formed by the head of the training institution conducts the examine, and the decision is taken by a simple majority of the members of the commission.

Persons passing the exam successfully will be issued a certificate approved by the Board of Mediation.

 

Rules on Maintaining the Register of Mediation have been approved

On 5 September 2019, the Cabinet of Ministers of the Republic of Azerbaijan adopted a resolution on the approval of the "Rules for Maintaining the Register of Mediation" (the "Rules"). The purpose of this Rules is to determine the list of mediation organizations, mediators and mediation training institutions and ensure access to information about them. Mediators, mediation organizations and mediation training institutions are included in the register by the Board of Mediation within five working days of their membership in the Board of Mediation.

The above-mentioned decision also contains relevant information on mediators, mediation organizations and mediation training institutions to be included in the registry.

 

Rules on Formation and Use of Single Database of Large State-Owned Companies have been approved

On 4 September 2019, the Cabinet of Ministers of the Republic of Azerbaijan adopted a resolution on the approval of the “Rules on formation and use of single database for large state-owned companies”. 

“Single Database for Large State-owned Companies” information system (the “Information System”) is designed to (i) increase transparency in the financial and economic activities of large state-owned companies, (ii) integrate financial, human resources and real estate data on large state-owned companies, and (iii) provide for users of the Information System real-time information on state-owned companies.

The State Committee for Property Affairs of the Republic of Azerbaijan (the “Committee”)  will carry out operator functions over the Information System, and the Information System services will be provided on the  Committee’s official website, as well as through the e-Government portal.

Legal News Update - 15 May 2019

Law On Insolvency and Bankruptcy has been amended

The Law of the Republic of Azerbaijan "On Insolvency and Bankruptcy" (the “Law") was amended by the Decree of the President of the Republic of Azerbaijan, dated 29 April 2019.

According to the Law, the grounds for debtor's insolvency determined by court or creditors have been amended. A debtor will be considered insolvent by the court or the creditor in the following cases:

•  incomplete execution of its obligations vis-à-vis creditors in the course of consecutive 2 (two) months from the due date of the execution and in respect of the reimbursement of damages caused to the life or health, alimony, the obligations arising out of labor and related relationships and the payments under copyright agreements;
•  incomplete execution of taxes (interest and applied financial sanctions) and other state payments within consecutive 10 (ten) months from the date of their calculation; and
•  nonexecution of its obligations vis-à-vis creditors in the specified period.

Other necessary changes to the Law shall include the following:

•  duration for debtor to prepare the rehabilitation plan has been determined 2 (two) months;
•  period for review of petitions filed with the court in connection with the termination or alteration of the property administrator’s decision on approval of settlement agreement with creditors, as well as rejection of creditors’ claims and complaints has been determined as 10 (ten) days.

Law On Telecommunications has been amended

Amendment to the Law of the Republic of Azerbaijan "On Telecommunications" (the "Law") has been entered into force by the Decree of the President of the Republic of Azerbaijan, dated 29 March 2019.

According to the amendment to the Law, an operator or provider has been obligated to take measures by using technical means, equipment or software to prevent illegal international telecommunication services conducted by joining the telecommunications network.

Code of Administrative Offenses has been amended

On 29 April 2019, the Law of the Republic of Azerbaijan “On Amendment to the Code of Administrative Offenses of the Republic of Azerbaijan" (the "Law") came into force by the Decree of the President of the Republic of Azerbaijan.

According to the Law, organization of illegal international telecommunication services by establishing the telecommunication operator’s or provider's telecommunications network through a relevant device has been identified as an administrative offence.   Along with confiscation of equipment and means used to commit such an administrative offense, monetary penalties have been introduced for the said violation.

Moreover, monetary penalties shall apply in case of failure by the telecommunications operator or provider to prevent by means of technical facilities, equipment or software, the use of illegal international telecommunication services conducted by joining the telecommunications network through an appropriate device.

Regulation on Single Internet Portal for Public Procurement has been approved

On 16 April 2019, the Regulation on Single portal for Public Procurement has been approved by the Decree of the President of the Republic of Azerbaijan.

The portal provides users with the opportunity to publish a tender announcement, submit relevant documents to the supplier (contractor), pay the participation fee, register the supplier as a bidder, create electronic data room, exchange information and documents between the buyer and the supplier, submit tender proposals and provide security, conduct virtual meetings of the tender commission, arrange the electronic signing of procurement contracts, place the relevant contract and other documents based on tender results, file complaints and obtain decisions on their results, submit invoices to the procuring company and etc.

The State Agency for Antimonopoly Policy and Supervision of the Consumer Market of the Republic of Azerbaijan (the “Agency") is responsible for the management, organization of activity and development of the portal.

With the help of the electronic services module, the suppliers will be able to be registered as applicants and send the relevant documents to the buyer. It will also be possible to maintain a single registry of procurement contracts. 

In addition to the above, the Agency together with the State Agency for Public Service and Social Innovations under the President of the Republic of Azerbaijan will take the necessary measures to integrate the portal into the “Electronic Government” Information System.

Decree on Establishment of Appeal Councils in State-Owned Legal Entities has been signed

On 6 May 2019, the President of the Republic of Azerbaijan signed the Decree “On Establishment of Appeal Councils in State-Owned Legal Entities” (the “Decree”). 

According to the Decree, the Appeal Councils will be established in the state-owned legal entities such as joint-stock companies, limited liability companies and any commercial legal entities in other organizational-legal forms whose 51% or more of the stakes are directly or indirectly owned by the state, as well as non-commercial legal entities and public legal entities established by the State. 

It should be noted that “legal entities” under the Decree do not include the legal entities subordinated to the legal entities themselves owned by the State or by the central and local executive authorities.

State Program On Food Safety in Azerbaijan for 2019-2025 has been approved 

The State Program in the field of food safety for 2019-2025 has been approved on the basis of Article 5.5 of the Decree no. 1235 of the President of the Republic of Azerbaijan On “Additional measures for improvement of the food safety system in the Republic of Azerbaijan” dated 10 February 2017.

Core targets of the State Program have been determined as follows:

•  adaptation of norms and standards in the field of food safety with international requirements; 
•  improvement of the population's safe and quality food supply; 
•  increase of food safety and quality, increasing their competitiveness and export potential to foreign markets; 
•  compliance of the activity of food subjects with the requirements of the legislation on food safety in cooperation with entrepreneurs; 
•  animal and plant health in accordance with the international best practice.
• It’s planned to carry out the priority activities by the working groups to be established by the relevant state authority in order to achieve the successful implementation of the State Program. The activities should include the following:
•  optimizing existing laboratories in the area of food safety, creating new laboratories that meet modern requirements and providing logistics;
•  establishing a food safety training center; 
•  creation of subjects and objects of the food sector acting in all stages of the food chain, as well as production of food products and database of trade flows;

- carrying out activities related to the electronic issuance of export certificates and implementation of measures for their recognition by importing countries.

Legal News Update - 10 April 2019

The Law on Mediation has been adopted

The President of the Republic of Azerbaijan signed the Decree on April 3, 2019 on the application of the Law of the Republic of Azerbaijan "On Mediation" No 1555-VQ dated March 29, 2019 (the "Law"). The Law regulates public relations in the field of mediation, and defines goals, principles, rules of conduct of the mediation, as well as the status of mediators.

A “mediation” means the process defined by the Law on the settlement of the disputes arising between the parties as mediated by mediator (mediators) based on mutual consent.

A "mediation process" agreement is signed between the parties in order to resolve the dispute through the implementation of mediation process. Mediation is applied to civil and economic disputes (including those with a foreign element), as well as the disputes arisen in the field of family, labor and administrative law relationships. From 1 July 2020, it will be required to attend the initial mediation session before applying to the court in connection with the disputes arisen in the field of economic, family and labor relations. The initial mediation session is carried out by a mediator or a mediator organization, which the parties have agreed to, and party’s non-participation at the initial mediation session without any valid reason entails liability prescribed by the Law.

According to the Law, the Mediation Council (the "Council") will carry out the regulation and control over mediation. Moreover, initial training for the persons wishing to become mediators and the professional development of the mediators will be carried out by the mediation training body.

Under the Law, subject to some exceptions, disputes arising from adoption, execution or cancellation of administrative acts by the administrative bodies or from any other action or omission of the administrative body can be settled through mediation in accordance with the Law of the Republic of Azerbaijan "On Administrative Execution".

In addition to the above, the Law defines the definition of a "judicial mediation." Thus, according to the Law, at any stage of the proceedings and by taking into account the circumstances of the case, the court may propose to resolve the disputes through mediation process at its own discretion and subject to the parties’ consent or by the request of one of the parties and subject to other party’s consent. In this case, the court proceedings are suspended until the settlement agreement and the protocol on the result of mediation process are submitted.

Decree on Reforms in Judicial System

Action plan on deepening of the reforms in the judicial system has been set up by the Decree of the President of the Republic of Azerbaijan, dated 3 April 2019 (the “Decree”). 

The Decree is directed to broaden the reform of the judicial practice, improve the social conditions of the court staff, develop the judicial proceedings and appeal procedures. 

The Decree stipulates the creation of a specialized court on tax and customs payments, the disputes arising out of payment of mandatory state social insurance contributions and other matters with regard to the entrepreneurial activity. The aim is to facilitate the entrepreneurs' access to court and to ensure the consideration of the disputes pertaining to entrepreneurial activity by the judges who would have deeper legal knowledge and experience in the relevant field.  At the same time, measures to promote international arbitration procedures have been envisaged in our country in order to extend the out-of-court settlement of disputes over entrepreneurial activity.

In addition to the above, the Decree provides implementation and strengthening of the following measures:

- ensuring the independence of judges and improving the mechanisms for preventing from an intervention in the judicial activities;

- substantial increase of compensation of the judges;

- differentiation of rates of the state duty paid for the court cases in accordance with the value of the claims;

- directing part of the paid state duty to strengthening the social protection of judicial staff employees and strengthening the material and technical conditions of the courts;

- examination of the possibility to apply advanced international experience in Azerbaijan in order to empower private institutions to execute decisions of the court and other state bodies as an alternative mechanism of the execution;

- analyzing advanced international experience in implementation of judicial expertise by private agencies;

- taking actions in formation of the court practice and publication of the court decisions in electronic form;

- carrying out relevant technical measures to ensure fast and effective search in the "Electronic Court" information system;

- allocation of funds directly to the Bar Association of Azerbaijan for legal support rendered at the state expense; and

- continuous audio recording of court proceedings and compilation of the minutes as per audio recording of the court proceedings to ensure the objectivity.

Legal News Update - 27 February 2019

The amount of minimum salary in the country has been increased

According to the Order of the President of the Republic of Azerbaijan dated 08 February 2019, the amount of minimum salary in the country has been determined as AZN 180 effective as of 01 March 2019.

Amendments to the Laws “On Regulation of inspections in the area of entrepreneurship and protection of interests of entrepreneurs” and “On suspension of inspections in the area of entrepreneurship” have been adopted

In accordance with the Amendments to the Laws of the Republic of Azerbaijan “On Regulation of inspections in the area of entrepreneurship and protection of interests of entrepreneurs” and “On suspension of inspections in the area of entrepreneurship” adopted on 12 February 2019, inspections in the area of financial markets have been added to the list of inspections which are not suspended and can be carried out by appropriate state authorities.  

It should also be mentioned that in accordance with the changes made to the above mentioned Laws on 28 December 2018, customs inspections have also been added to the list of inspections which are not suspended and can be carried out by appropriate state authorities.  

 

Action Plan for 2019-2020 on reduction of negative impact of plastic wastes to the environment has been approved

According to the Order of the President of the Republic of Azerbaijan dated 07 February 2019, “Action Plan for 2019-2020 on reduction of negative impact of plastic wastes to the environment” (the “Action Plan”) has been approved. The Action Plan has been prepared in accordance with the Strategic Road Map on the Production and Processing of Agricultural Products in the Republic of Azerbaijan.

The main aim of the measures under the Action Plan has been defined as reduction of pollution of plants, animals, land and water resources created by mass use of plastic products. The Action Plan identifies two strategic targets for achieving this: efficient management of plastic waste and reduction of the rate of plastic waste creation.

 

Law “On State Registration and State Registry of Legal Entities” has been amended

New amendments have been made to the Law “On State Registration and State Registry of Legal Entities” (the “Law”) since 05 February 2019.  According to the new amendments, new Article 9-1 on “Electronic registration of changes in constituent documents and subsequent change of the registered facts of a limited liability company” has been added to the Law.

According to the new Article, any changes in constituent documents of a limited liability company (except for changes in case of reorganization), as well as subsequent change of the registered facts can be made through electronic application to the Ministry of Taxes of the Republic of Azerbaijan (the “Ministry of Taxes”). A necessary electronic application form can be found on the web page of the Ministry of Taxes and the scanned copies approving the changes shall be attached to the electronic application and approved with enhanced electronic signature. 

The participant(s) and legal representative(s) of a limited liability company shall approve the application with respect to the change of the legal representative via enhanced electronic signature.  In the event that the changes are made to the charter, the software will provide the draft amendment to the charter, and the participant(s) will be able to review and approve it via enhanced electronic signature. 

The Ministry of Taxes shall register the changes within three days, as long as such changes comply with the Law. The Ministry of Taxes shall also provide the founders or other authorized representative(s) of the limited liability company with the original copies of the extract from the commercial registry and amended documents and send their electronic copies to the electronic cabinet of the limited liability company. 

The electronic registration is also applicable for changes (excluding change of founder) in the constituent documents of a limited liability company with foreign investment having foreign or stateless person as a founder.  

It should be added that by virtue of the amendments made to the Law on 28 December 2018, the concept of electronic cabinet has been introduced.  Electronic Cabinet is a personal electronic page, which is accessed by an electronic signature or password issued by the Ministry of Taxes aimed at mutual exchange of information and documents for the purposes of the Law.

The Law provides for some changes in the registration of limited liability companies with local investment. Thus, in order to carry out e-government registration of a limited liability company with local investment, an electronic application form is filled in with the appropriate authentication in the internet information resource. If the founder(s) and the legal representative(s) are not same persons during e-registration, the application should be confirmed by enhanced electronic signature of both the founder(s) and the legal representative(s).  During e-registration, the necessity to approve the charter by enhanced electronic signature of the founder has been abolished.

A limited liability company with local investment having undergone e-registration must further send to the Ministry of Taxes information on initiation of its business activity signed by its legal representative(s) through enhanced electronic signature within two working days upon the state registration.

In addition to the above, under the Law, the mobile operators must respond on an online basis the request of the Ministry of Taxes for the purposes of identification of the mobile number during the state registration of a limited liability company with local investment.

 

New powers have been granted to the Financial Monitoring Service of the Republic of Azerbaijan 

A number of new powers have been granted to the Financial Monitoring Service of the Republic of Azerbaijan (the “FMS”) under the Decree of the President of the Republic of Azerbaijan dated 04 February 2019 (the “Decree”).  Thus, according to the Decree, improving the supervisory system in connection with the prevention of legalization of the criminally obtained funds or other property and financing of terrorism has been dismissed from the authorities of the Financial Market Supervisory Authority of the Republic of Azerbaijan (the “FIMSA”).

Accordingly, in consideration of the provisions of the Law of the Republic of Azerbaijan "On Cashless Settlements", the FMS shall examine the proceeds of the funds withdrawn from banks in light of the Law of the Republic of Azerbaijan "On Combating the Legalization of Criminally Obtained Funds or Other Property and Financing of Terrorism" and provide for the measures envisaged by the legislation. 

Moreover, under the Decree the amendments have been made to the "List of Officials Who Have the Right to Consider Cases on Administrative Offenses".  Thus, the supervision over the administrative offenses contained in Article 598 of the Code of Administrative Offenses of the Republic of Azerbaijan (in relation to pawnshops and persons providing brokerage services with regard to real estate) shall be exercised by the Chairman of the Management Board and his/her deputies on behalf of the FMS.

Legal News Update - 18 February 2019

The minimum monthly salary was increased

The President of the Republic of Azerbaijan amended the Decree "On Increase of the Minimum Monthly Salary" No. 3545 dated 25 December 2017 as of 8 February 2019. According to the amendment, the minimum monthly salary in the country has been increased in amount of AZN 50 and set as AZN 180. Consequently, the minimum monthly salary of the state-funded employees and the employees of the private sector with salary less than AZN 180 should be adjusted to the new minimum salary ranges within one month. 

The Order enters into force on 1 March 2019.

Legal News Update - 28 December 2018

Dates of Novruz, Ramadan and Gurban holidays for 2019 have been announced 

On 19 December 2018, the Cabinet of Ministers of the Republic of Azerbaijan has announced the dates of  Novruz, Ramadan and Gurban holidays for 2019, which shall be non-working days: 

i.March 20, 21, 22, 23, 24  - Novruz holidays;

ii.June 5, 6 – Ramadan holidays; and

iii.August 12, 13 – Gurban holidays.

 

The Production Calendar for 2019 has been approved

According to the Decision of the Ministry of Labor and Social Protection of Population of the Republic of Azerbaijan dated 25 December 2018, the standard working hours and production calendar for 2019 have been approved.

The following dates within 2019 have been determined as non-working days due to holidays:

i.January 1, 2 – New Year;

ii.March 8 –Women’s day;

iii.March 20, 21, 22, 23, 24  - Novruz holidays;

iv.May 9 - Victory Day on Fascism;

v.May 28 - Republic Day;

vi.June 5, 6 – Ramadan holidays;

vii.June 15 - National Salvation Day of Azerbaijan;

viii.June 26 - Day of the Armed Forces of the Republic of Azerbaijan;

ix.August 12, 13 – Gurban holidays;

x.November 9 - Day of State Flag of the Republic of Azerbaijan;

xi.December 31 - World Azerbaijanis Solidarity Day.

