Doing Business 2019 Azerbaijan Economy Profile Azerbaijan Page 1 Doing Business 2019 Azerbaijan Economy Profile of Azerbaijan Doing Business 2019 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as post-filing processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Labor market regulation Flexibility in employment regulation and aspects of job quality Page 2 Doing Business 2019 Azerbaijan About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of labor market regulation. Although Doing Business does not present rankings of economies on the labor market regulation indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational reports, which exhaustively cover business regulation and reform in different cities and regions within a nation. These reports provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business report, published in 2003, covered 5 indicator sets and 133 economies. This year’s report covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. More about Doing Business (PDF, 5MB) Page 3 Doing Business 2019 Azerbaijan Ease of Doing Business in Region Europe & Central Asia DB 2019 Rank 190 1 Azerbaijan Income Category Upper middle income 25 DB 2019 Ease of doing business score Population 9,862,429 0 100 City Covered Baku 78.64 DB 2019 Ease of Doing Business Score 0 100 78.64: Azerbaijan (Rank: 25) 77.37: Russian Federation (Rank: 31) 76.95: Poland (Rank: 33) 72.34: Regional Average (Europe & Central Asia) 72.30: Romania (Rank: 52) 71.24: Bulgaria (Rank: 59) Note: The ease of doing business score captures the gap of each economy from the best regulatory performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s ease of doing business score is reflected on a scale from 0 to 100, where 0 represents the lowest and 100 represents the best performance. The ease of doing business ranking ranges from 1 to 190. Rankings on Doing Business topics - Azerbaijan 2 1 9 17 22 28 28 40 45 55 61 74 84 82 Rank 109 136 163 190 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Ease of Doing Business Score on Doing Business topics - Azerbaijan 100 96.14 84.63 85.23 80.00 81.67 80 77.27 77.04 73.11 67.51 63.79 Score 60 40 20 0 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Page 4 Doing Business 2019 Azerbaijan Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate To make the data comparable across economies, several assumptions about the a company (number) business and the procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business - Is a limited liability company (or its legal equivalent). If there is more than one type city of limited liability company in the economy, the most common among domestic firms • Postregistration (for example, social security is chosen. Information on the most common form is obtained from incorporation registration, company seal) lawyers or the statistical office. - Operates in the economy’s largest business city. For 11 economies the data are • Obtaining approval from spouse to start a also collected for the second largest business city. business or to leave the home to register the - The entire office space is approximately 929 square meters (10,000 square feet). company - Is 100% domestically owned and has five owners, none of whom is a legal entity; • Obtaining any gender specific document for has a start-up capital of 10 times income per capita and has a turnover of at least company registration and operation or national 100 times income per capita. identification card - Performs general industrial or commercial activities, such as the production or sale of goods or services to the public. The business does not perform foreign trade Time required to complete each procedure activities and does not handle products subject to a special tax regime, for example, (calendar days) liquor or tobacco. It does not use heavily polluting production processes. • Does not include time spent gathering - Leases the commercial plant or offices and is not a proprietor of real estate and the information amount of the annual lease for the office space is equivalent to the income per capita. • Each procedure starts on a separate day (2 - Does not qualify for investment incentives or any special benefits. procedures cannot start on the same day) - Has at least 10 and up to 50 employees one month after the commencement of • Procedures fully completed online are recorded operations, all of whom are domestic nationals. as ½ day - Has a company deed that is 10 pages long. • Procedure is considered completed once final The owners: document is received - Have reached the legal age of majority. If there is no legal age of majority, they are • No prior contact with officials assumed to be 30 years old. Cost required to complete each procedure (% of - Are sane, competent, in good health and have no criminal record. income per capita) - Are married and the marriage is monogamous and registered with the authorities. - Where the answer differs according to the legal system applicable to the woman or • Official costs only, no bribes man in question (as may be the case in economies where there is legal plurality), the • No professional fees unless services required by answer used will be the one that applies to the majority of the population. law or commonly used in practice Paid-in minimum capital (% of income per capita) • Funds deposited in a bank or with third party before registration or up to 3 months after incorporation Page 5 Doing Business 2019 Azerbaijan Starting a Business - Azerbaijan Standardized Company Legal form Limited Liability Company (LLC) Paid-in minimum capital requirement AZN 0 City Covered Baku Indicator Azerbaijan Europe & OECD high Best Regulatory Central Asia income Performance Procedure – Men (number) 3 5.2 4.9 1 (New Zealand) Time – Men (days) 3.5 12.9 9.3 0.5 (New Zealand) Cost – Men (% of income per capita) 1.3 4.6 3.1 0.0 (Slovenia) Procedure – Women (number) 3 5.2 4.9 1 (New Zealand) Time – Women (days) 3.5 12.9 9.3 0.5 (New Zealand) Cost – Women (% of income per capita) 1.3 4.6 3.1 0.0 (Slovenia) Paid-in min. capital (% of income per capita) 0.0 2.3 8.6 0.0 (117 Economies) Figure – Starting a Business in Azerbaijan and comparator economies – Ranking and Score DB 2019 Starting a Business Score 0 100 96.14: Azerbaijan (Rank: 9) 93.04: Russian Federation (Rank: 32) 90.02: Regional Average (Europe & Central Asia) 85.38: Bulgaria (Rank: 99) 83.90: Romania (Rank: 111) 82.85: Poland (Rank: 121) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2019 Azerbaijan Figure – Starting a Business in Azerbaijan – Procedure, Time and Cost Time (days) Cost (% of income per capita) 3.5 1.4 3 1.2 Cost (% of income per capita) 2.5 1 Time (days) 2 0.8 1.5 0.6 1 0.4 0.5 0.2 0 0 1 2 3 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2019 Azerbaijan Details – Starting a Business in Azerbaijan – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain electronic signature for online registration 1 day AZN 18 (e-signature Agency : Data Processing Center under the Ministry of Transport, ASAN-Imza, per Communication and High Technologies person) An electronic signature is a pre-requisite to online registration. The most common type of electronic signature is ASAN Imza, which can be activated on a sim-card. ASAN Imza costs AZN 18 and is valid for 3 years. Each founder is required to obtain e-signature (alternatively, a PoA needs to be issued and notarized, which will then require only one person to obtain e-signature). 2 Apply for registration; obtain TIN number and register for VAT 2 days no charge Agency : One Stop Shop, Ministry of Taxes Online application for registration is available at https://www.e-taxes.gov.az/ as of December 2011 (Article 5-1. has been added to the Law of Azerbaijan Republic "On state registration of legal entities and state registry.") Online application for registration is exempted from state fee and is completely free (Article 20-1.3 of the Law of Azerbaijan Republic “On State Fee”). Details are available at http://www.taxes.gov.az/modules/birpencere/eng/1.html The time limit for online application for registration is 1 day. A hard copy of registration documents are obtained from the Tax Office the day after application was submitted. Having a registration number is sufficient to start operation. Expedited registration is available for companies that have one founder. For online application for registration, it is required to have e-signature. The only document required to be submitted online is the charter. Documents required for paper registration include the following: -Standard application form -Founding documents – the charter of the entity approved by the founder or his/her legal representative, minutes of the foundation meeting; -Resolution of establishment -If the founder is an individual – copy of his/her identity card (notarization of the signature is optional); -A document confirming the legal address of the entity. 3 Register employees with the Ministry of Labor and Social Protection Less than one day no charge Agency : Ministry of Labor and Social Protection (online procedure) As of February 9, 2014, all employment agreements must be registered with the Ministry of Labor and Social Protection. Registration is done at the website of the Ministry of Labor and Social Protection (accessible through www.e-gov.az). After that, immediate confirmation is obtained and employees can start actual employment. A fine of AZN 25 000 AZN applies if employment agreements were not registered. Takes place simultaneously with previous procedure. Page 8 Doing Business 2019 Azerbaijan Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2018. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse To make the data comparable across economies, several assumptions about the (number) construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining The construction company (BuildCo): all necessary clearances, licenses, permits and certificates - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest business city. For 11 economies the data are also collected for the second • Submitting all required notifications and receiving largest business city. all necessary inspections - Is 100% domestically and privately owned; has five owners, none of whom is a • Obtaining utility connections for water and legal entity. Has a licensed architect and a licensed engineer, both registered with sewerage the local association of architects or engineers. BuildCo is not assumed to have any other employees who are technical or licensed experts, such as geological or • Registering and selling the warehouse after its topographical experts. completion - Owns the land on which the warehouse will be built and will sell the warehouse Time required to complete each procedure upon its completion. (calendar days) The warehouse: • Does not include time spent gathering - Will be used for general storage activities, such as storage of books or stationery. information - Will have two stories, both above ground, with a total constructed area of • Each procedure starts on a separate day— approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 though procedures that can be fully completed meters (9 feet, 10 inches) high and will be located on a land plot of approximately online are an exception to this rule 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the • Procedure is considered completed once final warehouse is valued at 50 times income per capita. document is received - Will have complete architectural and technical plans prepared by a licensed architect. If preparation of the plans requires such steps as obtaining further • No prior contact with officials documentation or getting prior approvals from external agencies, these are counted as procedures. Cost required to complete each procedure (% of - Will take 30 weeks to construct (excluding all delays due to administrative and income per capita) regulatory requirements). • Official costs only, no bribes The water and sewerage connections: Building quality control index (0-15) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there • Quality of building regulations (0-2) is no water delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage infrastructure, a septic tank in the smallest size available will be • Quality control before construction (0-1) installed or built. • Quality control during construction (0-3) - Will have an average water use of 662 liters (175 gallons) a day and an average • Quality control after construction (0-3) wastewater flow of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and a peak wastewater flow of 1,136 liters (300 • Liability and insurance regimes (0-2) gallons) a day. • Professional certifications (0-4) - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 9 Doing Business 2019 Azerbaijan Dealing with Construction Permits - Azerbaijan Standardized Warehouse Estimated value of warehouse AZN 340,512.30 City Covered Baku Indicator Azerbaijan Europe & OECD high Best Regulatory Central Asia income Performance Procedures (number) 18 16.0 12.7 None in 2017/18 Time (days) 116 170.1 153.1 None in 2017/18 Cost (% of warehouse value) 1.9 4.0 1.5 None in 2017/18 Building quality control index (0-15) 12.0 12.0 11.5 15.0 (3 Economies) Figure – Dealing with Construction Permits in Azerbaijan and comparator economies – Ranking and Score DB 2019 Dealing with Construction Permits Score 0 100 75.46: Bulgaria (Rank: 37) 75.18: Poland (Rank: 40) 74.61: Russian Federation (Rank: 48) 73.11: Azerbaijan (Rank: 61) 69.02: Regional Average (Europe & Central Asia) 58.20: Romania (Rank: 146) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Figure – Dealing with Construction Permits in Azerbaijan – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 1 100 Cost (% of warehouse value) 0.8 80 Time (days) 0.6 60 0.4 40 0.2 20 0 0 1 2 *3 *4 *5 6 7 8 9 10 11 12 * 13 14 15 16 17 18 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 10 Doing Business 2019 Azerbaijan Figure – Dealing with Construction Permits in Azerbaijan and comparator economies – Measure of Quality 15 14.0 14.0 13.0 12.0 12.0 Index score 10.0 10 5 0 Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Details – Dealing with Construction Permits in Azerbaijan – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain geotechnical study / soil test 14 days AZN 1,750 Agency : Private licensed company The soil investigation helps to determine the bearing capacity of the land, which in turn helps to determine the load capability, the type and depth of foundation, in order to make sure to select a suitable construction technique. 2 Obtain technical conditions from the Baku City Sanitation and 15 days no charge Epidemiology Center Agency : Baku City Sanitation and Epidemiology Center Technical conditions from the Baku City Sanitation and Epidemiology Center are required for the preparation of the project. According to the new Building Code, the Baku city executive authority will have to obtain all technical conditions and approvals on behalf of BuildCo. However, in practice building companies obtain the technical conditions directly from the issuing authorities. 3 Obtain technical conditions from the State Fire Control Service of the 15 days no charge Ministry for Emergency Situations (MES) Agency : Fire Department (Ministry for Emergency Situations) Under the law “On Fire Safety” and according to other norms of Azerbaijan, the authorities (taking into account prohibitions and limitations) shall grant a permit and, if necessary, present specific guidelines for the construction design and implementation phases. A fire inspection must be carried out. According to the new Building Code, the Baku city executive authority will have to obtain all technical conditions and approvals on behalf of BuildCo. However, in practice building companies obtain the technical conditions and project approvals directly from the issuing authorities. 4 Obtain technical conditions from the Ministry of Ecology and Natural 15 days no charge Resources Agency : Ministry of Ecology and Natural Resources According to the law “On Environmental Protection”, a permit shall be granted and the conditions adjusted to meet environmental protection regulations, land reclamation, rehabilitation and efficient use of natural resources, improvement of territories, and enhancement of the environment. According to the new Building Code, the Baku city executive authority will have to obtain all technical conditions and approvals on behalf of BuildCo. However, in practice building companies obtain the technical conditions and project approvals directly from the issuing authorities. 5 Obtain technical conditions from the water and sewage authority (Azersu 10 days no charge OJSC) Agency : Azersu OJSC Under the law “On Water Supply and Waste Waters”, the water and sewage authority will grant a permit and issue guidelines for the construction design and implementation phases. In doing so, the authorities must consider prohibitions and limitations for the water system and wastes. Connection to the main lines is permitted after construction is done. According to the new Building Code, the Baku city executive authority will have to obtain all technical conditions and approvals on behalf of BuildCo. However, in practice building companies obtain the technical conditions and project approvals directly from the issuing authorities. Page 11 Doing Business 2019 Azerbaijan 6 Register construction passport at Baku City Executive Authority 1 day no charge Agency : Baku City Executive Authority (Department of Architecture and City Building) Based on the technical conditions and the opinions received from the various agencies, BuildCo creates a construction passport that will allow for the project design phase to begin. Once the passport is registered at the Baku City Executive Authority (Department of Architecture and City Building), BuildCo obtains a number assigned to the project. The project must be registered this way for all of the agencies involved to have access to the information. 7 Request and obtain a building permit through the single window 30 days AZN 3,221 Agency : Single Window at the Baku City Executive Authority According to Article 75 of the Urban Planning and Construction Code, BuildCo submits an application to the Single Window at the Baku City Executive Office. The building permit application includes the following: - copy of document certifying the right of ownership, lease or use of the land plot; - construction project; - copy of excerpt from state register of legal persons, if the customer is a legal person. BuildCo gets the building permit together with a mark for construction (i.e. signing board with all the relevant information about construction: the name of the construction company, the duration of construction, the area of construction, etc) which will be placed at the site to inform the neighbors and public about the construction. 8 Receive inspection of foundation works 1 day no charge Agency : Chief Agency for Construction Supervision and Safety According to the Article 96.2.1 of the Building Code of the Republic of Azerbaijan, the competent state bodies have to conduct supervision of construction. State supervision of construction is carried out in the order stipulated in the "Rules of state supervision of construction", approved by Presidential Decree of November 17, 2014, № 349". The inspections are conducted in all major phases of the construction and inspection results are recorded in the Registry of State Supervision in Construction. 9 Receive inspection of structural works 1 day no charge Agency : Chief Agency for Construction Supervision and Safety According to the Article 96.2.1 of the Building Code of the Republic of Azerbaijan, the competent state bodies have to conduct supervision of construction. State supervision of construction is carried out in the order stipulated in the "Rules of state supervision of construction", approved by Presidential Decree of November 17, 2014, № 349". The inspections are conducted in all major phases of the construction and inspection results are recorded in the Registry of State Supervision in Construction. 