January 20 - National Day of Mourning has also been determined as a non-working day.

The living minimum for 2019 has been determined

According to the Law “On living minimum in the Republic of Azerbaijan” adopted on 21 December 2018 (“Law”), the amount of living minimum for 2019 in Azerbaijan have been determined as follows:

i.AZN 180 within the country;

ii.AZN 191 for employment capable population; 

iii.AZN 149 for pensioners; and 

iv.AZN 160 for children.

The Law enters into force on 1 January 2019.

 

New rules on “Green Corridor” have been approved

On 21 December 2018, the President of the Republic of Azerbaijan approved the new Rules “On obtaining, suspension, termination and restoration of the rights of foreign trade participants on permanent use of the “Green Corridor” customs clearance system” (“New Rules”).

The New Rules become effective from 1 February 2019.

The New Rules have been prepared in accordance with the Rules “On Green Corridor and other customs clearance systems for goods and transportation means crossing the border” (“Rules on Green Corridor”).

“Green Corridor” is a customs clearance system, which allows release of goods and means of transport into the customs territory of Azerbaijan without their physical inspection.   

Clearance of goods and means of transport through “Green Corridor” customs clearance system is carried out based on short import declaration to be submitted electronically with the customs authorities at least one hour before the goods cross the border.

The Rules on Green Corridor stipulate that importers will be categorized into high, medium and low risk groups in order to be able to apply the available customs clearance systems, including the “Green Corridor” customs system.

Only importers with low or medium (in certain cases) risk category will be eligible to benefit from “Green Corridor” customs clearance system.

By virtue of the New Rules, importers belonging to a low risk category and which meet all of the following requirements may obtain the right of permanent use of the “Green Corridor” system for import-export operations:

1.having experience on import operations within the last one year;

2.capable of using electronic services provided by the customs authorities or having an agreement with an authorized representative who has the ability to use such electronic services;

3.carrying out transportations using transportation means that meet international transportation standards;

4.using warehouses meeting the requirements established by the Cabinet of Ministers of the Republic of Azerbaijan;

5.lacking criminal conviction on smuggling or avoidance of payment of customs duties or whose criminal conviction has been redeemed.

The right of permanent use of the “Green Corridor” customs clearance system grants its holders certain privileges within their import-export operations, such as, inter alia:

i.faster clearance of goods and transportation means through the customs borders; 

ii.carrying out of customs clearance services by the customs authorities in priority order; 

iii.minimization of customs audits and physical inspections;

iv.carrying out of customs examination of goods by customs authorities in priority order;

v.based on the consent of customs authorities, carrying out of customs clearance of goods imported into the customs territory and exported from this territory by customs officers outside their workplaces and beyond their working hours;

vi.direct transportation of the imported goods into warehouses designated by the importers; etc.

The New Rules further determine the procedure for suspension, termination and restoration of the right of permanent use of the “Green Corridor” customs clearance system.

 

New changes in the Code of Administrative Offences 

On 10 December 2018, new changes were adopted to the Code of Administrative Offences. New offences aimed at restriction of use of tobacco products have been determined as follows: 

i.Pollution of environment with tobacco products waste – penalty of AZN 50 (fifty); 

ii.Attracting minors to smoking through buying, giving, offering or demanding tobacco products – penalty of AZN 100 (one hundred); and

iii.Failure to prevent tobacco smoking at places prohibited by the Law of the Republic of Azerbaijan "On restriction of use of tobacco products" (except for special places arranged for smoking tobacco) - for officials penalty of AZN 500 (five hundred), for legal entities – AZN 1,200 (one thousand two hundred).

New changes in excise stamp 

According to the changes to the Code of Administrative Offences adopted on 20 December 2018, the article containing liability for selling, storing, removing from production building and cash purchase of products required to be labeled with excise stamps without such stamps has been abolished. 

The change becomes effective as of 01 January 2019.

 

Legal News Update - 18 October 2018

Adoption of the rules on obtaining information with respect to founders (shareholders), their shares in the charter capital  of commercial legal entities and owners of securities

On 10 October 2018, the Cabinet of Ministers of the Republic of Azerbaijan approved the Rules “On providing information to the monitoring participants and other persons participating in monitoring with respect to founders (shareholders) of commercial legal entities, their shares in the charter capital and owners of securities” (“Rules”). 

With reference to the Law of the Republic of Azerbaijan “On Prevention of the legalization of criminally obtained funds or other property and the finance of terrorism” dated 10 February 2009 (“Law”), monitoring participants include:

• Credit institutions;

• Insurers, reinsurers and insurance intermediaries;

• Investment companies;

• Legal entities providing leasing services;

• Entities and other organizations providing post services which are engaged in transfers of funds;

• Pawnshops;

• Investment funds and their managers;

• Non–governmental organizations, branches/representative offices of foreign non-governmental organizations in the Republic of Azerbaijan as well as religious organizations engaged in receipt, collection, delivery or transfer of the funds as an integral part of their activities;

• Persons that have obtained a license for currency exchange activities.

According to the Law, other persons participating in monitoring are comprised of:

• Physical persons or legal entities engaged in the purchase and sale of precious stones, precious metals, including jewelry and other household articles made of precious stones or precious metals;

• Physical or legal persons providing brokerage services on real estate purchase and sale;

• Lottery and sports betting games organizers;

• Lawyers, notaries, persons providing legal services as well as accounting and tax advisory, audit services.

By virtue of the Rules, monitoring participants as well as other persons participating in monitoring can now, based on a request and free of any charge, obtain information on founders (shareholders) of commercial legal entities as well as their respective shares in the charter capital, and on owners of securities while carrying out due diligence, enhanced and on-going due diligence measures in cases defined under the Rules as well as the Law, which include, inter alia, establishment of business relations, conducting transactions (single or series of related transactions) in the value of AZN 15,000 or above, etc. 

The Ministry of Taxes of the Republic of Azerbaijan acts as an information holder with respect to founders (shareholders) of commercial legal entities and shares they own in the charter capital, while the National Depositary Center acts as a holder of information on owners of securities. 

In order to submit requests on obtaining the aforementioned information, the monitoring participants as well as other persons participating in monitoring shall register in the information system of the Ministry of Taxes and Financial Markets Supervisory Authority of the Republic of Azerbaijan through using an enhanced electronic signature.

 

Legal News Update - 2 October 2018

The Constitutional Court adopted new decision relating to termination of loan agreements in connection with significant change in circumstances On September 7, 2018, in accordance with Article 130 of the Constitution of the Republic of Azerbaijan, the Constitutional Court of the Republic of Azerbaijan (“Court”) considered the case based on application from the Baku Appeals Court to comment on Article 422 of the Civil Code of the Republic of Azerbaijan (“Civil Code”). Article 422 of the Civil Code regulates the issues with regard to the change and termination of a contract due to significant change in its circumstances. The change of circumstances is deemed significant in the event that the contract would be concluded on substantially different terms or would not be concluded at all if the parties could reasonably predict such a change. The Court in its decision resolved that it does not consider the change of Manat's exchange rate unexpected or unpredictable for the parties since according to Article 5.0.3 of the Law of the Republic of Azerbaijan “On Central Bank of the Republic of Azerbaijan”, the Central Bank regularly establishes and announces the official exchange rate of Manat. The position of the Court is that in accordance with Article 422 of the Civil Code, the change of exchange rate of Manat cannot be considered unexpected for the parties, and cannot be regarded as a substantial change due to the fact that the borrower takes the financial risk by borrowing means in foreign currency. It should also be noted that the Court, taking into account the change of exchange rate of Manat, considered appropriate that the terms of loan agreements in foreign currency are changed in the interest of the population depending on the banks' financial capacities. “First in Azerbaijan” investment promotion mechanism to be developed and established On 19 September 2018, the President of the Republic of Azerbaijan adopted the Decree “On additional measures to support competitive domestic production in the non-oil sector” (“Decree”). The President of the Republic of Azerbaijan has tasked the Cabinet of Ministers of the Republic of Azerbaijan to prepare within three months of proposals and draft legislative acts on: 1.    “First in Azerbaijan” investment promotion mechanism for the production of new competitive products not produced in the country; 2.    State support mechanism to internal market research to support the competitive production of micro, small and medium businesses; 3.    State support mechanism to increase employment capacity to support the production activity of micro, small and medium businesses; 4.    Application of customs privileges to imports of raw materials not produced in the country and used in domestic production; 5.    Expansion of sales of products produced by micro and small businesses in trade networks; 6.    “Exemplary Regulations of Clusters of Micro, Small and Medium Business Entities”; 7.    Rules regulating “Investing in Azerbaijan” mechanism to support direct investment in the country's economy. With the aim of increasing the competitiveness and export capacity of the non-oil sector, the President has tasked the Ministry of Economy of the Republic of Azerbaijan to: 1.    Submit proposals within three months on entering into the global value chains of enterprises operating in the country; 2.    Prepare a list of specific products which if domestically produced can be competitive on a comparable basis; 3.    Establish the working group to ensure implementation of the above paragraph with participation of the representatives from the Ministry of Taxes, the Ministry of Transport, Communications and High Technologies, the Ministry of Energy, the State Customs Committee, the State Statistical Committee, the State Agency for Control of Antimonopoly and Consumer Market, the Intellectual Property Agency, the Ministry of Agriculture and the State Oil Company of the Republic of Azerbaijan; 4.    Undertake measures to attract foreign direct investment into the non-oil sector by using the opportunities of www.azexport.az and www.enterpriseazerbaijan.com internet portals, introduce open investment projects for alternative financing, expand access to traditional and new markets for local goods, accelerate the process of integration of non-oil products producers into the international market and increase the export capacity of this sector. With the aim of improving direct foreign investment attractiveness of Azerbaijan, the President has instructed the Centre of Economic Reform Analysis and Communication to launch “www.enterpriseazerbaijan.com” internet platform, which shall reflect information on projects open for alternative financing and new investment opportunities in the country.

 

Legal News Update - 31 May 2018

Law "On Free Economic Zone of Alat” 

The draft law "On Free Economic Zone of Alat" (the Law) has been approved by the Parliament of Azerbaijan on 18th of May 2018. 

The Law determines the legal regime of activities, development and management of the free economic zone of Alat in accordance with clause 1 and 10 of Section I of Article 94 of the Constitution of the Republic of Azerbaijan. 

Pursuant to the Law, competent body (the administrative body responsible for the activities of the free zone and conducting the control over the activities thereof), administrative facilities, legal entities and their employees, as well as the residents of the free zone are exempt from all taxes related to their activities in the free zone. The regulatory requirements of the main economy (the rest of the jurisdiction of Azerbaijan except for the free zone) can be applied to the services and goods provided by the legal entities or residents of the free zone to any taxpayer of main economy. 

Goods and services imported to the free zone are not subject to customs duties and taxes. 

For the purpose of regulation and control over the activities within the free zone there free zone authorities, administrative facilities, free zone economic, labor and other legislation, internal rules and regulations will be established.

The free zone sets up a customs office which carries out its activities in accordance with the strategic objectives, international practices and legislation of the free zone. 

Under the Law, investors, entrepreneurs, residents, legal entities of the free zone and their employees are entitled to conduct transactions in any currency, without any limitation. 

It is the requirement of the Law, that the competent body of the free zone should ensure the establishment of an arbitration center or body for settlement of disputes. 

Along with Azerbaijani and English, other languages can be used as a working language in the territory of the zone. In case of discrepancies between the English and Azerbaijani, the language opted by the agreement of the parties shall prevail.

 

Decree “On Additional Measures to Improve the Activity of the Mortgage and Credit Guarantee Fund (“Fund”) of the Republic of Azerbaijan

For the purposes of improving the supply of people with housing, increasing opportunities to receive mortgage loans, and minimizing the risks of mortgage and credit and guarantee mechanisms, the President of the Republic of Azerbaijan has signed the Decree on “Additional Measures to Improve the Activity of the Mortgage and Credit Guarantee Fund (“Fund”) of the Republic of Azerbaijan” as of 1 May 2018.

By virtue of the Decree, Rules on “Procedures for provision of guarantees on mortgage loans issued by the Mortgage and Credit Guarantee Fund” has been approved. 

According to the Decree, the Cabinet of Ministers must present within a month proposals regarding the exemption of the Fund from tax liabilities, as well as the exemption of authorized banks and borrowers from tax obligations when the Fund makes payments on guarantees. 

Under the Decree, the Cabinet along with the Fund should define the volume of the funds that will be needed to grant subsidies in 2019-2021 for loans issued since January 1, 2018. 

Furthermore, Financial Markets Supervision Authority of Azerbaijan must define and present to the President the special economic regulations and requirements to ensure banks' active participation in mortgage lending and in activity of the credit and guarantee system.

Decree was signed in accordance with clause 32 of Article 109 of the Constitution of Azerbaijan and eliminates the Fund's authority to determine the limit on subsidies for each authorized bank. 

The Fund should also ensure creation of a special reserve fund to cover possible financial losses.

 

Rules “On Procedures for provision of guarantees on mortgage loans issued by the Mortgage and Credit Guarantee Fund” 

Rules “On Procedures for provision of guarantees on mortgage loans issued by the Mortgage and Credit Guarantee Fund” approved by the Presidential Decree of 01 May 2018 define general issues related to the provision of guarantees on mortgage loans issued by the Mortgage and Credit Guarantee Fund of the Republic of Azerbaijan. 

According to the Rules, guarantees shall be issued only on mortgage loans that meet the requirements of the Mortgage Loan Regulations. 

The proportion of the amount of guaranteed mortgage loan to the value of the loan as of the date of loan issuance set by an independent appraiser should not be less than 60% and not more than 85%.

The rules further define the terms of issuance of guarantees, formation of reserve fund, restructuring of mortgage loan, execution of a guarantee obligation, termination of a guarantee obligation. 

 

 

 

Legal News Update - 2 May 2018

Amendments to Civil Code

The President of the Republic of Azerbaijan has approved the law on “Amendments to the Civil Code of the Republic of Azerbaijan” dated 3 April 2018.

The Amendments particularly introduce provisions defining liabilities of individuals acting on behalf or represented in the governing bodies (supervisory board, executive body) of a legal entity (“Authorized Representative”). 

Following the Amendments, any Authorized Representative not fulfilling or improperly fulfilling respective obligations in the interests of a legal entity shall bear responsibility for the damages inflicted to such legal entity or its shareholders in the following cases: 

•  provision of bonuses to the members of governing bodies of a legal entity in the amount disproportionate to the profit of a legal entity or when such legal entity is operating at loss;

•  alienation or commissioning of the property of a legal entity with significantly lower terms and conditions than the market conditions;

•  conclusion of contracts with the related persons to a legal entity leading to violation of the legislative requirements or damaging the interests of a legal entity;

•  purchase of goods (works, services) by a legal entity on the basis of contracts significantly higher than their real value;

•  acquisition or waste of a legal entity's property for gaining rights to material and non-material property benefits and to such property either for himself/herself, for related persons to a legal entity or other persons;

•  conclusion of unfair deals with respect to shareholders.

The Amendments also introduce the procedures to be followed by the shareholder of a legal entity owning at least 5% of shares, in case any of the aforementioned cases occur.

Moreover, as per the Amendments, any Authorized Representative may be dismissed from his/her position based on the resolution of a general meeting, for the damages incurred to a legal entity and will not be relieved from an obligation to compensate the damages, regardless of imposition of either a criminal or administrative liability.

By virtue of the Amendments, the audit committees of a Limited Liability Company and a Joint Stock Company may now consist of the members of their supervisory boards. 

 

Measures regarding licenses and permissions

For the purposes of implementation of the Law on “Licenses and permissions” dated 15 March 2016, the President of the Republic of Azerbaijan signed the following Decrees on 23 April 2018:

•  On “Amendments to the Decree of the President of the Republic of Azerbaijan on Certain Measures with respect to the Licensing Activity (“Decree”);

•  On “Abolition of the Decree of the President of the Republic of Azerbaijan on Certain Issues in Regulation of Entrepreneurship Activity”;

As per the Amendments, addendums to the provisions of the Decree governing issuance, suspension, restoration and annulment of the licenses, as well as certain lists outlining licensing activities and their state duties have been eradicated and are no longer applicable.  

 

Improving administration in the areas of consumer market supervision, standardization, metrology and protection of intellectual property rights 

By virtue of the Decree of the President of the Republic of Azerbaijan on “Measures regarding the improvement of administration in the areas of consumer market supervision, standardization, metrology and protection of intellectual property rights” dated 20 April 2018, the State Committee on Standardization, Metrology and Patent (“Committee”) has been abolished and the following bodies have been established:

•  State Agency for Antimonopoly and  Control of Consumer Market of the Republic of Azerbaijan (“State Agency”’);

•  Agency on Intellectual Property (as a result of merger of Copyright Agency of the Republic of Azerbaijan and the Centre for Patent and Trademarks of the Republic of Azerbaijan) (“Intellectual Property Agency”). 

Authorities of the Committee on technical regulation, standardization, metrology, conformity assessment, accreditation and quality management have been transmitted to the State Agency, while authorities on protection of industrial property objects have been allocated to the Intellectual Property Agency.

 

Legal News Update - 1 February 2018

The Draft Law on Investment Activity to be developed

For the purposes of increasing the volume of investment flows in national economy, improving business-investment environment and legislation on investments protection, as well as ensuring favorable business environment for foreign investors which allows them to operate in accordance with internationally recognized standards, the President of the Republic of Azerbaijan has signed the Decree on “Some measures related to promotion of investment activity and protection of the rights of foreign investors” as of 18 January 2018. 

According to the Decree, the new draft law on “Investment Activity” with consideration of current laws on “Investment Activity” and “Protection of foreign investments” as well as international practice shall be presented to the President of the Republic of Azerbaijan within 3 months and reflect the minimum provisions stated below:

• Main tendencies of state policy in the field of investment activity;

• A set of measures promoting investment activity;

• Mechanisms on protection of investors’ rights and rules on granting them a state guarantee;

• Dispute resolution methods (including international arbitration rules);

• Compensation of damages and repayment of lost benefits to the investors;

 

Legal News Update - 11 January 2018

Law on restrictions on use of tobacco products

The new Law of the Republic of Azerbaijan “On restrictions on use of tobacco products” (“Law”) has been approved by the President of the Republic of Azerbaijan.

By virtue of the Law, individuals and legal entities while selling tobacco products are not allowed to encourage the tobacco users by means of distributing free products or free samples, offering tobacco products as a lottery, competition, sports competitions, awards for games, etc.

The Law also prohibits all forms of advertising or promotion of tobacco products, as well as through sponsorship of tobacco products.

Smoking in public areas, buildings and facilities such as educational, health and sport centers and institutions, including their areas, public-catering facilities, including restaurants, cafes, bars, trade facilities, cinemas, theaters, elevators, workplaces, etc. has been banned by the Law. The breach of this rule is subject to the administrative penalty of AZN 30 according to Article 212.1 of the Code of the Republic of Azerbaijan on Administrative Offences (“Code”).

The Law requires all enterprises, institutions and organizations to ensure that boards with signs or marks “smoking is prohibited” are placed in the areas mentioned above.  Failure to comply with this requirement is subject to the administrative penalty of AZN 400 for officials and AZN 1,000 for legal entities pursuant to Article 212.2 of the Code.

Additionally, special areas for smoking, either open or closed with special ventilation systems can be arranged. Rules on arranging such special smoking areas and the legislative requirements on them shall be further developed and adopted by the Cabinet of Ministers of the Republic of Azerbaijan within the three months period.

Unemployment allowance has been annulled

According to the Decree #608 of the Cabinet of Ministers of the Republic of Azerbaijan, the Rules approved by the Cabinet of Ministers of the Republic of Azerbaijan “On calculation and payment of unemployment allowance” have been annulled as a result of implementation of the Law of the Republic of Azerbaijan “On unemployment insurance”, which has been effective since 01 January 2018.

Agency on development of small and medium  entrepreneurship has been established 

By virtue of the Decree of the President of the Republic of Azerbaijan dated 28 December 2017, the Agency On Development of Small and Medium Entrepreneurship (“Agency”) has been established as a public legal entity under the Ministry of Economy of the Republic of Azerbaijan. The Agency is aimed at supporting the development of small and medium entrepreneurship in the country and shall carry out a range of services to SME subjects, coordinate and regulate the services of state authorities in this area.

“Small and Medium Entrepreneurship Houses” shall be established within the Agency, which shall offer small and medium-sized businesses a range of services, such as training, consulting, information, business incubator, innovation center, financial services, etc. in the country's major cities and regions.  The activities of such houses will be carried out through ASAN service centers and the departments of the Ministry of Economy of the Republic of Azerbaijan in the regions where ASAN service centers are not present.

Minimum monthly salary has increased 

By virtue of the Decree of the President of the Republic of Azerbaijan, the minimum monthly salary in Azerbaijan has been defined as AZN 130 as of 01 January 2018.

Living minimum has increased

In accordance with the Law of the Republic of Azerbaijan “On living minimum in the Republic of Azerbaijan” adopted on 01 December 2017, the living minimum in Azerbaijan has been defined as AZN 173 for the country, AZN 183 for the employable part of the population, AZN 144 for pensioners and AZN 154 for children for 2018.

Mortgage and Credit Guarantee Fund has been established

The President of the Republic of Azerbaijan has signed the Decree “On a number of measures related to the establishment and functioning of the Mortgage and Credit Guarantee Fund of the Republic of Azerbaijan (“Fund”)”, according to which the Fund has been established as a result of merging of Azerbaijan Mortgage Fund and Credit Guarantee Fund Open Joint Stock Companies.  The Fund has been established in the form of a non-commercial legal entity as a legal successor of those joint stock companies. 

The Fund is responsible for establishing a mechanism for providing long-term mortgage lending to the population in the Republic of Azerbaijan with respect to living areas, providing assistance in attracting local and foreign financial resources to mortgage lending, granting guarantees to entrepreneurs for their loans in Manat from authorized banks as well as subsidizing the part of the interest accrued on those loans in cases and order determined by the President of the Republic of Azerbaijan.

The form of quarterly reports on unemployment insurance has been approved

The Ministry of Labour and Social Protection of Population of the Republic of Azerbaijan approved the form of the quarterly reports on unemployment insurance on 20 December 2017.

Please follow the below link to find the form of the report: http://e-qanun.az/framework/37452 

Several Rules on Unemployment Insurance have been adopted

On 29 December 2017, the Cabinet of Ministers of the Republic of Azerbaijan adopted several decrees approving rules related to implementation of unemployment insurance. The Rules are effective from 01 January 2018 and comprise the following:

1. The Rules “On issuance of insurance payments”;

2. The Rules “On registration of the unemployment insurance funds and reporting procedure”. These Rules define the procedure for payment of unemployment insurance funds, registration of these funds and reporting.  According to the Rules, the State Social Protection Fund under the Ministry of Labour and Social Protection of Population has been defined as a supervisory state authority in this field.

3. The Rules “On financing of the salaries of the insureds”; 

The Rules “On registration of the employers and the insureds for the unemployment insurance purposes within the insurer”.

 

Legal News Update - 1 December 2017

Decree on ensuring the activity of “Azerbaijan Republic Credit Guarantee Fund” Open Joint Stock Company 

On 29 November 2017, the President of the Republic of Azerbaijan signed the Decree “On Ensuring the activity of “Azerbaijan Republic Credit Guarantee Fund” Open Joint Stock Company (“Fund”)”. By virtue of the Decree, the following legislative acts have been approved:

• The Charter of the Fund;

• The Structure of the Fund;

• The Rules “On guarantying the loans received by entrepreneurs in Manats”;

• The Rules “On implementation of credit rating system and other risk management tools by the Fund”;

• The Rules “On Subsidizing interest rates on loans received by entrepreneurs in Manats”.

The Charter of the Fund (“Charter”)

According to the Charter, the Fund has been established as a legal entity pursuing the aim to increase the access of entrepreneurs to financial resources and stimulate entrepreneurial activity, as well as to form a lending system based on risk sharing in the financial sector.

The Rules “On Guarantying the loans received by entrepreneurs in Manats” (“Rules”)

Pursuant to the Rules, guarantees shall be granted on obligations of entrepreneurs operating in the non-oil sector and applying to their authorized banks for receiving loans to finance their entrepreneurial activity in the territory of the Republic of Azerbaijan. 

The Rules define the conditions under which the guarantees shall be issued as well as the cases when issuing of guarantees is prohibited.

Entities with state share exceeding 50%, entrepreneurs engaged in gambling activities, credit institutions, insurance companies, investment funds and other participants of the financial market are excluded from the scope of entrepreneurs eligible to apply for guarantees.

It is the requirement of the Rules that borrowers shall use guaranteed funds only in accordance with their purpose and in a cashless manner.

The Rules “On Subsidizing interest rates on loans received by entrepreneurs in Manats” (“Rules”)

According to the Rules, interest rate subsidies shall be granted by the Fund on loans received by entrepreneurs from the authorized banks and guaranteed by the Fund.  Under the Rules and for their purposes, interest rate subsidies have been defined as gratuitous financial contribution by the government to entrepreneurs covering the part of the interest rates paid by entrepreneurs under the loans received from their authorized banks and guaranteed by the Fund. 

The Rules further define the criteria, the limits and the conditions for issuing such interest rate subsidies.

Interest rate subsidies would be issued only with respect to loans received by entrepreneurs in Manats from 1 January to 31 December 2018.

 

Legal News Update - 6 November 2017

Suspension of inspections in the area of entrepreneurship has been extended until 2021

On 31 October 2017, the President of the Republic of Azerbaijan approved the Law of the Republic of Azerbaijan “On amendments to the Law of the Republic of Azerbaijan “On suspension of inspections of entrepreneurial activities”” (“Amendment”).

According to the Amendment, inspections in the area of entrepreneurship have been suspended until 1st January 2021. 

By virtue of the Amendment, it has been allowed to conduct inspections of medicine and food products for the purpose of checking their compliance with the quality and safety rules in addition to other fields where inspections were previously allowed to be held. 

 

Legal News Update - 27 October 2017

Credit Guarantee Fund of the Republic of Azerbaijan was established 

The President of the Republic of Azerbaijan has signed the Decree “On measures related to state support for expansion of opportunities for entrepreneurs in access to financial resources in the Republic of Azerbaijan”, on 15 September 2017.

According to the Decree, “Credit Guarantee Fund of the Republic of Azerbaijan” Open Joint Stock Company (“Company”) was established. 

The Company is a legal entity providing  guarantee to entrepreneurs for loans received from authorized banks in Manats and granting subsidies to part of the interest accrued on these loans in cases and in the manner which are yet to be defined.  

The Supervisory Board of the Company consists of 7 member who will work on a voluntary basis. Day to day management of the Company should be exercised by the Board of Directors.

Pursuant to the Decree, “Working Group” was established in order to take actions to ensure the activity of the Company. The Working Group includes the following members:

Kamil Heydarov (Head of the Working Group) – Head of Monetary and Fiscal Policy Division, Department of Economic Policy and Industrial Affairs, Presidential Administration of the Republic of Azerbaijan

Asif Gasimov – Director, Department of Researches, the Central Bank of the Republic of Azerbaijan

Asim Zulfugarov  - Deputy Chief Executive Officer, Financial Markets Supervision Chamber of the Republic of Azerbaijan, Director of Strategic Services Department

Samir Humbatov – Head of Entrepreneurship Development Department, Fund Entrepreneurship Support of the Republic of Azerbaijan

Khalid Ahadov – Chairman of the Board of Directors of the Open Joint Stock Company “International Bank of Azerbaijan”

Jalal Gasimov – Chairman of Supervisory Board of the Open Joint Stock Company “Kapital Bank”

Nuran Kerimov –Managing Partner of Deloitte & Touche  Limited Liability Auditor Company 

Vugar Aliyev – Executive Director of KPMG Audit Azerbaijan Limited Liability Company

 

Amendments To The Law On State Registry And State Registration Of The Legal Entities  

The President of the Republic of Azerbaijan approved the law “On amendments to the law on state registry and state registration of the legal entities” on 02 October 2017.

As per the Amendments, the following new definitions will be added to the Law: 

“2.0.15. limited liability company with foreign investment - a limited liability company established by a foreigner or stateless person, as well as a legal entity registered in a foreign country.

2.0.16. e-government registration of a limited liability company with foreign investment – a state registration of a limited liability company with foreign investment (excluding limited liability companies created as a result of reorganization) upon application  approved by e-signature by foreigner or stateless person and submitted  to the relevant executive authority electronically together with supplementary documents.”

According to the Amendments, new Article 7-2 “E-government registration of a limited liability company with foreign investment” shall be added to the Law. 

 

New Article has following clauses:

7-2.1. A foreigner or a stateless person fills and approves by e-signature an electronic application form in the internet information resource of the relevant executive authority in order to register a limited liability company with foreign investment. 

7-2.2. During the electronic state registration, the founder (founders) declares information about the field of activity and receives the charter prepared by the software in real time regime based on the information entered by him and confirms it with an electronic signature.

7-2.3. During the electronic state registration, a document confirming the legal address of the limited liability company in the Republic of Azerbaijan should be scanned with a translated copy into Azerbaijani and attached to the application.

7-2.4. During the electronic state registration, a notification on confirmation of acceptance of application shall be sent to an email address of the applicant. 

On the day of state registration of a limited liability company with foreign investment, a certificate of state registration, an extract from the state register and a charter shall be sent to applicant’s e-mail address.

 

Legal News Update - 10 October 2017

New Rules on issuance of electronic signature certificates to non-residents through diplomatic representatives and consulates of the Republic of Azerbaijan have been issued                                                    

The President of the Republic of Azerbaijan signed the Decree “On approval of the rules “On issuance of electronic signature certificates to non-residents through diplomatic representatives and consulates of the Republic of Azerbaijan” (“Rules”) and the Regulations “On “www.azexport.az” web portal” (“Regulations”)” (“Decree”) on 12 September 2017.  

The Decree aims at strengthening the position of the Republic of Azerbaijan as the Digital Trade Centre and expansion of foreign trade operations.

Pursuant to the Rules, non-resident individuals or legal entities can apply for and obtain electronic signature certificates for e-signature or ASAN signature through diplomatic representatives and consulates of the Republic of Azerbaijan upon submission of applications via “e-non-resident” subsystem of “www.azexport.az” web portal.  By virtue of the Rules, non-residents may apply for either business or personal certificates. Business certificates are issued to non-resident legal entities.  They allow for authentication of electronic service users, identification of personality of signatories, designated areas and purposes of signatures. They are also used as seals and reflect tax identification numbers of their owners. Personal certificates are issued to non-resident individuals and allow for their authentication and identification of their personality. 

Electronic signature certificates are issued to non-residents for the period of three years. The Rules also stipulate procedures of suspension, restoration and cancellation of electronic signature certificates. 

Based on the Regulations, along with applications for electronic signature certificates, “www.azexport.az” web portal shall provide for the following:

• Information on goods produced in Azerbaijan and their producers;

• Preparation and execution of electronic documents, including electronic contracts between the registered taxpayers of Azerbaijan and their foreign business partners within their entrepreneurial activity;

• Transboundary electronic services within real-time regime;

• Obtaining of permits necessary for exportation of products produced in Azerbaijan and which are sold within e-commerce;

• Submission of applications for export customs declaration and export incentive payments at the expense of the state budget for persons engaged in exportation of non-oil products.

 

New Rules on use of social insurance reserves and payment of additional funds to special accounts of insured persons have been adoptedin 

On 12 September 2017, the President of the Republic of Azerbaijan approved the Rules “On use of social insurance reserves” and the Rules “On payment of additional funds to special accounts of insured persons”. The Rules on use of social insurance reserves define social insurance reserves as the amounts of the mandatory state social insurance payments remaining upon deduction of the expenses on management of personal accounts and insurance part.  The Rules further stipulate the designations of such reserves. 

According to the Rules on payment of additional funds to special accounts of insured persons, individuals may now open special accounts within the State Social Insurance System under the Ministry of Labor and Social Protection of Population of the Republic of Azerbaijan and pay additional funds to such accounts, which shall not exceed 3,300 times the minimum amount of labour pension. Such funds shall be used for the purpose of forming a pension at the minimum or higher amount of labour pension.

 

Decree on ensuring the activity of trade representations has been adopted

According to the Decree of the President of the Republic of Azerbaijan dated 5 September 2017 (“Decree”), for the purpose of ensuring the activity of trade representations within the embassies and consulate departments of the Republic of Azerbaijan, administrations of such trade representations shall be established therein. By virtue of the Decree, the trade representations and their administrations shall constitute a part of the internal structure of the Ministry of Economy of the Republic of Azerbaijan.  The Decree further stipulates that establishment of the list and number of staff of the administrations shall be carried out by the Ministry of Economy upon approval of the Ministry of Finance of the Republic of Azerbaijan. 

 

The charter of the State Agency on Compulsory Health Insurance has been approved

On 6 September 2017, the President of the Republic of Azerbaijan approved the charter of the State Agency on Compulsory Health Insurance (“Agency”). 

According to the approved charter, the Agency is established in the form of a public legal entity aimed at implementation of compulsory health insurance. The Agency appears to be a recipient of healthcare services and provides funds for financing of medical services. Pursuant to its charter, the purpose of the Agency comprises the following activities: 

• to involve the population in compulsory health insurance;

• to attract funds for financing the basic medical services;

• to take measures directed at improving the quality of medical services;

• to ensure accessibility to the healthcare services; and 

• to protect the rights and legitimate interests of the insured persons.

The initial charter capital of the Agency has been determined at the expense of the state budget in the amount of AZN 4,000,000.

The Agency shall carry out its activities under the supervision of the President of the Republic of Azerbaijan.

 

Legal News Update - 22 August 2017

The Law “On Unemployment Insurance”

The President of the Republic of Azerbaijan approved a new Law “On Unemployment Insurance” (“Law”), which will be effective as of 1st January 2018.

The Law is aimed to establish relations and new financing mechanisms based on a risk transfer in the labor market; compensate lost wages of insured persons and ensure the social protection of the population through preventive measures to prevent the occurrence of unemployment.

The Law is intended to apply to those, whose employment agreements have been terminated due to liquidation of the state authority or legal entity or the redundancy. The Law will not apply to those holding political office.

As per the Law, the insurance will enable the unemployed to get payments over a definite period.  In order to be eligible for an insurance payment, the unemployed shall be registered within the State Employment Fund.  The amount of payments will be differentiated depending on the length of insurance record and the amount of past average monthly salary. 

 

Charter of the State Advertising Agency has been approved

The President of the Republic of Azerbaijan approved the Law “On organization of the State Advertising Agency of the Republic of Azerbaijan” on July 31, 2017. 

The Charter of the State Advertising Agency of the Republic of Azerbaijan has been approved by the President and the annual financial report of the Agency has been approved by the Cabinet of Ministers.  

The charter fund of the Agency is determined at the expense of the state budget in the amount of 10,000 AZN. The Supervisory Board consists of three members. The appointment and dismissal of the members of the Supervisory Board, as well as early termination of their office shall be determined by the President of the Republic of Azerbaijan. 