10 Receive inspection of plumbing works 1 day no charge Agency : Chief Agency for Construction Supervision and Safety According to the Article 96.2.1 of the Building Code of the Republic of Azerbaijan, the competent state bodies have to conduct supervision of construction. State supervision of construction is carried out in the order stipulated in the "Rules of state supervision of construction", approved by Presidential Decree of November 17, 2014, № 349". The inspections are conducted in all major phases of the construction and inspection results are recorded in the Registry of State Supervision in Construction. 11 Receive inspection of roofing works 1 day no charge Agency : Chief Agency for Construction Supervision and Safety According to the Article 96.2.1 of the Building Code of the Republic of Azerbaijan, the competent state bodies have to conduct supervision of construction. State supervision of construction is carried out in the order stipulated in the "Rules of state supervision of construction", approved by Presidential Decree of November 17, 2014, № 349. The inspections are conducted in all major phases of the construction and inspection results are recorded in the Registry of State Supervision in Construction. 12 Receive examination from Labor Inspection and other state authorities 1 day no charge during construction works Agency : Ministry of Economic Development All examinations, except for tax, may be carried out only with the participation of a representative from the Azerbaijan Republic Ministry of Economic Development. Pursuant to the Labor Code and its implementing rules and regulations, the state labor authorities may examine the workplace and labor protection and technical security policies. A report is issued with the examination results. Page 12 Doing Business 2019 Azerbaijan Receive inspection from Ministry of Ecology and Natural Resources 1 day no charge 13 Agency : Ministry of Ecology and Natural Resources If environmental standards were not in full compliance during construction, the Ministry of Ecology and Natural Resources could inspect the site. An act or statement is issued with the examination results. 14 Receive inspection from State Fire Control Service of the Ministry of 1 day no charge Emergency Situations Agency : Ministry for Emergency Situations (Chief Agency of Supervision on Safety at Construction) Fire inspections could be conducted to check if fire prevention measures are in order. A report is issued with the examination results. 15 Obtain water and sewage connection 7 days AZN 200 Agency : AzerSu (State Water Agency) Connecting to the water supply and sewage systems is done in accordance with the "Rules of issuing of technical specifications and connection of consumers to the water supply and sewage", approved by the Cabinet of Ministers of Azerbaijan Republic dated August 13, 2014, № 275. The fee to obtain a water and sewage connection is AZN 2.00 multiplied by the water volume to be delivered in 24 hours (based on the connected pipe’s diameter). In this case, it is assumed that 100 cubic meters can be delivered in 24 hours. 16 Receive final inspection 1 day no charge Agency : Chief Agency for Construction Supervision and Safety and Baku City Executive Authority (Department of Architecture and City Building) Once the building is complete and the water and sewage connection is obtained, a final inspection is performed by representatives from the Chief Agency for Construction Supervision and Safety and the Baku City Executive Authority (Department of Architecture and City Building), with the investor and BuildCo present. Only after the final inspection may BuildCo apply for an occupancy permit. 17 Request and obtain occupancy permit 30 days no charge Agency : State control authorities: Architecture and City Building Department and ecology, energy, sanitation, fire inspection, and supply organizations After BuildCo completes construction, a commission will examine the building quality and determine the feasibility of putting the building into operation. The commission consists of representatives from the state control authorities, especially the Architecture and City Building Department, and representatives of organizations for ecology, energy, sanitation, supply, and fire inspection. 18 Register building with Real Estate Registry 9 days AZN 1,395 Agency : Real Estate Registry This procedure is governed by the Civil Code of the Azerbaijan Republic and the Law of the Azerbaijan Republic on State Registry of Real Estate. Attached to the application must be the documents defining the company status, construction documents, and a copy of the act or the statement on the operation license. Relevant fees must also be paid. The State Registry of Real Estate registers the building (warehouse) accoridng to the following schedule: - Regular Service: 10 business days (14 calendar days); regular fee - Faster Service: 7 business days (9 calendar days); fee multiplied by 1.5 - Express Service: 3 business days (4 calendar days); fee multiplied by 2 - One-day Service: 1 business day; fee multiplied by 3 BuildCo will obtain the complete property right (ownership, order, and use) over the building (warehouse) from the date the certificate is registered. Takes place simultaneously with previous procedure. Page 13 Doing Business 2019 Azerbaijan Details – Dealing with Construction Permits in Azerbaijan – Measure of Quality Answer Score Building quality control index (0-15) 12.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; 1.0 Free of charge; In official gazette. Which requirements for obtaining a building permit are clearly specified in the building List of required 1.0 regulations or on any accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in Licensed 1.0 compliance with existing building regulations? (0-1) architect; Licensed engineer. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during construction? Inspections by in- 1.0 (0-2) house engineer; Inspections at various phases. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice. Quality control after construction index (0-3) 3.0 Is there a final inspection required by law to verify that the building was built in accordance Yes, final 2.0 with the approved plans and regulations? (0-2) inspection is done by government agency; Yes, in- house engineer submits report for final inspection. Do legally mandated final inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 0.0 Which parties (if any) are held liable by law for structural flaws or problems in the building No party is held 0.0 once it is in use (Latent Defect Liability or Decennial Liability)? (0-1) liable under the law. Which parties (if any) are required by law to obtain an insurance policy to cover possible No party is 0.0 structural flaws or problems in the building once it is in use (Latent Defect Liability Insurance required by law or Decennial Insurance)? (0-1) to obtain insurance . Professional certifications index (0-4) 4.0 What are the qualification requirements for the professional responsible for verifying that the Minimum number 2.0 architectural plans or drawings are in compliance with existing building regulations? (0-2) of years of experience; University degree in architecture or engineering; Passing a certification exam. Page 14 Doing Business 2019 Azerbaijan What are the qualification requirements for the professional who supervises the construction Minimum number 2.0 on the ground? (0-2) of years of experience; University degree in engineering, construction or construction management; Passing a certification exam. Page 15 Doing Business 2019 Azerbaijan Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection To make the data comparable across economies, several assumptions about the (number) warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining The warehouse: all necessary clearances and permits - Is owned by a local entrepreneur and is used for storage of goods. • Completing all required notifications and - Is located in the economy’s largest business city. For 11 economies the data are receiving all necessary inspections also collected for the second largest business city. • Obtaining external installation works and possibly - Is located in an area where similar warehouses are typically located and is in an purchasing material for these works area with no physical constraints. For example, the property is not near a railway. - Is a new construction and is being connected to electricity for the first time. • Concluding any necessary supply contract and - Has two stories with a total surface area of approximately 1,300.6 square meters obtaining final supply (14,000 square feet). The plot of land on which it is built is 929 square meters Time required to complete each procedure (10,000 square feet). (calendar days) The electricity connection: • Is at least 1 calendar day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed • Each procedure starts on a separate day capacity of 140-kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW). • Does not include time spent gathering information - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution network and is either overhead or underground, whichever is more • Reflects the time spent in practice, with little common in the area where the warehouse is located and requires works that involve follow-up and no prior contact with officials the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property Cost required to complete each procedure (% of because the warehouse has access to a road. income per capita) - Does not require work to install the internal wiring of the warehouse. This has • Official costs only, no bribes already been completed up to and including the customer’s service panel or switchboard and the meter base. • Value added tax excluded The monthly consumption: The reliability of supply and transparency of tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 • Duration and frequency of power outages (0–3) p.m. (8 hours a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts (assumed for simplicity reasons) and the monthly energy • Tools to monitor power outages (0–1) consumption is 26,880 kilowatt-hours (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier. • Regulatory monitoring of utilities’ performance (0–1) - Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation • Financial deterrents limiting outages (0–1) purposes only 30 days are used. • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor the ranking on the ease of getting electricity. Page 16 Doing Business 2019 Azerbaijan Getting Electricity - Azerbaijan Standardized Connection Price of electricity (US cents per kWh) 5.4 Name of utility Azerishiq OJSC City Covered Baku Indicator Azerbaijan Europe & OECD high Best Regulatory Central Asia income Performance Procedures (number) 7 5.3 4.5 3 (25 Economies) Time (days) 41 110.3 77.2 18 (3 Economies) Cost (% of income per capita) 140.4 325.1 64.2 0.0 (3 Economies) Reliability of supply and transparency of tariff 7 5.5 7.5 8.0 (27 Economies) index (0-8) Figure – Getting Electricity in Azerbaijan and comparator economies – Ranking and Score DB 2019 Getting Electricity Score 0 100 94.00: Russian Federation (Rank: 12) 81.35: Poland (Rank: 58) 77.27: Azerbaijan (Rank: 74) 71.66: Regional Average (Europe & Central Asia) 54.93: Bulgaria (Rank: 147) 53.53: Romania (Rank: 154) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Page 17 Doing Business 2019 Azerbaijan Figure – Getting Electricity in Azerbaijan – Procedure, Time and Cost Time (days) Cost (% of income per capita) 160 40 140 35 Cost (% of income per capita) 30 120 Time (days) 25 100 20 80 15 60 10 40 5 20 0 0 1 *2 3 4 5 6 7 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Figure – Getting Electricity in Azerbaijan and comparator economies – Measure of Quality 8 8 7 7 7 7 6 6 5.5 Index score 5 4 3 2 1 0 Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Page 18 Doing Business 2019 Azerbaijan Details – Getting Electricity in Azerbaijan – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Submit application to Asan Communal and receive technical conditions 12 calendar days AZN 0 Agency : Asan Communal The customer submits an application for a new electricity connection to Asan Communal. The following documents must be submitted in paper format: • copy of state registration certificate of legal entity; • copy of document proving the right of ownership or use of a facility and a land plot where the facility is situated; • the permit of local executive power authority on the construction of a facility; • breakdown of the power load 2 Receive site inspection by Azerishiq OJSC for preparing technical 1 calendar day AZN 0 conditions Agency : Azerishiq OJSC A network engineer from Baku Electric Shabaka will visit the site to determine the arrangements for an optimal connection and prepare the technical conditions. It is required that someone from the applicant’s party is present at the site during the inspection. 3 Await completion and approval on the design of the external connection 11 calendar days AZN 0 Agency : Azerishiq OJSC Azerishiq OJSC prepares the design of the external electrical connection based on the technical conditions. 4 Submit notification on the commencement of the external works 2 calendar days AZN 0 Agency : Local Municipality and Ministry of Interior After the receipt of the application for technical conditions and electrical connection, Asan communal submits an application for an excavation permit without involving the customer. However, a letter must be sent to the Local Municipality and Ministry of Interior (Police) notifying the beginning of the excavation works. 5 Await completion of external works 7 calendar days AZN 9,562.5 Agency : Electrical contractor The customer hires a licensed electrical installation organization to carry out the external connection works. 6 Receive external and internal inspections and obtain operation permit 2 calendar days AZN 0 Agency : Energonadzor (State Energy Inspectorate) After the completion of the external connection works there is a final inspection by Energonadzor (State Energy Inspectorate) which issues an operation permit. Energonadzor checks the compliance of the installation with the technical conditions. 7 Conclude supply contract with Azerishiq OJSC and await final connection 7 calendar days AZN 0 Agency : Azerishiq OJSC The customer must submit the operation permit to the utility and concludes a supply contract. Once this is completed, the customer is connected to the electrical network and electricity starts flowing. Takes place simultaneously with previous procedure. Page 19 Doing Business 2019 Azerbaijan Details – Getting Electricity in Azerbaijan – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 7 Total duration and frequency of outages per customer a year (0-3) 3 System average interruption duration index (SAIDI) 0.9 System average interruption frequency index (SAIFI) 1.0 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 3.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of Yes supply? Financial deterrents aimed at limiting outages (0-1) 0 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages No exceed a certain cap? Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online http://www.azerishiq. az/index.php? lang=az&menu=law_ base&id=68 Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 20 Doing Business 2019 Azerbaijan Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on To make the data comparable across economies, several assumptions about the immovable property (number) parties to the transaction, the property and the procedures are used. • Preregistration procedures (for example, The parties (buyer and seller): checking for liens, notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). - Are located in the periurban area of the economy’s largest business city. For 11 • Registration procedures in the economy's largest economies the data are also collected for the second largest business city. business city. - Are 100% domestically and privately owned. • Postregistration procedures (for example, filling - Have 50 employees each, all of whom are nationals. title with municipality) - Perform general commercial activities. Time required to complete each procedure The property (fully owned by the seller): (calendar days) - Has a value of 50 times income per capita, which equals the sale price. • Does not include time spent gathering - Is fully owned by the seller. information - Has no mortgages attached and has been under the same ownership for the past 10 years. • Each procedure starts on a separate day - - Is registered in the land registry or cadastre, or both, and is free of title disputes. though procedures that can be fully completed online are an exception to this rule - Is located in a periurban commercial zone, and no rezoning is required. - Consists of land and a building. The land area is 557.4 square meters (6,000 • Procedure is considered completed once final square feet). A two-story warehouse of 929 square meters (10,000 square feet) is document is received located on the land. The warehouse is 10 years old, is in good condition, has no • No prior contact with officials heating system and complies with all safety standards, building codes and legal requirements. The property, consisting of land and building, will be transferred in its Cost required to complete each procedure (% of entirety. property value) - Will not be subject to renovations or additional construction following the purchase. - Has no trees, natural water sources, natural reserves or historical monuments of • Official costs only (such as administrative fees, any kind. duties and taxes). - Will not be used for special purposes, and no special permits, such as for • Value Added Tax, Capital Gains Tax and illicit residential use, industrial plants, waste storage or certain types of agricultural payments are excluded activities, are required. - Has no occupants, and no other party holds a legal interest in it. Quality of land administration index (0-30) • Reliability of infrastructure index (0-8) • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 21 Doing Business 2019 Azerbaijan Registering Property - Azerbaijan Indicator Azerbaijan Europe & OECD high Best Regulatory Central Asia income Performance Procedures (number) 3 5.3 4.7 1 (4 Economies) Time (days) 5.5 20.3 20.1 1 (New Zealand) Cost (% of property value) 0.1 2.6 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 17.5 19.6 23.0 None in 2017/18 Figure – Registering Property in Azerbaijan and comparator economies – Ranking and Score DB 2019 Registering Property Score 0 100 88.74: Russian Federation (Rank: 12) 84.63: Azerbaijan (Rank: 17) 76.09: Poland (Rank: 41) 75.57: Regional Average (Europe & Central Asia) 74.96: Romania (Rank: 44) 69.32: Bulgaria (Rank: 67) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Figure – Registering Property in Azerbaijan – Procedure, Time and Cost Time (days) Cost (% of property value) 0.09 5 0.08 Cost (% of property value) 0.07 4 0.06 Time (days) 3 0.05 0.04 2 0.03 0.02 1 0.01 0 0 1 2 3 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 22 Doing Business 2019 Azerbaijan Figure – Registering Property in Azerbaijan and comparator economies – Measure of Quality 30 26.0 25 Index score 19.0 19.0 19.6 20 17.5 17.0 15 10 5 0 Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Details – Registering Property in Azerbaijan – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Verification of title and obtaining non-encumbrance certificate Less than one day, AZN 31; (AZN 31 for Agency : Notary online online certificate) According to the Law of the Republic of Azerbaijan "On introduction of changes into the Civil Code of the Republic of Azerbaijan" and the Law of the Republic of Azerbaijan "On introduction of changes into the Law on the State Registry of Real estate" (both