The Charter specifies the goals, functions and the rights of the Agency, the management of the organization, the charter fund, the basis of its property and financial activities, the form and scope of control over its activities, accounting and reporting in the Agency, its liquidation and reorganization.

 

Regulation of the Financial Stability Council has been approved

The President of the Republic of Azerbaijan signed the Decree “On approval of Regulation of the Financial Stability Council of the Republic of the Republic of Azerbaijan” on July 31, 2017.

The approved Regulation identifies Council’s functions, rights, obligations and the organization of its activities.

It should be noted that, the Decree “On the establishment of the Financial Stability Council of the Republic of Azerbaijan” aiming to facilitate macroeconomic and financial stability was issued on July 15, 2016.

 

Legal News Update - 4 August 2017

Amendments to the law on “Non-Cash Settlements”

The President of the Republic of Azerbaijan approved the law “On amendments to the law on Non-Cash Settlements” on 13 July 2017.

Under the new amendments, along with some tehcnical changes, settlements specified in Article 3.4.4 which are pensions, scholarships, financial assistance, allowances (including one-time allowances), compensation, indemnities etc. shall not be subjected to detective search activity, intelligence and counter-intelligence activity. 

 

The Law on “Tourism” has been amended

The President of the Republic of Azerbaijan approved the law “On amendments to the law on Tourism” on 13 July 2017.

A new clause was added to Article 9 of the Law on Tourism according to which, payments to travel agents must only be made by non-cash methods. 

 

Amendments to the Labour Code

The law “On amendments to the Labour Code” was approved by the Presidential Decree of 13 July 2017.

New clause of “x” has been added to the first paragraph of Article 12 under which, all payments made to the employees may only be implemented according to the law on “Non-Cash Settlements”

 

Amendments to the Civil Code 

Presidential Decree of 25 April 2017 approved the “Law On Amendments to the Law on state duty”.

The amendments introduce state duty of AZN 500 for performing currency exchange operations.

 

Amendments to the law on Compulsory Insurances

The law “On amendments to the law on Compulsory Insurances” was approved by the Presidential Decree on 13 July 2017. 

A new Article 4-1 has been introduced under the current amendtments which states that:

“Payments under settlements defined with this law are implemented only in non-cash”

Moreover, Article 11.3 has been removed from the Law and the word “cash or” has been replaced with the word “only” in the text of Article 11.1.  As per the prior wording of Article 11.1, insurance premiums were paid in cash or non-cash.  Following the amendments, insurance premiums may be paid only in non-cash now.

 

Amendments to the law on Central Bank

The President of the Republic of Azerbaijan approved the Law “On amendments to the law on Central Bank” on 13 July 2017. 

Under the amendments, the word “Central” in Articles 22.0.5, 22.0.13, 22.0.16 has been replaced with the words “under an agreement with the appropriate executive power, Central” and the word “international” in Article 22.0.8 has also been replaced with the words “under an agreement with the appropriate executive power, international”. 

Now, by the virtue of Articles 22.0.5, 22.0.13 and 22.0.16, the Board of the Central Bank has an authority approve the Central Bank's budget and amendments to it, its organizational structure and management procedures, to determine the forms and amounts of remuneration by agreeing with the President of the Republic of Azerbaijan.

Moreover, the Board has an authority to define the strategy and rules for the maintenance and management of international gold and currency reserves by agreeing with the relevant international executive authority under article 22.0.16

 

Amendments to the law on Deposit Insurance

The President of the Republic of Azerbaijan approved the Law “On amendments to the law on Deposit Insurance” on 13 July 2017.

Under the amendments, according to Article 6.2, the Trustee Board consists of one representative of the financial markets supervisory authority, one representative of the Central Bank, three representatives of the relevant executive authorities (Ministry of Labour and Social Protection and Population, Ministry of Finance and Ministry of Economy respectively) and two representatives of the member banking community as recommended by member banks. 

At the same time, the word “the Fund’s” in Articles 8.1.1-8.1.4, 8.1.10, 8.1.13, 8.1.16 is replaced with the words “under an agreement with the appropriate executive power, the Fund’s”. 

According to the amendments, the Fund’s Board of Trustees has an authority, by agreeing with the President of the Republic of Azerbaijan, to approve Fund’s organizational structure, rules, annual budget and amendments to it and forms and amounts of remuneration of its employees; to determine the methods, directions and rules of placement of the it’s funds; to appoint the external auditor and confirm the audit results; to make a decision  on issuing long-term debt securities.

 

Legal News Update - 18 July 2017

Amendments to the Code of Administrative Offences of the Republic of Azerbaijan  

The President of the Republic of Azerbaijan approved the Law “On Amendments to the Code of Administrative Offences” on 29 June 2017.  According to the amendments, after the word “persons” in Article 422, the words “central depositor, stock investment fund, investment fund manager” have been added. Therefore, under the current updates, for the violation of rules of data declaration by licensed persons, central depositor, stock investment fund, investment fund manager and issuer in securities market, the officials will be cautioned or imposed penalty in the amount of 500 to 600 AZN.  Legal entities will be subject to a penalty in the amount of 2000 to 3000 AZN for the same breach. 

                                                   

Changes in the Migration Code

The Law “On Amendments to the Migration Code of the Republic of Azerbaijan” passed the first reading at the Parliament of Azerbaijan on 03 July 2017.  A new paragraph is added to Article 38 of the Migration Code which states that foreigners or stateless persons should leave the territory of the Republic of Azerbaijan on the basis of an electronic visa they have presented while entering the country (except those who have been granted a temporary or temporary residence permit in the Republic of Azerbaijan).

Foreigners and stateless persons are required to present their e-visas along with border crossing documents when crossing Azerbaijani borders. 

Moreover, as per the introduced amendments, the information shall be sent to applicant’s email address within 3 hours after the receipt of application on issuance of an accelerated e-visa. 

 

Amendments to the Migration Code

The Law “On Amendments to Migration Code of the Republic of Azerbaijan” was approved by the Presidential Decree on July 14, 2017.

Under the new amendments, after receipt of the application, applicant shall be notified in 3 hours on the issuance of an accelerated e-visa.  At the same time, foreign nationals and stateless persons must submit e-visa information along with border crossing document while crossing the borders of the Republic of Azerbaijan.  According to the newly introduced Article 38.11 of the Migration Code, foreign nationals and stateless persons shall leave the country, based on the presented e-visa. However, this Article exempts foreigners and stateless persons who have extended their stay in Azerbaijan or who have obtained temporary residence permit.

 

Amendments to the Law of the Republic of Azerbaijan "On Children’s Rights"

The Law “On Amendments to the Law on Children’s Rights" was adopted on 31 May 2017 for the purpose of adjusting it to the Law “On Advertising”. Article 11-1 was added to the Law of the Republic of Azerbaijan on Children’s Rights. The new article provides protection for children in advertisements. There are several prohibitions in advertising to prevent children from being morally and physically harmed. For instance, encouraging children to repeat actions that are dangerous to life and health, showing children in situations which can create psychological tension, appealing to children about the use of alcoholic beverages, delivering programs for children with advertisements of alcoholic beverages and etc. are prohibited. Moreover, advertisements cannot be placed in textbooks, syllabus, educational materials, school diaries, books, albums, and children's books.

                                                                            

The Law “On Telecommunications" has been amended 

On 31 May 2017 the Law “On Amendments to the Law of the Republic of Azerbaijan on Telecommunications” was adopted.

According to the amendments, the operator and provider of advertisements may issue ads based on a contract signed with the advertiser. The operator and provider may advertise to the subscriber individually, if it is agreed upon in the written agreement with the subscriber. The operator and provider should allow the subscriber to refuse the advertisement at any time or to broadcast the ads that the subscriber only wishes. The operator and provider are responsible for the delivery of advertising that is contrary to the provisions of the Law of the Azerbaijan Republic "On Advertising" without the consent of the subscriber. In addition, alcoholic beverages, which contain more than 5% of alcohol, cannot be advertised on telecommunication devices.

 

The Strategic Roadmap For Development of Financial Services in the Republic of Azerbaijan has been prepared. 

For the purpose of performing the goals specified by the Presidential Decree “On approval of Main directions of the strategic roadmap for national economy and main sectors of economy and issues arising out of this” No.1897 dated March 16, 2016, Strategic Roadmap for development of financial services in the Republic of Azerbaijan” (hereinafter referred to as Strategic Roadmap) has been prepared by the Center for Analysis of Economic Reforms and Communication of Azerbaijan.

The Strategic Roadmap covering short, medium and long terms is comprised of the strategic vision and action plan for 2020, long term vision by 2025 and aspirational vision for post 2025. There have been prepared 5 strategic targets and 16 priorities for 2020 in order to achieve the objectives specified in the Strategic Roadmap.

 

Legal News Update - 3 July 2017

Amendments to the Law “On the Central Bank of the Republic of Azerbaijan” 

On 25 April 2017, the President of Azerbaijan Republic approved the amendments to the Law “On the Central Bank of the Republic of Azerbaijan”. 

The Amendments revoke provision of targeted lending by the Central Bank to the credit institutions on the state guarantee in order to fund socio-economic projects, as well as provide financial support for real sector of the economy. 

The Amendments are effective as of 2nd June 2017. 

 

Amendments to the Law “On State Registration and State Registry of the Legal Entities”

Pursuant to the Amendment dated 14 April 2017 to the Law “On state registration and the state registry of legal entities”, information about founders (participants) of the legal entities and their shares in the charter capital is provided upon request to monitoring entities and other entities involved in monitoring in the manner prescribed in the legislation.

The Amendments are effective as of 4th June 2017. 

 

Amendments to the Law “On Securities Market” 

The President of Azerbaijan Republic approved The Amendments to the Law “On securities market” on 14th April 2017 to be effective as of 4th June 2017.  

Further to the Amendments, information regarding the owners of the securities is provided upon request to monitoring entities and other entities involved in monitoring in the manner prescribed by the legislation and according to the “Law on Prevention of the Legalization of Criminally Obtained Funds or Other Property and the Financing of Terrorism”.

 

Amendments to the Civil Code 

Presidential Decree of 25 April 2017 approved the “Law On Amendments to the Law on state duty”.

The amendments introduce state duty of AZN 500 for performing currency exchange operations.

 

Amendments to the Law on “Law On Encumbrance of Movable Property”

Pursuant to the Presidential Decree dated 02 May 2017, the “Law On Encumbrance of Movable Property” has been approved. 

The Law provides for definitions such as encumbrance of movable property, the priority right, the subject of encumbrance, the debtor, the owner of encumbrance, state registry of encumbrance of movable property. 

According to the Law with the exception of movable objects registered in the registry of movable property and the securities to be registered, any movable property as well as rights and claims, including movable property that the owner of encumbrance will own in future can be subject of encumbrance. Encumbrance of movable property is divided into state, municipal and specific encumbrance type. The following notices are included in the register:

• Notification on encumbrance;

• Amendments to the notice on encumbrance;

• Notification on appeal to encumbrance;

• Notification on termination of encumbrance.

The following information is displayed in the notification of the encumbrance in the Registry:

• In case the owner of encumbrance is an individual – surname, name, patronymic, address, ID PIN code; TAX ID of taxpayer, contact information; passport series, number and contact information – in case the owner is a foreigner;

• In case the owner of encumbrance is a state or municipal authority, or legal entity – name, legal address, TAX ID, contact information, in case the owner is a foreign legal entity - full name in Latin letters and contact information;

• In case the debtor or the burdener is an individual - surname, name, patronymic, address, ID PIN code; TAX ID of taxpayer, contact information; passport series, number and contact information – in case the debtor or burdener is a foreigner;

• In case the debtor or the burdener is a state or municipal authority, or legal entity – name, legal address, TAX ID, contact information, in case the debtor or burdener is a foreign legal entity - full name in Latin letters and contact information;

• A description of the subject of encumbrance;

• The validity of the notice of encumbrance;

• Confirmation of consent of the burdener on inclusion of its information to the registry by marking the relevant cell;

• The amount of main obligation provided by encumbrance;

• Sex of debtor (if individual);

• New or repetitive client;

• Scope of the debtor`s activities;

• Type of movable property;

• Other information as may be required.

Fee is envisaged for an input of a notification on encumbrance, notification on amendment to the encumbrance, notification on termination of the encumbrance, and the issuance on paper of the approved report on the results of search at the request of person seeking information in the registry. The fee and exemptions from payment of the fee is determined by the relevant executive authority.

 

Approval of Convention “On Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism” 

On 25 June 2017 the President of Azerbaijan Republic approved the Law “On approval of the  Warsaw Convention on the Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism of 2005” with the relevant reservations and declarations of the Republic of Azerbaijan.  

This Convention is the first international treaty encompassing both the prevention and control of money laundering and the financing of terrorism.

 

Amendments to the Labor Code 

Law “On Amendments to the Labour Code of the Republic of Azerbaijan” has been officially published on 18 June 2017 and will become effective starting from 1 January 2018 (“Amendments”). 

As per the Amendments, employment agreement may be concluded for definite or indefinite periods.  However, in contrast to the past reading of the Labor Code, where a fixed-term employment agreement could be concluded for a maximum period of 5 years, such limitation has now been removed and the term may be defined based on a mutual agreement of both employer and the employee.

Further to the Amendments, automatic prolongation of a fixed-term employemnt agreement is possible provided that the fixed-term employment agreement is not considered as open ended (due to continuance during the last five years).

Furthermore, time period for sending a notification to an employee prior to termination of an employment agreement due to redundancy will now depend on seniority of an employee (seniority which is defined under the employment agreement with the current employer). 

Thus, notification will be sent to an employee within the following periods prior to termination of an employment agreement on the ground of redundancy:

• At least two calendar weeks – for an employee having up to 1 year of seniority;

• At least four calendar weeks – for an employee having from 1 to 5 years of seniority;

• At least six calendar weeks – for an employee having from 5 to 10 years of seniority;

• At least nine calendar weeks – for an employee having more than 10 years of seniority.

However, as per the Amendments, the aforementioned notification period may be also substituted by one-time payment of the salary followed by the termination of the employment agreement.  In such case, the amount of a one-time payment will depend on the length of notification period and defined as follows:

• 0,5 times of the average monthly salary – instead of a minimum two weeks notification period 

• 0,9 times of the average monthly salary – instead of a minimum four weeks notification period

• 1,4 times of the average monthly salary – instead of a minimum six weeks notification period

• 2 times of the average monthly salary – instead of a minimum nine weeks notification period.

Moreover, the Amendments now allow to provide the employee with one-time payment of the salary (not less than the average monthly salary) followed by the termination of the employment agreement instead of a one-month notification period communicated to an employee prior to the changes in the labor conditions.  However, such payment is reduced in proportion to the overdue portion of the notice period.  It shall be also emphasized that the Amendments do not prohibit the provision of a higher amount of payments instead of the aforementioned notification periods, if expressly stated in either the employment or collective agreements.

Another important update was introduced with respect to the amount of compensation granted to an employee upon termination of an employment agreement on the grounds of redundancy or liquidation of an entity.  Thus, the amount of such compensation shall be also contingent on employee’s seniority (seniority which is defined under the employment agreement with the current employer) and defined as follows:

• In the amount of an average monthly salary -  for an employee having minimum 1 year of seniority;

• At least 1.4 times the amount of average monthly salary – for an employee having from 1 to 5 years of seniority;

• At least 1.7 times the amount of average monthly salary – for an employee having from 5 to 10 years of seniority;

• At least twice the amount of average monthly salary – for an employee having more than 10 years of seniority.

The Amendments abolished the requirement stipulating the payment of the average salary to the employees for second and third months of unemployment based on the respective certificates issued by the State Employment Service (“Service”).

 

Draft Law on “Amendments to the Customs Code” 

Draft Law on “Amendments to the Customs Code of the Republic of Azerbaijan” has passed the first reading in the Parliament of the Republic of Azerbaijan (“Amendments”).  According to the Amendments, most of the applications of the individuals (e.g. on defining the classification of goods, their customs value, country of origin, amount of customs fees) and notifications sent by the customs authorities may now be provided electronically.  

Moreover, in case some of the documents are not submitted along with the customs declaration, the applicant may later submit them electronically.  Last but not least, if the Amendments are adopted, cargo customs declaration, being the only document for re-loading of the goods, will be removed.

 

Adoption of the Law on “Unemployment Insurance”

The Parliament has passed the law on "Insurance of Unemployment”. 

The law is aimed to establish relations and new financing mechanisms based on a risk transfer in the labor market; compensate lost wages of insured persons and ensure the social protection of the population through preventive measures to prevent the occurrence of unemployment.

The main principles of this law are coercion, the legal equality of unemployment insurance subjects and differentiation of insurance payments depending on insurance experience and duration of unemployment

Insurance tariffs for unemployment insurance are set at 0.5 per cent of employee's wage and 0.5 per cent of calculated labour compensation fund.

Calculation of the monthly insurance fee is carried out as follows: 50% of the lost monthly salary during the period of 3-5 years, 55% of the lost monthly salary during the period of 5-10 years, 60% of the lost monthly salary during 10 years of insurance experience.

Under the law, only insured persons whose employment relationships have been terminated because of the abolition of the state body or legal entity or the reduction of the staff of its employees have a right to determine insurance payments. The law will not apply to those holding political office either. 

The law will enter into force on January 1, 2018

 

Amendments to the Code of Administrative Offences of the Republic of Azerbaijan  

The President of the Republic of Azerbaijan Mr. Ilham Aliyev has confirmed the latest amendments to the Code of Administrative Offences. After the word “persons” in the Article 422, the words “central positor, stock investment fund, investment fund manager” have been added. Therefore, under the current updates, for the violation of rules of data declaration by licensed persons, central positor, stock investment fund, investment fund manager and issuer in securities market, the officials will be cautioned or charged in amount of 500 to 600 manats. Legal entities will also be fined in amount of 2000 manats to 3000 manats. 

 

Changes in the Migration Code

The Migration Code of the Republic of Azerbaijan is being amended. A new paragraph is added to Article 38 of the Code (Electronic Visas). According to the draft law, the new paragraph states that foreigners or stateless persons should leave the territory of the Republic of Azerbaijan on the basis of an electronic visa they have presented while entering the country 

(except those who have been granted a temporary or temporary residence permit in the Republic of Azerbaijan).

Foreigners and stateless persons shall demonstrate their e-visas along with border crossing documents when crossing Azerbaijani borders. 

Moreover, the information shall be sent to applicant’s email address in 3 hours after the receipt of application on issuance of accelerated e-visa.

 

Legal News Update - 8 June 2017

Amendments to the Law “On the Central Bank of the Republic of Azerbaijan”

On 25 April 2017, the President approved the amendments to the Law “On the Central Bank of the Republic of Azerbaijan”.  

The Amendments revoke provision of targeted lending by the Central Bank to the credit institutions on the state guarantee in order to fund socio-economic projects, as well as provide financial support for real sector of the economy. 

The Amendments are effective as of 2nd June 2017.

 

Amendments to the Law “On State Registration and State Registry of the Legal Entities”

Pursuant to the Amendment dated 14 April 2017 to the Law “On state registration and the state registry of the legal entities”, information about founders (participants) of the legal entities and their shares in the charter capital is provided upon request to monitoring entities and other entities involved in monitoring in the manner prescribed in the legislation.

The Amendments are effective as of 4th June 2017. 

 

Amendments to the Law “On Securities Market”

The President approved Amendments to the Law “On securities market” on 14th April 2017 to be effective as of 4th June 2017.  

Further to the Amendments, information regarding the owners of the securities is provided upon request to monitoring entities and other entities involved in monitoring in the manner prescribed by the legislation and according to the “Law on Prevention of the Legalization of Criminally Obtained Funds or Other Property and the Financing of Terrorism”.

 

Legal News Update - 26 May 2017

Amendments to the Civil Code

Presidential Decree of 25 April 2017  approved the “Law On Amendments to the Civil Code of the Republic of Azerbaijan”.

The amendments prohibit any subsidiary company and affiliates to buy the shares of the parent company.

In addition, the following provisions regarding the board of directors (supervisory board) of a Limited Liability Company (“LLC”) and Public Legal Entities are introduced to the Civil Code:

1. The chairman of the board of directors (supervisory board) of an LLC shall convene the meetings at least once in three months and preside over them. Meetings of the board of directors (supervisory board) may be also convened by the chairman of the board of directors (supervisory board) on the basis of a request of, inter alia, inspection committee (inspector), the executive body, board members and others as defined in the charter of the LLC. Rules on convoking the meeting shall be outlined in the charter of the LLC;

2. With one vote per member, decisions of the meeting of the board of directors (supervisory board) shall be made through a simple majority of votes. Where the number of votes are distributed equally, the conclusive vote shall belong to the chairman of the board of directors (supervisory board);

3. Protocol, reflecting the place, time, participants, agenda, summary of the outputs, results and decisions of the voting shall be drawn up and signed by the chairman and members of the board of directors (supervisory board).

Moreover, the amendments have introduced the following new provisions regarding the Audit Committee in the structure of both LLC and Joint Stock Company (“JSC):

1. An Audit Committee must be established by the board of directors (supervisory board) for the purposes of preparation and implementation of internal audit strategy and policy, as well as organization of the audit control, provided that the number of participants of an LLC or Public Legal Entity (or shareholders of a JSC) surpasses 50;

2. Where the number of participants of an LLC or Public Legal Entity (or shareholders of a JSC) is less than 50, the establishment of an Audit Committee is not mandatory and may be outlined in the Charter of an LLC (JSC);

3. Rules on establishment, content and activities of an Audit Committee are determined by the laws and charter of the LLC (JSC);

4. Members of an Audit Committee shall be comprised of physical persons, excluding any participant of the LLC (JSC) and/or person represented in other management body of the LLC (JSC);

5. Upon initiative of an Audit Committee, internal audit of the LLC (JSC) shall be conducted on the basis of either a resolution of its general meeting or the board of directors (supervisory board), or request of its executive body or participant, having more than 10 (ten) percent of shares; 

6. All bodies and officials of the LLC (JSC) shall present the documents related to the financial-economic activities upon the request of an Audit Committee;

7. An Audit Committee is reporting to the board of directors (supervisory board).

Furthermore, by virtue of the amendments, the Open JSC shall now publish the following information on an annual basis:

1. Financial indicators for the accounting period;

2. Deals of special importance and deals concluded with the related persons;

3. Engaged financial resources;

4. Management structure;

5. Management bodies and officials, their primary and secondary functions;

6. Development policy;

7. Returns of equity as well as dividend policy;

8. Payments to the members of executive bodies;

9. Volume and source of investments;

10. Turnover and profitability of securities;

11. Public projects.

Last but not least, the rights of the shareholders of a JSC were enhanced, including but not limited to participation in the process of sale of shares, applying to courts or other authorized bodies in regard to damages resulted from conclusion of deals and payment of costs thereof and etc. 

Pursuant to the Presidential Decree dated 07 April 2017, the agreement dated 28 November 2016 “On implementation of the agreement dated 21 November 2003 on cooperation between the Republic of Belarus and the Republic of Azerbaijan in the area of provision of pension” (“Agreement on cooperation”) between the Ministry of Labor and Social Protection of the Population of the Republic of Azerbaijan and the Ministry of Labor and Social Protection of the Population of the Republic of Belarus has been approved.

As per the main concept of the Agreement on cooperation, seniority, obtained in one of the states, party to the Agreement, shall be recognized on the territory of another state, party to the Agreement, excluding the cases where both seniorities overlapped in the same period. 

Amendments to the Criminal Code 

According to the amendments to Criminal Code approved on 25 April 2017, violation of the rules on conclusion of the transactions with the related persons as well as failure to provide the necessary information with respect to the said transactions, resulting in the damages (or generation of the incomes) with the amount of AZN 20,000 – 100,000 , may lead to a penalty constituting two to four fold of the amount of caused damages (generated incomes) or imprisonment up to one year. 

The same actions, however, causing the damages (or generating the incomes) in the amount exceeding AZN 100,000, are subject to the penalty comprising three to five fold of the amount of caused damages (generated incomes) or imprisonment up to three years.

Amendments to the Law on Currency Regulation

According to the Amendments to the Law on Currency Regulation, approved on 25 April 2017, local banks, local branches of the foreign banks, national postal operators, resident legal entities and individuals and branches of the non-resident legal entities are entitled to conduct currency exchange services based on the licence.

The currency exchange can be conducted only in cash and based on the client’s request. 

The state duty for obtaining of a license for currency exchange activity is defined as AZN 500

 

Legal News Update - 11 May 2017

Transfer of non-performing (toxic) assets

Decree of the President of the Republic of Azerbaijan dated 03 May 2017 approved the Rules on “Transfer of non-performing (toxic) assets of insolvent banks as a part of their resolution and recovery measures” (“Rules”) in accordance with Article 164.1.36 of the Tax Code of the Republic of Azerbaijan.

According to the Rules, transfer of non-performing (toxic) assets of insolvent bank as a part of its resolution and recovery measures involves alienation of both, property rights over non-performing (toxic) assets and rights to pledge the collateral with respect to non-performing (toxic) assets.

Pursuant to the Rules, assets classified as non-standard assets in accordance with the normative acts of Financial Markets Supervision Chamber as well as collateral on such assets are defined as non-performing (toxic) assets.

Prior to transfer of non-performing (toxic) assets, the bank must receive the opinion of Financial Markets Supervision Chamber on recognition of such assets as non-performing (toxic) assets. Such opinion must be issued within 20 calendar days.

Transfer of non-performing (toxic) assets of insolvent banks as a part of their resolution and recovery measures must be conducted in compliance with civil contracts, reflecting at least the following:

• Parties, subject and amount of a contract;
• Rights and obligations as well as liability of the parties to the contract;
• Parties, date and the number of a contract confirming the proprietary rights of an insolvent bank with respect to non-performing (toxic) assets.

Based on a mutual consent of the parties to the contract, the value of non-performing (toxic) assets is defined by an independent evaluator (evaluators).

Legal News Update - 5 May 2017

Change of the pension age

On 10 March 2017, the President of the Republic of Azerbaijan approved the Amendments to the Law "On Labour Pensions" which increases the pension age from 57 to 60 for females and from 62 to 63 for males without consideration of the social insurance background provided that pension capital, registered within the insurance part of the personal account, is satisfactory for payment of minimum labor pension (AZN 110 as of 1^st July 2017).  Otherwise, the individual must possess at least 25 years of the social insurance background.

Further to the Amendments, age limit is subject to annual increase of six months for females during the period of 1^st July 2017 - 1^st July 2027 and for males during the period of 1^st July 2017 - 1^st July 2021.

The Amendments are effective as of 1^st July 2017.

Prevention of informal labour relations in the construction sector

On 28 April 2017, the President of the Republic of Azerbaijan signed the Decree "On Measures to Strengthen the Supervision over Prevention of Informal Employment in the Construction Sector".

The Decree provides for provisions on the following issues:

• To establish an electronic registry of residential buildings under construction as well as individuals and legal entities engaged in construction of such buildings;
• To integrate the electronic information system of the Ministry of Labour and Social Protection of Population of the Republic of Azerbaijan for registration of employment agreements with the aforementioned Registry;
• To install real-time surveillance cameras at the construction sites at the expense of individuals or legal entities conducting the construction for the purpose of identifying the persons involved in execution of work (services) under employment agreements which are not registered;
• To establish Labour Relations Monitoring Center within the State Agency for Public Service and Social Innovations under the President of the Republic of Azerbaijan for the purposes of coordination of  monitoring and control activities with respect to prevention of informal employment in the construction sector.

Labour Relations Monitoring Center will perform the following functions:

• Carrying out the electronic Registry;
• Observation of cameras installed at the construction sites;
• Establishing and management of the analytical detection system carrying out identification of workers;
• Conducting  comparative analysis of materials and reports of the Ministry of Taxes, Ministry of Labour and Social Protection of Population on measures implemented to prevent informal employment;
• Allocation of mobile teams to monitor the construction sites;

Sending documents to the relevant public authorities for the purpose of documentation of the facts revealed and implementation of measures on administrative liability or criminal prosecution of the parties in breach of laws.

Amendments to the “List of permitted inspections conducted in cases of threatening human life and health, national security and economic interests” signed on 28 April 2017 by the President of the Republic of Azerbaijan, included the monitoring of cases informal employment to the respective list of inspections.  Such monitoring will be conducted by the State Agency for Public Service and Social Innovations under the President of the Republic of Azerbaijan.

Legal News Update - 18 April 2017

Amendments to “Regulations on the form and rules of conducting unified register of inspections in the field of entrepreneurship”

On 16 March 2017, President of the Republic of Azerbaijan signed a Decree approving the Amendments to “Regulations on the form and rules of conducting unified register of inspections in the field of entrepreneurship”.

According to the amendments, any state authorities, public legal entities, as well as state-owned legal entities, which hold a dominant position in the sphere of provision of the respective services and are empowered to conduct inspection in the field of entrepreneurship, must ensure registration of all types of on-site inspections within the timeframe and order defined in the Regulations.

On-site inspections may only be conducted upon registration with the Registry.  The inspections conducted without proper registration will not be legally valid.

Decree “On establishment of the Commission on Regulation and Coordination of Employment Relations”

On 17 March 2017, President of the Republic of Azerbaijan signed a Decree “On establishment of the Commission on Regulation and Coordination of Employment Relations”. The functions of the Commission include:

 

1. By analyzing the legislation and the current situation in the labour market and taking into account international experience, to make proposals to improve administration in the field of regulation of employment relations as well provide suggestions to the President of the Republic of Azerbaijan for the improvement of the respective industry;

2. To ensure coordination of control measures to strengthen social protection of employees and formalization of employment relations;

3. To ensure the preparation and approval of action plan on disclosure of informal employment relations, development and adaptation of legislative measures against persons who violated the laws in this field;

4. To work out proposals for further improvement of the country's position in international rankings;

5. To inform the President of the Republic of Azerbaijan once in a quarter on measures taken to ensure formalization of employment relations and improvement employees` social security.

 

Amendments to the Law “On Banks”

Amendment to the Law “On Banks” dated 07 April 2017 provides for the new definitions such as fund, bridge bank, banks important for the system, investor, a healthy active, resolution, bankrupt bank etc. The Amendments introduce provisions on appointment of a temporary administrator to the bank, which lost the ability to pay, and on the scope of authority of the temporary administrator in the bank's management. According to the changes, financial markets supervision authority controls the activities of the temporary administrators.

Moreover, according to amendments the courts appoint the Fund (defined as a legal entity established in accordance with the Law “On Insurance of Deposits”) as a liquidator of a bank subject to mandatory liquidation.  Based on contract, the Fund may assign the liquidator functions to legal entities or individuals.

The Amendment provides for the rules on:

• Action plan on resolution of the bank which lost the ability to pay;

• Transfer of the assets and liabilities of the bank which lost the ability to pay to the bank- acceptor;

• Sale of the bank which lost the ability to pay and its joining to the healthy bank;

• The establishment of the bridge bank and implementation of its sale;

• Participation of the government in restoration of the solvency of banks important for the system;

• Voluntary restructuring of the bank`s liabilities;

• Mandatory liquidation of the bank;

• Control over the activities of a liquidator by the financial markets supervision authority.

 

 

 

Legal News Update - 9 March 2017

Amendment to the “Law on Education”

On 15th of February 2017, President of the Republic of Azerbaijan signed Decree amending the “Law on Education”. According to the amendments, no advertisement may be placed in the books, textbooks, teaching materials, diaries, albums and books designed for children.

In addition, advertisements that may affect children mentally and physically may not be placed closer to the pre-school establishments and general educational institutions than the distance defined by the respective executive bodies.

Amendment to the “Law on Lotteries”

On 15th of February 2017, President of the Republic of Azerbaijan signed a Decree, amending the “Law on Lotteries”. Amendments to the law are concerning advertisement of lotteries.

According to the amendments, it is allowed to place advertisements on lottery tickets. Additionally, the name of winner of lottery can not be announced in advertisements without his written consent.

The following are prohibited in advertisement of lotteries:

•To address to children

•Promotion of idea that participation in lottery is a way to gain reputation within society

•Guarantying earnings from lottery

•Discredit people who do not participate in lotteries

•Advertisements on lotteries can be placed in telecommunication and mass media devices, as well as transportations and advertisement banners in open spaces. Advertisements on lotteries cannot be displayed on advertisement carriers that are situated closer than 100 meters to establishments for children and educational institutions.

Additionally, terms of lottery, its time and duration, prize fund, place and time of provision of prizes, terms of receiving thereof and information about organizer have to be indicated or sounded in the advertisements on lotteries.

Beverages containing more than 5% of alcohol, tobacco and tobacco products cannot be offered as a prize of lottery.

Conduction of a lottery with the purpose of promotion of sales of beverages containing more than 5% alcohol, tobacco and tobacco products is prohibited.

Organization of lotteries that are not duly registered or are prohibited by law cannot be advertised.

 

Changes to the list of state officials entitled to access commercial (tax) secret

The Presidential Decree signed on 1 February 2017, approved the new list of state officials who are permitted to obtain commercial (tax) secret which include:
1. Minister of Taxes of the Republic of Azerbaijan
2. First Deputy Minister of Taxes of the Republic
of Azerbaijan
3. Deputy Ministers of Taxes of the Republic of Azerbaijan
4. General Director of Department on Tax Policy and Strategic Researches of the Ministry of Taxes of the Republic of Azerbaijan
5. General Director of Department on Internal Security of the Ministry of Taxes of Republic of Azerbaijan
6. General Director of Legal Department of the Ministry of Taxes of the Republic of Azerbaijan
7. General Director of Tax Risks Analysis and Control Department of Ministry of Taxes of Republic of Azerbaijan
8. General Director of Work with Territorial Tax bodies Department of Ministry of Taxes of Republic of Azerbaijan
9. General Director of Services to taxpayers and transparent tax partnership Department of Ministry of Taxes of Republic of Azerbaijan.
10. General Director of International Cooperation and tax monitoring in financial institutions Department of Ministry of Taxes of Republic of Azerbaijan.
11. General Director of Control on execution of tax liabilities Department of Ministry of Taxes of Republic of Azerbaijan.
12. General Director of Control on execution of Tax legislation Department of Ministry of Taxes of Republic of Azerbaijan.
13. General Directors of departments and territorial tax departments under the Ministry of Taxes of the Republic of Azerbaijan
14. General Directors of territorial tax offices and regional tax departments
15. Head of the Section for Fight Against Organized Crimes in the Economic Sphere within the Primary Investigation of Tax Crimes Department of the Ministry of Taxes of the Republic of Azerbaijan

 

 

 

Legal News Update  - 27 December 2016

Law on living minimum for 2017

The Law of the Republic of Azerbaijan “On living minimum for 2017” (“Law”) will become effective as of 01 January 2017. According to the Law, the countrywide average living minimum for 2017 is determined as AZN 155. The law differentiates the living minimum for the following categories of population:
• For able-bodied population – AZN 164.5
• For pensioners – AZN 130.2
• For children – AZN 136.6.