dated December 27, 2013) starting from March 3, 2014, notaries in Azerbaijan are now responsible for checking against encumbrances. Notaries now have an access to the database of SSRRE under SCPI and can get information about encumbrances on real estate and issue non-encumbrance certificates online. The new online service provided by the State Property Committee is available at www. e-emdk.gov.az. The cost of online procedure is AZN 31. Territorial offices of SSRRE under SCPI provide this services to applicants via electronic system connected with electronic system of notaries. " 2 Notarization of sale-purchase agreement 1 day AZN 200; ( Agency : State Notary ) Under the law, the sale-purchase agreement and the transfer and acceptance act duly signed by both parties must be notarized. In order to get the agreement notarized the seller must provide evidence of his title to the property, i.e. registration certificates . In addition to the above, both the seller and the buyer must provide the notary public with other documents certifying their powers to enter into the sale-purchase agreement (e.g. corporate documents, powers of attorney). There is no legal requirement for the agreement to be prepared by a lawyer. Accordingly, the parties are free to prepare the agreement themselves.The stamp duty is paid to the notary, which in turn he shall transfer to the Treasury within two banking days since the date of receipt of the duty. However, in practice the stamp duty can be paid at a commercial bank. If the parties pay at the bank, receipt of payment should be submitted. The documentation shall include: • Sale-purchase agreement and transfer and acceptance act • Registration certificates • Seller’s cadastral package of documents • Corporate documents of the parties (e.g. charters, foundation agreements, powers of attorney) • Technical passport of the property (according to Article 144.2 of the Civil Code, amended by the law of the Republic of Azerbaijan No. 201-IVQD dated September 30, 2011 "On Making Amendments to the Civil Code of the Republic of Azerbaijan", the notary certifies the agreement, which transfers immovable property in accordance with the technical specifications of such immovable property as recorded in the Real Estate State Registrar Service) • Deposit slip (the buyer presents the deposit slip from the bank, confirming that the funds were properly deposited before notary notarizes the transfer agreement. After the completion of transaction, the notary write a cheque payable to the seller to be presented to the bank to collect the purchase price for the property) Page 23 Doing Business 2019 Azerbaijan 3 The buyer obtains the updated title 4 days AZN 277.88; (- AZN Agency : Real Estate State Register Service under State Committee on Property 159.48 payable for Issues the registration of a Registration of the land as well as the property takes place simultaneously at the title transfer for the State Committee on Property Issues of the Republic of Azerbaijan. warehouse of 929 In accordance with Resolution of Cabinet of Ministers of the Republic of square meters of the Azerbaijan No. 266 dated 31 July 2014, the electronic service on "receipt of total area; applications and documents for issuance of technical documents (passport and - AZN 18.4 payable plan) regarding real estate registered in state registry of real estate at the for the registration of discretion of owner" added to the list of electronic services provided by State a title transfer for the Registry Service of Real Estate. land of 557.4 square meters of the total Collegium of State Committee on Property Issues approved on 18 November land area; 2014 the administrative regulation on receipt of applications and documents for issue of technical documents (passport and plan) regarding real estate registered - AZN 50 state duty in state registry of real estate at the discretion of owner. On basis of these for technical documents, it has become possible to apply for technical documents (passport passport; and plan) via online procedure. - AZN 30 state duty for an extract; Service fees for building: - AZN 20 official Technical re-inventory of real estate (service fee of this section is determined by service fee) applying 0,2 ratio to relevant tariffs of 1st section, but minimum amount must not be under AZN 14,0) Non-residential buildings (facilities), property complexes and enterprises. - up to 50 m 2 50.0 - for every 1 m 2 area exceeding 50 m 2 to 100 m 2 1.40 - for every 1 m 2 area exceeding 100 m 2 to 200 m 2 1.0 - For every 1 m 2 area exceeding 200 m 2 to 300 m 2 0.95 - for every 1 m 2 area exceeding 300 m 2 to 400 m 2 0.90 - for every 1 m 2 area, exceeding 400 m 2 to 500 m 2 0.85 - for every 1 m 2 area exceeding 500 m 2 to 600 m 2 0.80 - for every 1 m 2 area exceeding 600 m 2 to 700 m 2 0.75 - for every 1 m 2 area exceeding 700 m 2 to 800 m 2 0.70 Land Plot - Other land plots - When the area is less than 0,01 hectares = 60 - For each 0.01 ha of 0.01 hectares, when the area is from 0.01 ha to 0.10 ha = 7 Takes place simultaneously with previous procedure. Page 24 Doing Business 2019 Azerbaijan Details – Registering Property in Azerbaijan – Measure of Quality Answer Score Reliability of infrastructure index (0-8) 7.0 What is the institution in charge of immovable property registration? Baku City Territorial Office of SSRRE under SCPI In what format are the majority of title or deed records kept in the largest business city—in a Computer/Fully 2.0 paper format or in a computerized format (scanned or fully digital)? digital Is there an electronic database for checking for encumbrances (liens, mortgages, restrictions Yes 1.0 and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Real Estate Cadastre and Address Register Service In what format are the majority of maps of land plots kept in the largest business city—in a Computer/Scann 1.0 paper format or in a computerized format (scanned or fully digital)? ed Is there an electronic database for recording boundaries, checking plans and providing Yes 1.0 cadastral information (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral Different 1.0 or mapping agency kept in a single database, in different but linked databases or in separate databases but databases? linked Do the immovable property registration agency and cadastral or mapping agency use the Yes 1.0 same identification number for properties? Transparency of information index (0–6) 3.0 Who is able to obtain information on land ownership at the agency in charge of immovable Only 0.0 property registration in the largest business city? intermediaries and interested parties Is the list of documents that are required to complete any type of property transaction made Yes, online 0.5 publicly available–and if so, how? Link for online access: http://e- emdk.gov.az/hom e/instructions Is the applicable fee schedule for any property transaction at the agency in charge of Yes, online 0.5 immovable property registration in the largest business city made publicly available–and if so, how? Link for online access: http://www.e- emdk.gov.az/Ho me/Tariff2 Does the agency in charge of immovable property registration commit to delivering a legally Yes, online 0.5 binding document that proves property ownership within a specific time frame–and if so, how does it communicate the service standard? Link for online access: http://www.e- emdk.gov.az/Ho me/Reqlament Is there a specific and separate mechanism for filing complaints about a problem that No 0.0 occurred at the agency in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the Yes 0.5 immovable property registration agency? Number of property transfers in the largest business city in 2017: 43575.0 Who is able to consult maps of land plots in the largest business city? Only 0.0 intermediaries and interested parties Page 25 Doing Business 2019 Azerbaijan Is the applicable fee schedule for accessing maps of land plots made publicly available— Yes, online 0.5 and if so, how? Link for online access: http://e- emdk.gov.az/Ho me/Customs, and http://e- emdk.gov.az/Ho me/Tariff Does the cadastral or mapping agency commit to delivering an updated map within a Yes, online 0.5 specific time frame—and if so, how does it communicate the service standard? Link for online access: http://www.e- emdk.gov.az/Ho me/Reqlament Is there a specific and separate mechanism for filing complaints about a problem that No 0.0 occurred at the cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 0.0 Are all privately held land plots in the economy formally registered at the immovable property No 0.0 registry? Are all privately held land plots in the largest business city formally registered at the No 0.0 immovable property registry? Are all privately held land plots in the economy mapped? No 0.0 Are all privately held land plots in the largest business city mapped? No 0.0 Land dispute resolution index (0–8) 7.5 Does the law require that all property sale transactions be registered at the immovable Yes 1.5 property registry to make them opposable to third parties? Is the system of immovable property registration subject to a state or private guarantee? Yes 0.5 Is there a specific compensation mechanism to cover for losses incurred by parties who No 0.0 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Does the legal system require a control of legality of the documents necessary for a property Yes 0.5 transaction (e.g., checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Notary; Does the legal system require verification of the identity of the parties to a property Yes 0.5 transaction? If yes, who is responsible for verifying the identity of the parties? Notary; Is there a national database to verify the accuracy of identity documents? Yes 1.0 For a standard land dispute between two local businesses over tenure rights of a property Baku worth 50 times gross national income (GNI) per capita and located in the largest business Administrative- city, what court would be in charge of the case in the first