New Rules on Conducting Foreign Currency Operations by Residents and Non-residents in Azerbaijan 

On 28 November 2016 the Central Bank of Azerbaijan approved the new Rules on Conducting Foreign Currency Operations by Residents and Non-residents of Azerbaijan (hereinafter, the “Rules”).
Rule No. 12 dated 27 May 2002, previously regulating the foreign currency transactions of residents and non-residents, was annulled with the adoption of the new Rules.
For the purposes of the Rules, “bank account” is defined as any current, credit, deposit or other account opened within a bank. The Rules further provide for the definition of “imported services” as services and works provided by non-residents within the territory of Azerbaijan as well as services and works provided for the benefit of residents outside of the country.

The Rules provide guidelines on foreign currency transactions with and without opening a bank account as described below.

Foreign currency transactions without opening a bank account

According to the Rules, only resident and non-resident individuals may conduct a foreign currency transfer within or outside of Azerbaijan without opening a bank account. Legal entities are not allowed to transfer foreign currency without opening a bank account.

The amount of the transfer of foreign currency without opening a bank account may not exceed the equivalent of USD 1,000 per day and the equivalent of USD 10,000 per month for both resident and non-resident individuals.

Foreign currency transactions conducted through bank accounts

Remittance of foreign currency (in cash or via transfer) to the foreign currency bank accounts of residents and non-residents may be conducted freely. The transfer of currency outside of Azerbaijan from bank accounts may be conducted for the following transactions:

1. Transfer of payments for goods or services imported to the country by residents and non-residents, including advance payments. As per the newly established rules, if payment for the importation of goods or services is made in advance, supporting documents attesting the customs clearance of the goods and provision of services must be submitted to the bank within 180 days.
2. The following transactions have not been significantly affected by the introduction of new rules:
• Payments for re-export of goods and services;
• Advance payments of contracts that have not been executed;
• Transactions of resident legal entities with a branch or representative offices abroad (by stating the purpose of transfers);
• Payments of debts obtained abroad;
• Payments for courts, notaries, state fees, other mandatory payments, scholarships, pensions, aliments and other similar or related payments;
• Payments of dividends to non-residents from residents.

3. Additionally, according to the rules, the transfer of foreign currency for the following activities may be carried out upon submission of the relevant agreement, invoice or digital commercial notification indicating the amount and purpose of the transaction:
• Payment of participation fees for international events, conferences and exhibitions;
• Payments of subscription fees and fees for advertisements to foreign publication products, libraries, data centres;
• Payments for education and medical treatments;
• Payments for the use of author rights, patent and franchising fees.
4. Transfers for personal purposes:
• Transfer of resident physical persons to their close relatives not exceeding USD 10,000 a month;
• Transfer of money previously brought into the country in cash or by bank transfer by providing the necessary documents proving the aforementioned;
• Any other transfer that does not exceed USD 1,000 a day and USD 10,000 a month.
5. Repatriation transfer of investments made by foreign companies to the economy of Azerbaijan by non-residents.
6. Transfer of revenue from investment projects carried out in Azerbaijan by non-residents, including compensations and payments related to losses.
7. Transfer of the salaries of foreign employees who have entered into employment agreements with residents and non-residents.
8. Transfer of the following cash flows by resident and non-resident individuals and legal entities with the respective documentation:
• Transfer of foreign currency for contribution to the charter capital of legal entities established outside of Azerbaijan;
• Transfer of foreign currency to acquire securities;
• Payments related to the fees for ownership rights of properties as well as other rights related to properties.

The rules on the implementation of the “build-operate-transfer” model were approved

Presidential Decree of 7 December 2016 approved the Rules regulating the implementation of investment projects on construction and infrastructure through the “build-operate-transfer” model (hereinafter, the “BOT Model”) on the basis of special financing (hereinafter, the “Rules”).

The Rules were prepared according to the Law “On the implementation of investment projects in connection with construction and infrastructure facilities on the basis of special funding”.

The state body authorized to perform duties with respect to the implementation of this model is the Ministry of Economy of Azerbaijan.

The rules include all the necessary information for investors who are planning to benefit from the BOT Model. The document contains information on the following matters:

1. Terms of implementing investment projects and requirements with respect to investors
2. Terms and characteristics of agreements to be signed between the authorized state body and investors
3. Rules on defining the value of products and services that would be obtained through investment
4. Rules on conducting bids
5. Authorities of the Ministry of Economy with regard to the implementation of the BOT Model

New Law “on Cashless Settlements”

The Law “On cashless settlements” was approved on 16 December 2016 by the President of the Republic of Azerbaijan (hereinafter, the “Law”).
The Law aims at ensuring the transparency of transactions and settlements, protection of consumer rights, replacement of cash settlements with cashless ones and the development of the banking system in Azerbaijan.
The Law defines the following settlements as cashless:
• Settlements through bank transfers, including transfers via payment means or devices (payment cards, payment orders, mobile phones, computers, etc.);
• Settlements through payment terminals;
• Cash settlements to the seller's bank account.

According to the Law, cashless payments within settlements between parties that are tax payers can be performed only through bank transfers, including transfers via payment means or devices.
Settlements within a calendar month in excess of AZN 30,000 performed by VAT registered taxpayers and taxpayers within the trade or public catering industry, whose taxable transactions during one month (months) of any consecutive twelve month period exceed AZN 200,000, and settlements of any other taxpayers within a calendar month in excess of AZN 15,000 shall be performed only by cashless means.
This requirement will come into force on 1 January 2017 for VAT registered taxpayers and taxpayers within the trade or public catering industry, whose taxable transactions during one month (months) of any consecutive twelve month period exceed AZN 200,000 and on 1 April 2017 for other taxpayers.

Regardless of the above, the following settlements must be performed by only cashless means:
• Payment of taxes, customs duties and levies, administrative fines, financial sanctions and interests, repayment of debt amounts under leasing transactions and issuance of credits;
• Payments defined under the laws of the Republic of Azerbaijan “On insurance activity” and “On compulsory insurance”;
• Payment of service fees and other payments made to government agencies, state-owned legal entities or legal entities, in which the state owns control package, public legal entities and budget enterprises;
• Payment of salaries and other payments defined by the legislation and paid to employees by employers, except those engaged in retail trade, public catering and the service industry, whose taxable transactions during one month (months) of any consecutive twelve month period are up to AZN 200,000; pensions, scholarships, financial aid, bonuses (including one-time bonuses), compensation and benefits;
• Payment of landline phone services and utility costs;
• Payment and repayment of interest-free cash funds (except where such funds are provided by non-taxpayers) and other money allocations;
• Utilisation/expenditure of funds received under public procurement contracts;
• Payment of tuition fees;
• Payments made to tour agents.
The following commodities can be sold and purchased by taxpayers from individuals who are not taxpayers by using cash:
• Obtaining agricultural products from the producers of agricultural products;
• Obtaining non-ferrous and ferrous scrap metal;
• Obtaining paper, glass and plastic products for recycling and other purposes;
• Obtaining used tires for recycling purposes.

Regulation “On e-Mortgage System” approved

The Regulation “On e-Mortgage System” was approved by the Presidential Decree dated 24 November 2016. The e-Mortgage system will be running on the e-government portal. The purpose of introducing the electronic system is to ease the access to mortgage loans and create equal conditions for those wishing to get a mortgage loan.

Amendment to the Law on State Registration of Real Estate

Amendment to the Law “On State Registration of Real Estate” (the “Law”) dated 14 November 2016 will simplify the state registration of residential houses. According to the new edition of Article 8.0.9.1. of the Law, the state registration of houses requires only the document certifying property rights of the owner of land where the house is situated. In addition, the new amendment applies to houses:
• Built before 01 January 2013
• Not taller than 12 meters
• Built on the land that meets basic living conditions
The list of documents required for the registration of houses situated on leased land remains the same as before; it includes approved building project, commissioning act and land lease documents.

Legal News Update - 7 December 2016

Strategic road maps for the national economy and main economic sectors approved

On 6 December 2016,  the President of Azerbaijan has signed a Decree approving “Strategic road maps for the national economy and main economic sectors”. Strategic road maps approved by the presidential Decree aim to define the country`s development goals and priorities as well as ensure their implementation.

The Decree has approved the Road Maps for the following sectors of the economy:

• For the prospects of the national economy;
• For the development of the oil and gas industry;
• For the manufacture and processing of agricultural products;
• For the manufacture of small and medium entrepreneurship-level consumer goods;
• For the development of heavy industry and machinery;
• For the development of specialized tourism industry;
• For the development of logistics and trade;
• For the development of housing provision at a reasonable price;
• For the development of vocational education and training;
• For the development of financial services;
• For the development of communication and information technologies;
• For the development of utilities (electricity and thermal energy, water and gas supply) in the Republic of Azerbaijan.

The strategic road maps will cover 2016-2020 economic development strategy, long-term outlook up to 2025 and target vision after 2025.
 

Legal News Update - 14 November 2016

Amendments to the Rules “On submission and publication of the annual and consolidated financial statements by commercial legal entities” have been introduced

The Resolution of the Cabinet of Ministers of Azerbaijan dated 21 October 2016 (“Resolution”) introduced amendments to the Rules “On submission and publication of the annual and consolidated financial statements by commercial legal entities” dated 27 May 2010.

According to the Resolution, the content of the annual financial statements of commercial entities has been amended and set as below:
1. Statement on financial condition
2. Statement on profit or loss and other comprehensive income
3. Statement on changes in equity
4. Cash flow statement
5. Significant accounting policies and explanatory notes.
 

Ministry of Economy approved criteria for selection of foreign countries, public venues, mass media, shops, including duty free shops in foreign countries to promote “Made in Azerbaijan” brand 

On 18 October 2016, the Ministry of Economy of Azerbaijan approved criteria for selection of shops in foreign countries, including duty free shops to place shelves with “Made in Azerbaijan” brand (“Brand”) and criteria for selection of foreign countries, mass media and public venues, where advertisement will be placed to promote the Brand. Such criteria include, amongst others:
• economic and trade relations between Azerbaijan and the foreign country
• export potential of Azerbaijani products in the foreign country
• requests of entrepreneurs.
Additionally, such criteria as broadness of media audience as well as high density of population in the places where advertisement is intended to be placed shall also be considered.
 

New standard forms on procurement of food products in a centralized manner at the expense of the state budget have been approved

On 27 October 2016 the Cabinet of Ministers of Azerbaijan approved the standard forms for procurement of food products in a centralized manner at the expense of the state budget by state enterprises, such as:

1. Information on demand for food products of a purchasing entity
2. Announcement on food products intended to be purchased, their prices and purchase conditions (also purchasing cycle)
3. Agreement between the Ministry of Agriculture of Azerbaijan and “Procurement and Supply of Food Products” Open Joint Stock Company (“OJSC”)
4. Agreement between the purchasing entities and the OJSC
5. Agreement between the OJSC and producers or sellers of food products
6. Information on agreements between purchasing entities and the OJSC
7. Information on agreements between the OJSC and producers or sellers of food products.
 

Amendments to the Law “On Combatting Corruption” have been adopted

On 14 October 2016, the Law of the Republic of Azerbaijan “On making amendments to the Law of the Republic of Azerbaijan On Combatting Corruption” was adopted (“Amendment”).
The Amendment reinstated each individual’s right to report on corruption both in verbal and written manner. Additionally, senior officials of state enterprises, municipalities, legal entities owned by the state or municipalities or legal entities, where the state or municipalities own interest, shall appoint a person or create a unit (department) responsible for collection of information regarding corruption. Employees of the aforementioned entities may report law breaks related to corruption to the authorized person or unit (department).
The Amendment eliminates the opportunity for the person who is the subject of the reported information or who may have any direct or indirect interest in the results of the investigation to get involved in the respective corruption investigation.

The Amendment introduces protection of the interests of the person reporting the corruption case. Thus, the authorized person, unit (department), senior officials of the state enterprises, the respective state authorities are obliged to keep information regarding the reporting person confidential. Such information can be disclosed only with the written consent of the reporting person.
Furthermore, the Amendment stipulates the opportunity for the individuals intending to report the corruption case to refer to the prosecution officials in cases when there is a real threat of death, damage to health, pressure, and usage of physical force against them or their relatives.
 

Azerbaijan signed the Convention of the Council of Europe on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism

On 7 November 2016, Azerbaijan signed the Convention of the Council of Europe On Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism dated effective as of 01 May 2008 (“Convention”).
The Convention includes provisions, which facilitate international co-operation and mutual investigation of crimes, seizure and confiscation of the criminal proceeds.
 

Legal News Update - 19 October 2016

Licensing rules have been amended

In accordance with Resolution of the Cabinet of Ministers of Azerbaijan No. 39 of 06 October 2016, the following amendments have been introduced:
1. Medical insurance contracts shall specify the insurance provider’s license number.
2. Only pharmacies and other medical establishments possessing a license for the sale of medications containing narcotic and psychotropic ingredients can sell such products to individuals for medical purposes.
3. To be registered, mortgage papers shall be printed only by print shops possessing a license for the preparation and sale of blank forms of securities.
4. Only properly licensed public and private preschool education institutions may teach children.
5. In accordance with the abovementioned amendments, a mobile operator is defined as a properly licensed telecommunications operator providing cellular (mobile) services within the public telecommunications network.

The major purpose of the above changes was to bring clarity to licensing rules, which required special permits for the respective activities as well. Under the described changes, such activities will be conducted only based on licenses.

Legal News Update - 11 October 2016

The Cabinet of Ministers of the Republic of Azerbaijan approved the list of products falling under export promotion

According to the Resolution of the Cabinet of Ministers of the Republic of Azerbaijan (the Cabinet) No. 401, dated 6 October 2016, (the Resolution) “The Rules on Payment of Export Promotion to Persons Engaged in the Export of Non-oil products”, “List of Non-oil Products Falling Under Export Promotion, in Accordance With the Commodity Nomenclature of Foreign Economic Activity”, “Coefficients to be Applied to the Base Amount of Export Promotion” were approved.

As per the Resolution, export promotion will apply to products of Azerbaijani origin. The specific weight of the value of local components of exported non-oil products produced in Azerbaijan or used in manufacturing process and non-oil products created in Azerbaijan will be determined based on the certificate of origin.

The amount of export promotion will be calculated and paid by applying coefficients determined by the Cabinet, depending on the type of non-oil products. The base amount of export promotion is three percent of the customs value of exported goods specified in the export customs declaration.
 

Legal News Update - 10 October 2016

Charter of OJSC Food Product Procurement and Supply approved

A Presidential Decree of 30 September 2016 approved the charter of OJSC Food Product Procurement and Supply (the “Company”), which was established on 11 April 2016 under Presidential Decree No. 1944.
According to the charter, the main goal of the Company is to stimulate the production and utilisation of agricultural products by (i) organising the centralised supply of food products purchased by state companies and organisations; (ii) monitoring activities of local producers; (iii) facilitating the direct purchase of food products by state companies and organisations from producers via the Company’s e-portal, etc.
Initially, the state will be the owner of all shares in the Company.

Amendments to the regulations of the State Customs Committee

In accordance with the Presidential Decree of 30 September 2016 (the “Decree”), amendments have been introduced to the Regulations of the State Customs Committee, entrusting the Committee with new duties. The new duties of the State Customs Committee include (i) updating the “Restriction List for Border Crossing” by recording information about wanted individuals, as well as individuals (a) with respect to whom an order on detainment has been issued; (b) accused of a crime; (c) with respect to whom preventive measures in relation to leaving the country are being taken; (ii) updating the “Special Attention List for Border Crossing” by recording information on individuals temporarily importing or exporting vehicles and goods for production and commercial purposes in the Republic of Azerbaijan, along with vehicles and goods temporarily imported or exported for production and commercial purposes.

Azerbaijan to promote ‘Made in Azerbaijan’ brand on foreign markets

The Presidential Decree signed on 5 October (the “Decree”) provides for measures for promoting the “Made in Azerbaijan” brand worldwide. The Decree outlines rules for defining and regulating the subsidy program related to the establishment of export missions to foreign countries, research of foreign markets and marketing activities, promotion of the “Made in Azerbaijan” brand on foreign markets, obtaining certificates and patents by local companies abroad for export purposes and export-related research programs and projects.
Three million manats from the President’s Reserve Fund has been allocated for financing the support measures outlined in the Decree.

Changes to list of individuals able to access commercial (tax) secret

The Presidential Decree signed on 4 October, approved the new list of state officials who are permitted to obtain commercial (tax) secrets which include:
1. Minister of Taxes of the Republic of Azerbaijan
2. First Deputy Minister of Taxes of the Republic of Azerbaijan
3. Deputy Ministers of Taxes of the Republic of Azerbaijan
4. Head of Main Department on Tax Policy and Strategic Researches of the Ministry of Taxes of the Republic of Azerbaijan
5. Head of the Main Department on Internal Security of the Ministry of Taxes of the Republic of Azerbaijan
6. Head of Legal of the Main Department of the Ministry of Taxes of the Republic of Azerbaijan
7. Head of Tax Risks Analysis and Control Department of Ministry of Taxes of the Republic of Azerbaijan
8. Head of Tax Audit and Operative (Operations) Control department of Ministry of Taxes of the Republic of Azerbaijan
9. Heads of departments under the Ministry of Taxes of the Republic of Azerbaijan
10. Heads of local tax departments, local tax offices, regional tax bodies
11. Head of the department for counteracting organised crime in the economic sphere within the Primary Investigation of Tax Crimes Department of the Ministry of Taxes of the Republic of Azerbaijan

New custom duties rates for importing certain products

The Resolution of the Cabinet of Ministers No. 367, dated 02 October, approved amendments to “Customs Duty Rates for Import/export Operations in the Republic of Azerbaijan” adopted by Resolution No. 80 of 12 April 2001. The amendments provide for new import duties for certain product groups such as meat, dairy products, eggs, natural honey, vegetables, fruits, nuts, alcoholic and non-alcoholic beverages.