instance? Economic Court No1 or No2 (depending on territorial jurisdiction) How long does it take on average to obtain a decision from the first-instance court for such a Less than a year 3.0 case (without appeal)? Are there any statistics on the number of land disputes in the first instance? Yes 0.5 Number of land disputes in the largest business city in 2017: 3663.0 Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Do married men and married women have equal ownership rights to property? Yes 0.0 Page 26 Doing Business 2019 Azerbaijan Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of • Rights of borrowers and lenders through indicators. The depth of credit information index measures rules and practices collateral laws (0-10) affecting the coverage, scope and accessibility of credit information available • Protection of secured creditors’ rights through through a credit registry or a credit bureau. The strength of legal rights index bankruptcy laws (0-2) measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first Depth of credit information index (0–8) determined whether a unitary secured transactions system exists. Then two case • Scope and accessibility of credit information scenarios, case A and case B, are used to determine how a nonpossessory security distributed by credit bureaus and credit registries interest is created, publicized and enforced according to the law. Special emphasis (0-8) is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest In some economies the legal framework for secured transactions will allow only case credit bureau as a percentage of adult population A or case B (not both) to apply. Both cases examine the same set of legal provisions relating to the use of movable collateral. Credit registry coverage (% of adults) • Number of individuals and firms listed in credit Several assumptions about the secured borrower (ABC) and lender (BizBank) registry as a percentage of adult population are used: - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 27 Doing Business 2019 Azerbaijan Getting Credit - Azerbaijan Indicator Azerbaijan Europe & OECD high Best Regulatory Central Asia income Performance Strength of legal rights index (0-12) 8 7.2 6.1 12 (5 Economies) Depth of credit information index (0-8) 8 6.6 6.7 8 (42 Economies) Credit registry coverage (% of adults) 41.5 25.3 21.8 100.0 (4 Economies) Credit bureau coverage (% of adults) 41.5 43.4 65.3 100.0 (25 Economies) Figure – Getting Credit in Azerbaijan and comparator economies – Ranking and Score DB 2019 Getting Credit Score 0 100 80.00: Azerbaijan (Rank: 22) 80.00: Romania (Rank: 22) 80.00: Russian Federation (Rank: 22) 75.00: Poland (Rank: 32) 68.70: Regional Average (Europe & Central Asia) 65.00: Bulgaria (Rank: 60) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Figure – Legal Rights in Azerbaijan and comparator economies 8 8 9 9 8 7 7.2 7 6 Index Score 5 4 3 2 1 0 Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Page 28 Doing Business 2019 Azerbaijan Details – Legal Rights in Azerbaijan Strength of legal rights index (0-12) 8 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and Yes enforcement of functional equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without No requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a Yes specific description of collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and No replacements of the original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be No secured between parties; and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by Yes asset type, with an electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? Yes Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed Yes online by any interested third party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency Yes procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? Yes Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization Yes procedure? Does the law protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow No the secured creditor to sell the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Azerbaijan and comparator economies 8 8 8 7 7 7 6.6 6 Index Score 5 5 4 3 2 1 0 Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Page 29 Doing Business 2019 Azerbaijan Details – Credit Information in Azerbaijan Depth of credit information index (0-8) Credit Credit Score bureau registry Are data on both firms and individuals distributed? Yes Yes 1 Are both positive and negative credit data distributed? Yes Yes 1 Are data from retailers or utility companies - in addition to data from banks and Yes No 1 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries Yes Yes 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes Yes 1 By law, do borrowers have the right to access their data in the credit bureau or Yes Yes 1 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes Yes 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help Yes Yes 1 banks and financial institutions assess the creditworthiness of borrowers? Total Score ("yes" to either public bureau or private registry) 8 Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 2,854,019 2,854,019 Number of firms 42,987 42,987 Total 2,897,006 2,897,006 Percentage of adult population 41.5 41.5 Page 30 Doing Business 2019 Azerbaijan Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Review and To make the data comparable across economies, a case study uses several approval requirements for related-party assumptions about the business and the transaction. transactions; Disclosure requirements for related- party transactions The business (Buyer): • Extent of director liability index (0–10): Ability - Is a publicly traded corporation listed on the economy’s most important stock of minority shareholders to sue and hold exchange. If there are fewer than ten listed companies or if there is no stock interested directors liable for prejudicial related- exchange in the economy, it is assumed that Buyer is a large private company with party transactions; Available legal remedies multiple shareholders. (damages, disgorgement of profits, fines, - Has a board of directors and a chief executive officer (CEO) who may legally act on imprisonment, rescission of the transaction) behalf of Buyer where permitted, even if this is not specifically required by law. - Has a supervisory board in economies with a two-tier board system on which Mr. • Ease of shareholder suits index (0–10): Access to internal corporate documents; James appointed 60% of the shareholder-elected members. Evidence obtainable during trial and allocation of - Has not adopted bylaws or articles of association that go beyond the minimum legal expenses requirements. Does not follow codes, principles, recommendations or guidelines that are not mandatory. • Extent of conflict of interest regulation index - Is a manufacturing company with its own distribution network. (0–10): Simple average of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two • Extent of shareholder rights index (0-10): directors to Buyer’s five-member board. Shareholders’ rights and role in major corporate - Mr. James also owns 90% of Seller, a company that operates a chain of retail decisions hardware stores. Seller recently closed a large number of its stores. - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand • Extent of ownership and control index (0-10): Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price Governance safeguards protecting shareholders is equal to 10% of Buyer’s assets and is higher than the market value. from undue board control and entrenchment - The proposed transaction is part of the company’s principal activity and is not • Extent of corporate transparency index (0-10): outside the authority of the company. Corporate transparency on ownership stakes, - Buyer enters into the transaction. All required approvals are obtained, and all compensation, audits and financial prospects required disclosures made—that is, the transaction was not entered into fraudulently. • Extent of shareholder governance index (0– - The transaction causes damages to Buyer. Shareholders sue Mr. James and the 10): Simple average of the extent of shareholders executives and directors that approved the transaction. rights, extent of ownership and control and extent of corporate transparency indices • Strength of minority investor protection index (0–10): Simple average of the extent of conflict of interest regulation and extent of shareholder governance indices Page 31 Doing Business 2019 Azerbaijan Protecting Minority Investors - Azerbaijan Indicator Azerbaijan Europe & OECD high Best Regulatory Central Asia income Performance Extent of disclosure index (0-10) 10.0 7.3 6.5 10 (13 Economies) Extent of director liability index (0-10) 5.0 4.9 5.3 10 (Cambodia) Ease of shareholder suits index (0-10) 8.0 6.8 7.3 10 (Djibouti) Extent of shareholder rights index (0-10) 9.0 7.1 6.4 10 (Kazakhstan) Extent of ownership and control index (0-10) 7.0 5.6 5.4 None in 2017/18 Extent of corporate transparency index (0-10) 10.0 7.5 7.6 10 (6 Economies) Figure – Protecting Minority Investors in Azerbaijan and comparator economies – Ranking and Score DB 2019 Protecting Minority Investors Score 0 100 81.67: Azerbaijan (Rank: 2) 68.33: Bulgaria (Rank: 33) 65.29: Regional Average (Europe & Central Asia) 61.67: Poland (Rank: 57) 61.67: Russian Federation (Rank: 57) 60.00: Romania (Rank: 64) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Figure – Protecting Minority Investors in Azerbaijan and comparator economies – Measure of Quality Azerbaijan 10 5 10 7 9 8 Bulgaria 9 2 10 4 8 8 Poland 8 2 7 5 6 9 Romania 7 4 9 5 6 5 Russian Federation 8 2 6 5 9 7 OECD high income 7.4 5.5 6.5 5.2 6.3 7.4 Europe & Central Asia 7.6 4.6 7.2 5.6 7.3 6.8 0 10 20 30 40 50 60 Sub-Indicator Score Extent of corporate transparency index (0-10) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-10) Extent of shareholder rights index (0-10) Ease of shareholder suits index (0-10) Page 32 Doing Business 2019 Azerbaijan Details – Protecting Minority Investors in Azerbaijan – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-10) 7.7 Extent of disclosure index (0-10) 10.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Shareholders 3.0 excluding interested parties Must an external body review the terms of the transaction before it takes place? (0-1) Yes 1.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) Full disclosure of 2.0 all material facts Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) Disclosure on the 2.0 transaction and on the conflict of interest Must Buyer immediately disclose the transaction to the public? (0-2) Disclosure on the 2.0 transaction and on the conflict of interest Extent of director liability index (0-10) 5.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the Yes 1.0 transaction caused to Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0- Liable if negligent 1.0 2) Can shareholders hold the other directors liable for the damage the transaction caused to Liable if negligent 1.0 Buyer (0-2) Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by Yes 1.0 shareholders? (0-1) Must Mr. James repay profits made from the transaction upon a successful claim by Yes 1.0 shareholders? (0-1) Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Only in case of 0.0 fraud or bad faith Ease of shareholder suits index (0-10) 8.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the Yes 1.0 transaction documents? (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 document Can the plaintiff request categories of documents from the defendant without identifying No 0.0 specific ones? (0-1) Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Yes 2.0 Is the level of proof required for civil suits lower than that of criminal cases? (0-1) Yes 1.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-10) 8.7 Extent of shareholder rights index (0-10) 9.0 Does the sale of 51% of Buyer's assets require shareholder approval? Yes 1.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of Yes 1.0 shareholders? Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Do shareholders automatically receive preemption rights every time Buyer issues new Yes 1.0 shares? Page 33 Doing Business 2019 Azerbaijan Must shareholders approve the election and dismissal of the external auditor? Yes 1.0 Are changes to the rights of a class of shares only possible if the holders of the affected Yes 1.0 shares approve? Assuming that Buyer is a limited company, does the sale of 51% of its assets require No 0.0 member approval? Assuming that Buyer is a limited company, can members representing 10% call for a Yes 1.0 meeting of members? Assuming that Buyer is a limited company, must all or almost all members consent to add a Yes 1.0 new member? Assuming that Buyer is a limited company, must a member first offer to sell their interest to Yes 1.0 the existing members before they can sell to non-members? Extent of ownership and control index (0-10) 7.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of Yes 1.0 directors? Must the board of directors include independent and nonexecutive board members? Yes 1.0 Can shareholders remove members of the board of directors without cause before the end Yes 1.0 of their term? Must the board of directors include a separate audit committee exclusively comprising board No 0.0 members? Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Yes 1.0 Buyer? Must Buyer pay declared dividends within a maximum period set by law? Yes 1.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? Yes 1.0 Assuming that Buyer is a limited company, must Buyer have a mechanism to resolve No 0.0 disagreements among members? Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to No 0.0 all shareholders upon acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer distribute profits within a maximum Yes 1.0 period set by law? Extent of corporate transparency index (0-10) 10.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? Yes 1.0 Must Buyer disclose information about board members’ primary employment and Yes 1.0 directorships in other companies? Must Buyer disclose the compensation of individual managers? Yes 1.0 Must a detailed notice of general meeting be sent 21 days before the meeting? Yes 1.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting Yes 1.0 agenda? Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Assuming that Buyer is a limited company, must members meet at least once a year? Yes 1.0 Assuming that Buyer is a limited company, can members representing 5% put items on the Yes 1.0 meeting agenda? Assuming that Buyer is a limited company, must Buyer's annual financial statements be Yes 1.0 audited by an external auditor? Page 34 Doing Business 2019 Azerbaijan Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2018 covering for the Paying Taxes indicator calendar year 2017 (January 1, 2017 – December 31, 2017). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in Using a case scenario, Doing Business records taxes and mandatory contributions a 2017 (number per year adjusted for electronic medium size company must pay in a year, and measures the administrative burden and joint filing and payment) of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of filing and payments, time taken to comply with tax • Total number of taxes and contributions paid or laws, time taken to comply with the requirements of postfiling processes and time withheld, including consumption taxes (value waiting. added tax, sales tax or goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2016. Time required to comply with 3 major taxes It produces ceramic flowerpots and sells them at retail. All taxes and contributions (hours per year) recorded are paid in the second year of operation (calendar year 2017). Taxes and mandatory contributions are measured at all levels of government. • Collecting information, computing tax payable • Preparing separate tax accounting books, if The VAT refund process: required - In June 2017, TaxpayerCo. makes a large capital purchase: the value of the • Completing tax return, filing with agencies machine is 65 times income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are • Arranging payment or withholding equally expensed per month (875 times income per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred in June will be Total tax and contribution rate (% of commercial fully recovered after four consecutive months if the VAT rate is the same for inputs, profits) sales and the machine and the tax reporting period is every month. Input VAT will • Profit or corporate income tax exceed Output VAT in June 2017. • Social contributions, labor taxes paid by The corporate income tax audit process: employer - An error in calculation of income tax liability (for example, use of incorrect tax • Property and property transfer taxes depreciation rates, or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. • Dividend, capital gains, financial transactions discovered the error and voluntarily notified the tax authority. The value of the taxes underpaid income tax liability is 5% of the corporate income tax liability • Waste collection, vehicle, road and other taxes due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. Postfiling Index • Time to comply with a VAT refund (hours) • Time to obtain a VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 35 Doing Business 2019 Azerbaijan Paying Taxes - Azerbaijan Indicator Azerbaijan Europe & OECD high Best Regulatory Central Asia income Performance Payments (number per year) 6 16.6 11.2 3 (Hong Kong SAR, China) Time (hours per year) 159 214.8 159.4 49 (Singapore) Total tax and contribution rate (% of profit) 40.8 32.3 39.8 26.1% (32 Economies) Postfiling index (0-100) 83.79 64.41 84.41 None in 2017/18 Figure – Paying Taxes in Azerbaijan and comparator economies – Ranking and Score DB 2019 Paying Taxes Score 0 100 85.23: Azerbaijan (Rank: 28) 80.30: Romania (Rank: 49) 79.77: Russian Federation (Rank: 53) 76.49: Poland (Rank: 69) 75.80: Regional Average (Europe & Central Asia) 72.00: Bulgaria (Rank: 92) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Figure – Paying Taxes in Azerbaijan and comparator economies – Measure of Quality 100 83.79 80 77.36 76.82 71.02 73.14 64.41 Index score 60 40 20 0 Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Page 36 Doing Business 2019 Azerbaijan Details – Paying Taxes in Azerbaijan Tax or Payments Notes on Time Statutory Tax base Total tax Notes on mandatory (number) Payments (hours) tax rate and TTCR contribution contribution rate (% of profit) Social 1.0 online 65.0 22% gross salaries 24.82 security contributions Corporate 1.0 online 50.0 20% taxable profit 13.96 income tax Property Tax 1.0 online 1% Annual 2.00 average tax written down value of Fixed Assets Tax on 0.0 10% interest 0.26 included in interest income other taxes Land tax 1.0 online AZN 10 land area per 0.02 100 square meters Employee 0.0 jointly 14%-25% gross salaries 0.00 withheld paid - labor tax Employee 0.0 jointly 3% gross salaries 0.00 withheld paid - Social security Fuel tax 1.0 included in 0.00 small amount price of fuel Value added 1.0 online 44.0 18% goods and 0.00 not included tax (VAT) services Totals 6 159 40.8 Page 37 Doing Business 2019 Azerbaijan Details – Paying Taxes in Azerbaijan – Tax by Type Taxes by type Answer Profit tax (% of profit) 14 Labor tax and contributions (% of profit) 24.8 Other taxes (% of profit) 2 Page 38 Doing Business 2019 Azerbaijan Details – Paying Taxes in Azerbaijan – Measure of Quality Answer Score Postfiling index (0-100) 83.79 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? Yes Restrictions on VAT refund process Carry forward for 3 months Percentage of cases exposed to a VAT audit (%) 50% - 74% Is there a mandatory carry forward period? Yes Time to comply with VAT refund (hours) 7.5 85 Time to obtain a VAT refund (weeks) 27.6 52.9 Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 0% - 24% Time to comply with a corporate income tax correction (hours) 