Legal News Update - 29 September 2016

New public entity in Azerbaijan to support family businesses, small and medium entrepreneurs

The Presidential Decree of 23 September 2016 provides for the establishment of the “ABAD” (“Ailə Biznesinə Asan Dəstək”, which means Easy Support for Family Business) public entity under the State Agency for Public Service and Social Innovations under the President of Azerbaijan. It has been created for the purpose of promoting the active participation of citizens in the socio-economic development of Azerbaijan, improving the employment rate and encouraging the creation of competitive family businesses. AZN 1 million was allocated to the State Agency for Public Service and Social Innovations from the President’s Reserve Fund in order to establish the ABAD centres.

Decree on establishing a single database of goods produced in Azerbaijan

Under the Presidential Decree #2349 dated 21 September 2016, a single database of the goods produced in Azerbaijan will be established. The purpose for establishing the database is to support the continuity of fast development of entrepreneurship, to promote products of Azerbaijan internationally and to accelerate the process of integration into the international markets.
According to the Decree, an internet portal must be established within three months, which will contain information at least in three languages about the goods produced in Azerbaijan and their producers.

 

Legal News Update - 27 September 2016

Presidential Decree on the establishment of Pirallahi Industrial District

Pirallahi Industrial District (“Industrial District”) is to be established under the Presidential Decree “On the Establishment of Pirallahi Industrial District” of 14 September 2016.
The Industrial District is intended to support small and medium-size businesses engaged in manufacturing and processing activities in non-oil industries and enhancing local production in order to increase employment in the manufacturing sector, along with the development of the pharmaceutical industry, particularly in reducing dependence on imported pharmaceutical products.

 

Amendments to the Decree of the Cabinet of Ministers of Azerbaijan #70, dated 13 April 2005

According to the Decree of the Cabinet of Ministers of Azerbaijan #354, dated 21 September 2016 amending the rules of the state registration of legal entities, the commercial legal entities are now required to notify the Ministry of Labor and Social Protection of Population instead of the State Social Protection Fund on liquidations or mergers.

 

Rules On the Unified Register of Licenses and Permits

By the Decree No. 347 of 16 September 2016, the Cabinet of Ministers of Azerbaijan approved the establishment of a unified register of licenses and permits within the Ministry of Economy of Azerbaijan, which would contain all information on issued licenses and permits.

Legal News Update - 20 June 2016

State Duty for single entry and transit visas were reduced

As per the amendments to the Law “On State Duties” effective as of 14 June 2016, the state duty for single entry and transit visas is defined in the amount of USD 20.

Presidential Decree on establishment of Masalli Industrial District

Under the Presidential Decree “On Establishment of Masalli Industrial District” dated 13 June 2016 (“Decree”), Masalli Industrial District (“Industrial District”) was established. The Industrial District is intended to support small and medium size businesses engaged in manufacturing, processing activity as well as in provision of services within industries other than oil and gas sector. According to the Decree “Azerbaijan investment Company” OJSC is assigned to manage, develop and arrange the activity of the Industrial District.

Legal News Update - 07 June 2016

Amendments to the Code of Administrative Offences of the Republic of Azerbaijan

Amendments to the Administrative Code of the Republic of Azerbaijan dated 2 June 2016 provide for new penalties for violation of the rules on conclusion of deals with related persons. As per the amendments, officials and legal entities, violating the rules on conclusion of deals with related persons to the bank and non-bank credit institutions, which inter alia includes failure to provide information on such deals in compliance with the legislative requirements, are respectively subject to penalties of 2,000-2,500 AZN and 15,000-20,000 AZN.

Officials and legal entities, violating the aforementioned rules with respect to joint stock companies are respectively subject to penalties of 1,000-1,500 AZN and 10,000 – 15,000 AZN. Officials and legal entities, violating the aforementioned rules with regard to other legal entities, are respectively exposed to penalties of 500-1,000 AZN and 5,000-10,000 AZN.

 

Amendments to the Criminal Code of the Republic of Azerbaijan

Amendments to the Criminal Code of the Republic of Azerbaijan (“Amendment”) effective as of 1 June 2016 defines new and updated provisions, stricter and expanded penalties for certain crimes, predominantly concerning the economic sphere. Thus, the Amendments stipulate increased penalties and new rules particularly concerning theft, property damage by a deceit or abuse, interference with the entrepreneurial activity, illegal obtaining of credit or its use in excess of the designated purpose, trade mark infringement, infringement of rules on emission of securities and other crimes in the economic sphere. The Code provides for retroactive force of those amended provisions eliminating or softening the penalties for an individual currently or previously convicted or sentenced for committing a crime.

 

Presidential Decree “On Simplification of Issuance of Electronic Visas and Creation of ‘ASAN Visa’ System

Presidential Decree on “Simplification of Issuance of Electronic Visas and Creation of ‘ASAN Visa’ System” dated 1 June 2016 (“the Decree”) aims at establishing the electronic visa system, to ensure the efficiency and transparency via modern information technology. Under the Decree, foreigners or stateless persons intending to visit Azerbaijan (“Applicants”) can now benefit from obtaining an electronic visa by merely using ‘ASAN Visa’ System. The applicants may enter all necessary information required for obtaining an electronic visa directly to ‘ASAN Visa’ System. The state duty for electronic visas can be also paid via ‘ASAN Visa’ System. An electronic visa will be issued within three working days and sent to the electronic address of an Applicant. It must be emphasized that the electronic visa is issued for the Applicants of the countries approved by the Ministry of Foreign Affairs of the Republic of Azerbaijan.

 

Rules “On Implementation of ‘Green corridor’ and Other Border Crossing Systems in relation to Release of the Goods and Vehicles through the Customs Border”

In a move to boost the flexibility and transparency of the customs clearance process of goods and vehicles and its simplification, the Presidential Decree dated 21 May 2016 approved the Rules on “Implementation of ‘Green corridor’ and Other Border Crossing Systems in relation to Release of the Goods and Vehicles through the Customs Border” (“Rules”). The Rules introduce four types of Border Crossing Systems (“Corridors”) (i.e. Green Corridor, Blue Corridor, Yellow Corridor and Red Corridor) and mainly concern the conditions and requirements for their implementation. The Green Corridor is defined as a system, where the goods and vehicles are released to the customs territory without the conduct of physical inspection in compliance with the customs procedure. The Blue Corridor is defined as a system, where the goods and vehicles released to the customs territory are subject to application of customs control forms. The Yellow Corridor is defined as a system, requiring the application of customs control forms and presentation of supplementary documents (e.g. veterinary, phytosanitary, hygienic certificates, special permits and etc.) during the border crossing. The Red Corridor is defined as a border crossing system, requiring undertaking of all mandatory inspections in relation to the goods and vehicles, as well as individuals, if necessary. The type of a Corridor for every good and vehicle is defined in line with the electronically submitted brief declaration specified in the Rules. In addition, the Rules outline the factors affecting risk criterions taken into account while classification of importers as high, medium or low risk groups. Information on whether an Importer belongs to high, medium or low risk group can be attained only after registration within the official website of the State Customs Committee. The criterions of classification under the aforementioned risk groups are also considered while selecting the relevant Corridor.

Amendments to the Presidential Decree “On Regulations of Central and Local Executive Authorities

Amendments to the Presidential Decrees “On Regulations of Central Executive Authorities” and “On Regulations of Local Executive Authorities” effective since 20 May 2016 introduce the Board of Appeals, aiming at investigation of recurring complaints made of individuals or legal entities, engaged in entrepreneurial activities, on decisions, actions or inactions (excluding corruption related matters) of the respective executive authorities or their local organizations.

 

Amendments to the Migration Code of the Republic of Azerbaijan

Amendments to the Migration Code of the Republic of Azerbaijan effective since 02 June 2016 (“Amendments”) outline new provisions in relation to the exemptions from residence and work permits. Under the Amendments, the following individuals are also exempted from obtaining the work permit, and therefore, have grounds to apply for residence permit:

• Experts, having higher education in shipbuilding area or vocational training in the relevant field with at least 1 year experience in the respective area, which are invited either by Azerbaijani citizens or contractors of an Azerbaijani legal entity, or the residents of Garadagh Industrial Park
• Heads or Deputy Heads of a legal entity established in the Republic of Azerbaijan, whose shareholder or at least one of its shareholders is a foreign legal entity or individual. Amendment to the Law on Customs Tariff According to the Amendment to the Law “On Customs Tariff” effective since 01 June 2016, import of all types of the goods for the purposes of shipbuilding activity by a resident of Garadagh Industrial Park shall be exempt from customs duty as of 1 May 2016 for the period of 5 years.

 

Administrative regulations for acceptance of electronic customs declarations for customs clearance of goods and vehicles

The Resolution of the Board of the State Customs Committee No. 100/03/001 “On administrative regulations for acceptance of electronic declarations for customs clearance of goods and vehicles” which became effective from of 03 May 2016 provides for the rules on submission and processing of customs declarations electronically for import or export of goods and vehicles.

According to the Regulations, applicants must submit scanned copies of supplementary documents, which are required for import of goods and vehicles along with the e-declaration. If all requirements are met, e-declarations will be approved by an authorized official of the State Customs Committee on the day of submission through an e-signature and the goods will be released for customs control.

The electronic service is subject to the fee of AZN 30 per page of declaration.

Below is the list of websites for electronic customs services:

http://dgk.gov.az/az/e-xidnew.html

http://www.e-gov.az

 

Law on Implementation of Investment Projects on Construction and Infrastructure on the basis of Special Financing

Law on “Implementation of Investment Projects on Construction and Infrastructure on the basis of Special Financing” effective as of 21 April 2016 (“the Law”) stipulates the legal and economic grounds for execution of investment projects on construction and infrastructure objects on the basis of special financing. The Law outlines the provisions on newly adopted BOT (Build-Operate-Transfer) model. BOT is a form of project financing, wherein a private entity receives a concession from the private or public sector to finance, design, construct, and operate a facility stated in the concession contract.

Amendments to the Law on Investment Funds

The Amendments to the “Law on Investment Funds” effective as of 20 April 2016 (“the Amendments”) mainly concern the provisions on deals between the Stock Investment Fund (“the Fund”) and related persons. As per the Amendments, if the value of a deal comprises 5% or more of the total value of assets of the Fund, the deal may be concluded on the basis of independent auditor’s report and decision of general meeting by simple majority of shareholders’ votes. Where the value of deal between the Fund and related persons is less than 5% of the total value of assets of the fund, the deal may be concluded on the basis of decision of either General Meeting, Supervisory Board or Executive Authority in compliance with the Charter of the Fund.

Amendments to the Law on Non-Bank Credit Institutions (“NBCI”)

According to the Amendments to the “Law on Non-Bank Credit Institutions” effective as of 20 April 2016 (“the Law”), the definition of related persons and provisions on deals between the NBCI and related persons are now identified in accordance with the Civil Code (“the Code”) of Azerbaijan. Referring to the Code, related persons include:
1. Chairman and members of the executive body and supervisory board of the legal entity;
2. Chairman of the structural unit of the legal entity (i.e. Branch, Representative Office etc.);
3. Spouse, parents, parents of spouse, grandparents, children, stepchildren, stepparents, siblings of the persons indicated in points 1 and 2;
4. Person directly or indirectly holding 10% of participation interest in the legal entity;
5. Legal entities where the persons indicated in points 1, 2 and 4 directly or indirectly possess participation interest;
6. Entities where the legal entity holds at least 20% of participation interests;
7. Persons holding 20% of participation interest in the legal entities indicated in points 4 and 6;
8. Chairman of the supervisory board and executive body of the legal entities indicated in points 4 and 6.
Moreover, conclusion of deals between the NBCI and related persons are subject to the following rules:
Where the value of the deal with the related person is 5% of total value of assets of the legal entity or more, the deal must be evaluated by the independent auditor and approved by a decision of the general meeting.
Where the value of the deal with the related person is less than 5% of total value of assets of the legal entity, the deal must be approved by the general meeting of participants, the supervisory board or the executive body in accordance with the charter of that legal entity.

Law on Licenses and Permissions

Law on Licenses and Permissions effective as of 20 April 2016 (“the Law”) introduces the legal, economic and organizational regulation of licensing and permission system for conduct of entrepreneurial activity (excluding activity in the area of financial markets).
The Law provides for the criteria, list and principles of state regulation of activities requiring licenses and special permissions, as well as for the rules on issuance, re-issuance, suspension, renewal and revocation of licenses (permissions).
The Law differentiates the meaning of license and permission, where the first grants the right to undertake the entrepreneurial activity as defined by the Law and the latter entitles to undertake certain actions related to entrepreneurial activity.
The Law applies to all legal entities, including representative offices and branches of the foreign legal entities, in the Republic of Azerbaijan, along with individual entrepreneurs.

Rules on Issuance of Confirmation Certificate on Import of Techniques, Technological Equipment and Installations to Legal Entities and Individual Entrepreneurs holding Investment Promotion Certificate

The Rules on Issuance of Confirmation Certificate on Import of Techniques, Technological Equipment and Installations to Legal Entities and Individual Entrepreneurs holding Investment Promotion Certificate (“the Rules”) were approved by the Presidential Decree of 20 April 2016.
By virtue of the Rules, the Confirmation Certificate (“Certificate”) on import of Techniques, Technological Equipment and Installations is issued to the legal entities and individual entrepreneurs having obtained the Investment Promotion Certificate.
The applicant shall file an application to the Ministry of Economy of the Republic of Azerbaijan following the requirements of the Rules which must be processed and resolved upon within seven working days. The form for Certificate is already approved under the Rules.

Approved criteria for Investment Projects

As per the Rules “On Issuance of Investment Promotion Certificate”, Investment Promotion Certificate is issued to the Legal Entities and Individual Entrepreneurs provided that they have presented investment projects which meet the following criteria (“Criteria”):
• Area of an economic activity where investment is carried out;
• Minimum amount in relation to the size of an investment project;
• Administrative-territorial units where investment project will be carried out.

Customs e-declaration of goods and vehicles with ASAN Signature

An electronic customs declaration system was introduced in Azerbaijan on 4 April 2016, aimed at ensuring transparency and efficiency in the customs process.
Electronic declaration services for goods and vehicles are now available through the E-Government Portal (www.e-gov.az).Individuals can benefit from prompt online customs clearance of imported goods and vehicles by simply using an ASAN Signature. This procedure involves logging into the E-Government Portal using the ASAN signature and filling in the customs declaration form by choosing the relevant electronic service. The completed declaration must be authenticated (signed) using the ASAN signature.

Law “On Full Insurance Coverage of Deposits”

In a move to boost public confidence in commercial banks a new Law “On Full Insurance Coverage of Deposits” was adopted on 19 January 2016.

By virtue of the Law, all deposits that are within the frames of the annual interest rates on deposits defined by the Board of Trustees of the Deposit Insurance Fund will be insured irrespective of their amount for the period of three years since the effective date of the Law.
For the purpose of the Law, the frames of annual interest rates on deposits constitute 3% in relation to a foreign currency deposits and 12% for the local currency deposits.
Deposits with annual interest rates exceeding the defined interest rates shall neither be subject to compensation nor full insurance. Depositors who have already held deposits by the effective date of the Law and those with annual interest rates exceeding the defined interest rates can become eligible for full insurance and compensation provided that they adjust their deposit agreements to the requirements of the Law. Once amendments are made to the deposit agreements, interest rates accrued up to the date of the amendments shall be fully paid to the depositors in accordance with the terms of the then valid agreements.

Amendments to the Law “On Insurance of Deposits”

Amendments to the Law “On Insurance of Deposits” were approved by the Parliament of Azerbaijan on 29 December 2015.
The Amendments introduce the additional rules for payment of compensation for deposits in case a depositor has outstanding obligations with regard to the bank at the time of an insurance event. The amount of an outstanding obligation will be deducted by the bank from the amount of compensation payable to the depositor.

Decree “On Implementation of Additional Measures Aimed at Encouraging Exportation of Non-oil Products in Azerbaijan”

The President of Azerbaijan has signed a Decree “On Implementation of additional measures aimed at encouraging exportation of non-oil products manufactured in Azerbaijan” dated 1 March 2016.
According to the Decree, individuals or entities engaged in exporting of non-oil products in the territory of Azerbaijan will receive export promotional payments, which will vary depending on the share value and types of local components either produced or used in production or manufacturing of non-oil products in Azerbaijan.
The base part of the promotional payment has been defined as 3% from the customs value of the actually exported product as defined in the export customs declaration.
The Decree has become effective from 1 March 2016 and is valid until 31 December 2020.
 

Law “On Approval of the New Administrative Code of Azerbaijan”

The Law of Azerbaijan “On Approval of the New Administrative Code of Azerbaijan” was adopted on 29 December 2015 and becomes effective as of 1 March 2016 (“Law”).
By virtue of the Law, the new Administrative Code of Azerbaijan (“Code”) has been adopted and stipulates new as well as updated penalties for violation of, inter alia, migration, labor, currency and other legislative requirements.

Area Status Subject matter Penalty (AZN) Exposed persons
Migration New Engagement in a paid labor activity without a work permit required for such activity 300-400, with or without administrative deportation Foreigners or stateless persons
New Intentional re-entrance into the country with amended documents once deported during the restriction period 500, together with administrative deportation Foreigners or stateless persons
New Employment of a foreign or stateless employee in the place other than his place of work 500 Officials of the employer
Updated Accepting, ensuring employment or provision of services in regard to foreigners or stateless persons, together with fulfilling duties in allowing them to stay, reside in Azerbaijan or transit, as well as violation of the established rules on registration, de-registration, or authorizing documents on their stay or residence in Azerbaijan 2,000-3,000 Legal entities
Updated Employment of one foreigner or a stateless person without obtaining work permit 3,000-4,000 Officials of the employer
15,000-20,000 Legal entities
Employment of three or more foreigners or stateless persons without a work permit 5,000-7,000 Officials
30,000-35,000 Legal entities
Currency Updated Purchase and sale, or exchange of currency values at public places violating the legislation, as well as acceptance of currency values as payment means 40-80% from the amount of transaction Individuals and legal entities
State Language Updated Violation of the rules regarding usage of official language (particularly propagation against, counteraction in usage and development of official language, along with attempt in limitation of the sphere of its usage and prevention of application of the Latin alphabet) in Azerbaijan 1,000 -1,500 Individuals
2,500-4,000 Officials of the legal entities
12,000-16,000 Legal entities

Amendment to the Migration Code of Azerbaijan on Issuance of Electronic Visas

In accordance with the Amendment to the Migration Code of Azerbaijan made on 1 February 2016 (“Amendment”), the term for review of the application made through tourism companies accredited in Azerbaijan concerning issuance of electronic visas to tourists is reduced from 10 up to five working days.

Law “On Ratification of the United Nations Convention on Contracts for the International Sale of Goods”
According to the Law of Azerbaijan “On joining the United Nations Convention on Contracts for the International Sale of Goods” dated 1 February 2016, Azerbaijan ratified the “United Nations Convention on Contracts for the International Sale of Goods” signed on 11 April 1980 (“Convention”).
This would mean that persons whose place of business is in Azerbaijan will be eligible to apply the entire Convention or any of its provisions within their contractual relationship in cross-border sale of goods, provided that the counterparty’s business place is in the member country to the Convention.
It should be noted that according to the Convention:
i. if a party has more than one place of business, the place of business would be that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract;
ii. if a party does not have a place of business, reference is to be made to his habitual residence.

Amendments to the Law “On Compulsory Insurance”

Amendments to the Law of Azerbaijan “On Compulsory Insurance” adopted on 18 December 2015 (“Law”) provides for the additional rules for payment of compulsory insurance fees. Thus, insurance agents may transfer fees received from the insured in cash to the accounts of the relevant insurers via the payment system integrated with information system. The previously mentioned payment system shall allow obtaining an electronic report on payments made to the Compulsory Insurance Bureau or accounts of the relevant insurers.
Moreover, the Law prohibits making any extras or discounts with regard to compulsory insurance fee or offering any other deals while concluding compulsory insurance agreement.
Last but not least, the Law now demands conclusion of compulsory insurance agreements on the liability of vehicle owners in the form of an electronic document in accordance with the requirements of the Law of Azerbaijan “On Electronic Signature and Electronic Document”.

Amendment to the Labor Code of Azerbaijan on Certification Rules of Employees working in the Field of Practical Medical or Pharmaceutical Activities

According to the Amendment to the Labor Code of Azerbaijan dated 19 January 2016, employees engaged in the field of practical medicine or pharmaceutical activity shall neither be questioned on matters not directly related to their activities, nor evaluated about their political views or beliefs during their professional certification.

Rules on issuing identification documents for the citizens of Azerbaijan under the age of 15
The Amendment to the Law of Azerbaijan “On Identification Document of Citizen Azerbaijan” dated 29 December 2015 (“Amendment”) introduces the following provisions:
• Towards implementation of personal identification card for Azerbaijani citizens under the age of 15 (“citizens under the age of 15”) as of 1 January 2020, citizens under the age of 15 shall obtain ID cards during the period from 1 January 2017 to 1 January 2020.
• Issuance or replacement of ID cards to citizens under the age of 15 shall be carried out via an application of either their parent, adopter, trustee or guardian.
• ID cards of citizens under the age of 15 will cover their personal photo, excluding personal signature.
• ID cards of Azerbaijani citizens under the age of 5 and 15 shall expire upon their 5th or 15th anniversary.
• ID card of an Azerbaijani citizen aged 5 to 15 years shall expire upon his/her 15th anniversaries, accordingly.

The Amendment shall be effective from of 1 January 2017.

Decree “On Establishment of the Financial Market Supervisory Chamber Public Legal Entity in Azerbaijan”

For the purposes of licensing, regulation and control of securities market, investment funds, insurance companies, credit organizations (banks, non-banking organizations and operators of postal communication) and payment systems, along with strengthening the control over prevention of the legalization of criminally obtained funds or other property and the financing of terrorism, the President of Azerbaijan signed the Decree “On Establishment of the Financial Market Supervisory Chamber Public Legal Entity in Azerbaijan” dated 3 February 2016 (“Decree”).
By virtue of the Decree, the Financial Market Supervisory Chamber public legal entity (“Chamber”) has been established in Azerbaijan. The President of Azerbaijan has retained certain powers as a founder of the Chamber, such as approval of the charter of the Chamber, defining the amount of charter fund of the Chamber, etc.
The Chamber will be governed by the Board of Directors comprising of five members to be appointed and removed by the President of the Republic of Azerbaijan.

As a result of creation of the Chamber, the below listed state bodies shall be liquidated upon approval of the charter of the Chamber:

1. State Securities Committee of Azerbaijan

2. State Insurance Control Service under the Ministry of Finance of Azerbaijan

3. Financial Monitoring Service under the Central Bank of Azerbaijan.

A special working group has been composed in order to support the activity of the Chamber.

New Law on Public Legal Entities

The Law of the Republic of Azerbaijan “On Public Legal Entities” was adopted on 29 December 2015 and became effective as of 3 February 2016 (“Law”).
The Law provides for the rules on establishment, operation and formation of the public legal entities and does not apply to the state owned entities.
The Law defines a public legal entity as any entity (excluding state or municipal authority), engaged in national and public activities and established either by state or municipal authority, or by a public legal entity.
The Law further provides for general rules of operation of public legal entities in Azerbaijan, their governance, liquidation procedures, property issues, etc.

Decree “On Establishment of the Board of Appeal in the Central and Local Executive Authorities”

Towards the establishment of transparency and objectivity during the review of appeals made by individuals and legal entities engaged in entrepreneurial activities, on 3 February 2016 the President of Azerbaijan signed the Decree “On Establishment of the Board of Appeal in the Central and Local Executive Authorities” (“Decree”).
The Decree envisages establishment of the Boards of Appeal within the central and local executive authorities and adoption of their model regulations.

Decree “On Establishment of the Board of Appeal under the President of the Republic of Azerbaijan”

On 3 February 2016 the President of Azerbaijan signed the Decree “On Establishment of the Board of Appeals under the President of the Republic of Azerbaijan” (“Decree”). The Decree stipulates establishment of multilevel structure for consideration of appeals made by individuals and legal entities engaged in entrepreneurial activities and aims at improvement of the appeal mechanism on decisions, actions or failure to act by central and local executive authorities.

The list of members of the Board of Appeal under the President of Azerbaijan was approved by the Decree of the President of the Republic of Azerbaijan dated 3 February 2016.
 

Visa facilitation for foreign citizens

Towards the execution of tasks reflected in the Presidential Decrees of the Republic of Azerbaijan dated 30 November 2012 and 20 November 2014, the Ministry of Foreign Affairs announced that citizens of Qatar, Oman, Saudi Arabia, Bahrain, Kuwait, Japan, China, South Korea, Malaysia and Singapore may enjoy simplified visa procedures starting from 1 February 2016. Consequently, citizens of the above countries will be able to obtain tourist or business visas by providing passports in all international airports of Azerbaijan

Simplified procedures for declaration of goods by individuals

For the purposes of ensuring convenience and transparency during the declaration of the goods by physical persons, the State Customs Committee of Azerbaijan integrated the electronic service on “Simplified Declaration for the Physical Persons” into the “E-Government Portal” as of 5 January 2016.

As a result, any individual entering or exiting the country, may electronically declare the information on vehicles, jewelries, currency and goods, conveyed through customs border, to the customs authorities. Online declaration may be done either via the official website of State Customs Committee (www.dgk.gov.az) or E-Government Portal (www.e-gov.az).

In addition, citizens may fill in the simplified electronic declaration, as well as get information on basic provisions of customs legislation and rules required for customs control by using special “customs” kiosks installed at all border checkpoints.

At the same time, the list of goods prohibited or limited for circulation can be found in special designated places at the border checkpoints.
 

Work time rate and production calendar for 2016

The Board of the Ministry of Labour and Social Protection of Population of Azerbaijan has approved the “Work Time Rate and Production Calendar” (“Production Calendar”) for 2016 by the Resolution # 9 dated 29 December 2015. Based on the Labour Code Azerbaijan and Resolution # 402 dated 24 December 2015 approved by the Cabinet of Ministers of Azerbaijan regarding “Novruz, Ramadan, Gurban holidays in 2016” (“Resolution”), the Production Calendar affirmed the following non-working days:

• January 1-2 (New Year Holiday) 
• January 20 (Day of National Mourning)
•  March 8 (Women’s day) 
•  March 20, 21, 22, 23, 24 ( Novruz holiday) 
•  May 9 (Victory day over Fascism) 
•  May 28 (Republic Day) 
•  June 15 (National Salvation Day of Azerbaijan) 
•  June 26 (Armed Forces Day of of Azerbaijan)
•  July 6, 7 (Ramadan Holiday) 
•  September 12,13 (Qurban Holiday) 
•  November 9 (Day of the State Flag of Azerbaijan) 
•  December 31(Day of Solidarity of World Azerbaijanis)

According to the Resolution, following days will also be considered as non-working days due to coincidence of holidays with the weekends:

• 25 March, 30 May, 27 June with respect to five-day working week and;
•  25 March, 30 May with respect to six-day working week. 

The annual rate of working time in 2016 will constitute 1937 hours for 40 hours weekly work and will be applicable with respect to both five-day and six-day working weeks. 

New Administrative Delinquencies Code to be adopted

During the last meeting of autumn session that was held on 29 December 2015, the Parliament of Azerbaijan approved the adoption of the new Administrative Delinquencies Code of the Republic of Azerbaijan (the “Code”). The Code consists of 40 Chapters and 608 Articles (in comparison to its predecessor, which contained 35 Chapters, 458 Articles) and determines stricter penalties and other updates in several areas. The Code is currently pending the approval of the President, and to be effective from 1 May 2016. 

 

Decree of the President of Azerbaijan “On Licensing Procedure”

According to the Decree of the President of Azerbaijan “On Licensing Procedure” dated 21 December 2015 (the “Decree”) the list of licenses and respective state duties were revised. According to the Decree, licenses will be issued for an indefinite period.

The Ministry of Economy and Industry of Azerbaijan (the “Ministry”) will be responsible for issuance of licenses for all types of activities, excluding those related to the state security.
The following lists are approved by the Decree which constitute annexes thereof:
i. The list of activities requiring licenses (except for those which, are related to the state security) and the amount of state duty for license for those types of activities;
ii. The list of activities related to the state security requiring licenses and the amount of state duty for license for those types of activities;
iii. The list of activities requiring licenses issued by executive authorities of Nakhichevan Autonomous Republic.
As per the Decree, the resolutions of the Ministry on licensing issues are mandatory for all the state authorities issuing licenses, as well as other central executive authorities, local authorities and local self-government bodies, legal entities and individuals.
Licenses issued by the relevant authorities of Nakhichevan Autonomous Republic are only valid on the territory of Nakhichevan Autonomous Republic.
Request for any additional document from the applicant not reflected in the Decree is forbidden.
In case any insufficiencies detected in the submitted application the authority issuing the licenses notifies the applicant on this within 5 working days upon submission of application. All insufficiencies should be eliminated by the applicant within 10 working days upon receipt of such notification. In such cases, the period for processing of license applications is suspended. Once insufficiencies are eliminated the processing of applications resumes.
The state authority issuing licenses must resolve on issuance or refusal of requested licenses within 10 working days upon registration of the respective application.

Decree of the President of Azerbaijan “on Approval of Regulations on turnover of the goods subject to excise marking in the territory of Azerbaijan”

According to the Decree of the President of Azerbaijan “on Approval of Regulations on turnover of the goods subject to excise marking in the territory of the Republic of Azerbaijan” dated 07 December 2015 (the “Decree”) the goods subject to excise marking include
i. Drinkable alcohol
ii. All types of alcoholic beverages
iii. Beer (excluding non-alcoholic beer) and other beverages containing beer
iv. Tobacco products
As per the new rules, Release from the production building, import and sale of the goods subject to excise marking is allowed only:
i. If production and sale of such goods is conducted by a taxpayer holding a respective license;
ii. In case documents confirming the non-cash payment of the value of goods by a provider of such goods are available (except for the cases when such goods are provided by producers);
iii. In case provision of such goods (excluding cases when such provision is carried out for personal consumption of individuals at retail trade and catering facilities) is documented with a strict reporting form (with electronic VAT invoice in case h provided by the producer).
It is not allowed to pay the value of goods subject to excise marking in cash (except for retail of tobacco products) at the time of sale and the purchase for selling purposes;
For the purposes of the Decree, Retail means the sale of goods only for personal, family, household and other purposes of this kind, which is not directly related to entrepreneurial activity.
Those who produce, import, sell and purchase the goods subject to excise marking (except for individuals purchasing for personal consumption) are required to provide the documents confirming the purchase of such goods to the representatives of the Ministry of Taxes upon their request.

Suspension of Audits in the Sphere of Entrepreneurship

The President of Azerbaijan signed a new law titled “On Suspension of Audits in the Sphere of Entrepreneurship” (“Law”), dated 20 October 2015. The Law will go into effect on 1 November 2015 with the purpose of stimulating entrepreneurship. The Law suspends the audits in the sphere of entrepreneurship for the period of two years; however, it does not apply to tax audits and audits by the General Prosecutor’s Office concerning corruption crimes, life and health-threatening situations, and instances threatening national security or the state’s economic interests. The Decree of the President “On Imposing Additional Measures on Application of the Law” (“Decree”) dated 26 October 2015 defines and approves the list of the aforementioned audits not subject to suspension under the Law. The Decree lists the processes of the aforementioned audits that arise from situations where human health and life, state security, or the state’s economic interests may be at risk:

• Checking the quality of drugs and verify compliance with the rules of safety and sanitary requirements set by the Ministry of Health of Azerbaijan

• Verifying compliance with phytosanitary and veterinary requirements set by the Ministry of Agriculture of Azerbaijan

• Investigating illegal access to gas, water supply, electricity, or heating networks
• Auditing of insurance and reinsurance companies (to be performed by the Ministry of Finance of Azerbaijan)

• Auditing of credit institutions and their affiliated business entities (to be performed by the Central Bank of Azerbaijan)

• Auditing the storage and distribution of radioactive, explosive, or highly dangerous substances or equipment. Verifying compliance with the technical safety codes of the mining industry, the hydraulic engineering, oil & gas industries, and the construction industry, as well as technical and fire safety codes set by the Ministry of Emergency Situations

• Checking all other activities that may pose a threat to human health and life, state security, or the state’s economic interests. All such audits shall be approved by the Ministry of Economy and Industry of the Republic of Azerbaijan. In the event of any violation of the requirements under the Law, an entrepreneur is entitled to file a claim with the Ministry of Economy and Industry of the Republic of Azerbaijan or to commence administrative and legal proceedings.

Rules on duty-free import of goods for non-commercial purposes were amended

Rules on duty-free import of goods for non-commercial purposes were amended The Presidential Decree dated 23 October 2015 (“Decree”) on simplification of control rules at customs check points amended the rules on import of goods for personal use. As per the Decree, individuals importing goods (excluding goods subject to excise tax, motor vehicles and goods for meeting the essential needs of the individuals during the trips) with customs value of not more than USD 10,000 (and additionally USD 2000 per accompanied minor) and which are not intended for manufactural or commercial purposes will be exempt from customs duties. The State Customs Committee of the Republic of Azerbaijan is assigned to arrange placing of the list of the goods prohibited/restricted for export/import on boards visible to everyone at the state border checkpoints.

Legal News October 2015

Deloitte in Azerbaijan issued an autumn edition of Legal News which includes new Decree of 19 October 2015 (“Decree”), issuance of all types of licenses (with the exception of licenses concerning public security).

To read more, please, click the .pdf file on the left

 

Tax and Legal News August 2015

Deloitte in Azerbaijan issued a summer edition of Tax and Legal News 2015 which includes new Codes, Laws, changes to existing legislation and etc.

To read more, please, click the .pdf file on the left

 

Tax and Legal News Summary 2014

Deloitte in Azerbaijan issued an annual Tax and Legal News Summary 2014 which includes new Codes, Laws, changes to existing legislation and etc.

To read more, please, click the .pdf file on the left

 

Important Migration Update 2014

The Migration Code of the Republic of Azerbaijan (“Migration Code”) provides a list of foreign nationals and stateless persons who are exempt from obtaining work permits in Azerbaijan. This list includes foreign nationals and stateless persons who are on business trips, provided that:

(i) The business trip does not last more than 90 days within a year; and 

(ii) activities during the business trip take place in the industries defined by the Cabinet of Ministers of Azerbaijan.

Previously, foreign nationals and stateless persons, in the absence of a list of exempted activities, were not required to obtain work permits while on business trips shorter than 90 days.

This list of exempted activities has now been approved by Decree # 387 of the Cabinet of Ministers of the Republic of Azerbaijan of 4 December 2014 “On approval of the list of activities exempt from obtaining a work permit for foreign nationals and stateless persons on business trips in the Republic of Azerbaijan for a period not exceeding 90 days within a year” (“List of Activities”).

The List of Activities includes the following industries:
1. Mining;
2. Processing;
3. Electricity, gas, steam, and air conditioning supply;
4. Information and communication;
5. Finance and insurance;
6. Education;
7. Transport;
8. Water supply, waste water, and refuse treatment.

The process of applying for work permits for foreign nationals and stateless persons on business trips for short periods is not yet clear and will be the subject of future communication.

 

 

To read more, please click the .pdf file on the left.

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