3.0 97.25 Time to complete a corporate income tax correction (weeks) No tax audit per 100 case study scenario Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 39 Doing Business 2019 Azerbaijan Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are or border handling in origin economy recorded as 22×24=528 hours). If customs clearance takes 7.5 hours, the data are • Obtaining, preparing and submitting documents recorded as is. Alternatively, suppose documents are submitted to a customs agency required by destination economy and any transit at 8:00a.m., are processed overnight and can be picked up at 8:00a.m. the next day. economies The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours. • Covers all documents required by law and in practice, including electronic submissions of Cost: Insurance cost and informal payments for which no receipt is issued are information excluded from the costs recorded. Costs are reported in U.S. dollars. Contributors Border compliance are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Contributors are private sector • Customs clearance and inspections experts in international trade logistics and are informed about exchange rates. • Inspections by other agencies (if applied to more Assumptions of the case study: than 20% of shipments) - For all 190 economies covered by Doing Business, it is assumed a shipment is in a • Handling and inspections that take place at the warehouse in the largest business city of the exporting economy and travels to a economy’s port or border warehouse in the largest business city of the importing economy. - It is assumed each economy imports 15 metric tons of containerized auto parts (HS Domestic transport 8708) from its natural import partner—the economy from which it imports the largest • Loading or unloading of the shipment at the value (price times quantity) of auto parts. It is assumed each economy exports the warehouse or port/border product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is the largest purchaser of this product. • Transport between warehouse and port/border Shipment value is assumed to be $50,000. • Traffic delays and road police checks while - The mode of transport is the one most widely used for the chosen export or import shipment is en route product and the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 40 Doing Business 2019 Azerbaijan Trading across Borders - Azerbaijan Indicator Azerbaijan Europe & OECD high Best Regulatory Central Asia income Performance Time to export: Border compliance (hours) 17 22.1 12.5 1 (19 Economies) Cost to export: Border compliance (USD) 214 157.5 139.1 0 (19 Economies) Time to export: Documentary compliance (hours) 33 24.3 2.4 1 (26 Economies) Cost to export: Documentary compliance (USD) 250 97.9 35.2 0 (20 Economies) Time to import: Border compliance (hours) 14 21.1 8.5 0 (25 Economies) Cost to import: Border compliance (USD) 300 162.3 100.2 0 (28 Economies) Time to import: Documentary compliance (hours) 33 24.7 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 200 93.9 24.9 0 (30 Economies) Figure – Trading across Borders in Azerbaijan and comparator economies – Ranking and Score DB 2019 Trading Across Borders Score 0 100 97.41: Bulgaria (Rank: 21) 86.17: Regional Average (Europe & Central Asia) 77.04: Azerbaijan (Rank: 84) 71.06: Russian Federation (Rank: 99) 100.00: Poland (Rank: 1) 100.00: Romania (Rank: 1) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Figure – Trading across Borders in Azerbaijan – Time and Cost Time (hours) Cost (USD) 35 33 33 350 300 30 300 250 Time (hours) 25 250 Cost (USD) 214 200 20 17 200 15 14 150 10 100 5 50 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 41 Doing Business 2019 Azerbaijan Details – Trading across Borders in Azerbaijan Characteristics Export Import Product HS 17 : Sugars and sugar confectionery HS 8708: Parts and accessories of motor vehicles Trade partner Iraq Russian Federation Border Astara border crossing Samur border crossing Distance (km) 520 204 Domestic transport time (hours) 8 6 Domestic transport cost (USD) 500 400 Details – Trading across Borders in Azerbaijan – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required 12.0 177.0 by customs authorities Export: Clearance and inspections required 2.4 37.1 by agencies other than customs Export: Port or border handling 3.0 0.0 Import: Clearance and inspections required 10.0 300.0 by customs authorities Import: Clearance and inspections required 0.0 0.0 by agencies other than customs Import: Port or border handling 4.1 0.0 Page 42 Doing Business 2019 Azerbaijan Details – Trading across Borders in Azerbaijan – Trade Documents Export Import Commercial invoice Commercial invoice Certificate of origin Certificate of origin Contract Contract with supplier Customs Export Declaration Customs Import Declaration Phytosanitary certificate CMR waybill CMR waybill Page 43 Doing Business 2019 Azerbaijan Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the The dispute in the case study involves the breach of a sales contract between 2 courts (calendar days) domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt • Time to file and serve the case enforcement. • Time for trial and to obtain the judgment To make the data comparable across economies, Doing Business uses several • Time to enforce the judgment assumptions about the case: Cost required to enforce a contract through the - The dispute concerns a lawful transaction between two businesses (Seller and courts (% of claim) Buyer), both located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. • Attorney fees - The buyer orders custom-made goods, then fails to pay alleging that the goods are not of adequate quality. • Court fees - The value of the dispute is 200% of the income per capita or the equivalent in local • Enforcement fees currency of USD 5,000, whichever is greater. - The seller sues the buyer before the court with jurisdiction over commercial cases Quality of judicial processes index (0-18) worth 200% of income per capita or $5,000. • Court structure and proceedings (-1-5) - The seller requests the pretrial attachment of the defendant’s movable assets to secure the claim. • Case management (0-6) - The dispute on the quality of the goods requires an expert opinion. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. - The seller enforces the judgment through a public sale of the buyer’s movable • Alternative dispute resolution (0-3) assets. Page 44 Doing Business 2019 Azerbaijan Enforcing Contracts - Azerbaijan Standardized Case Claim value AZN 11,568 Court name Baku Administrative Commercial Court City Covered Baku Indicator Azerbaijan Europe & OECD high Best Regulatory Central Asia income Performance Time (days) 277 496.3 582.4 None in 2017/18 Cost (% of claim value) 18.5 26.3 21.2 None in 2017/18 Quality of judicial processes index (0-18) 6.5 10.3 11.5 None in 2017/18 Figure – Enforcing Contracts in Azerbaijan and comparator economies – Ranking and Score DB 2019 Enforcing Contracts Score 0 100 72.25: Romania (Rank: 17) 72.18: Russian Federation (Rank: 18) 67.51: Azerbaijan (Rank: 40) 67.04: Bulgaria (Rank: 42) 65.65: Regional Average (Europe & Central Asia) 64.36: Poland (Rank: 53) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Figure – Enforcing Contracts in Azerbaijan – Time and Cost Time (days) Cost (% of claim value) 800 30 Cost (% of claim value) 26.3 685 25.8 700 25 564 582.4 21.2 600 Time (days) 18.5 18.6 496.4 19.4 512 20 500 16.5 400 337 15 300 277 10 200 5 100 0 0 Azerbaijan Bulgaria Europe OECD Poland Romania Russian & high Federation Central income Asia Page 45 Doing Business 2019 Azerbaijan Figure – Enforcing Contracts in Azerbaijan and comparator economies – Measure of Quality Azerbaijan 0 2 1.5 3 Bulgaria 2.5 2.5 2 3.5 Poland 3 1.5 1.5 5 Romania 3 4 2 5 Russian Federation 2.5 4 0 3 OECD high income 2.5 3.1 2.3 3.6 Europe & Central Asia 2.1 3 1.4 3.6 0 2 4 6 8 10 12 14 16 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Azerbaijan Indicator Time (days) 277 Filing and service 27 Trial and judgment 160 Enforcement of judgment 90 Cost (% of claim value) 18.5 Attorney fees 16.4 Court fees 1.1 Enforcement fees 1 Quality of judicial processes index (0-18) 6.5 Court structure and proceedings (-1-5) 3.0 Case management (0-6) 2.0 Court automation (0-4) 1.5 Alternative dispute resolution (0-3) 0.0 Page 46 Doing Business 2019 Azerbaijan Details – Enforcing Contracts in Azerbaijan – Measure of Quality Answer Score Quality of judicial processes index (0-18) 6.5 Court structure and proceedings (-1-5) 3.0 1. Is there a court or division of a court dedicated solely to hearing commercial cases? Yes 1.5 2. Small claims court 0.0 2.a. Is there a small claims court or a fast-track procedure for small claims? No 2.b. If yes, is self-representation allowed? n.a. 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, but manual 0.5 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 2.0 1. Time standards 0.0 1.a. Are there laws setting overall time standards for key court events in a civil Yes case? 1.b. If yes, are the time standards set for at least three court events? No 1.c. Are these time standards respected in more than 50% of cases? Yes 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be No granted? 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) time to Yes 1.0 disposition report; (ii) clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the Yes 1.0 competent court? 5. Are there any electronic case management tools in place within the competent court for No 0.0 use by judges? 6. Are there any electronic case management tools in place within the competent court for No 0.0 use by lawyers? Court automation (0-4) 1.5 1. Can the initial complaint be filed electronically through a dedicated platform within the no 0.0 competent court? 2. Is it possible to carry out service of process electronically for claims filed before the No 0.0 competent court? 3. Can court fees be paid electronically within the competent court? Yes 1.0 4. Publication of judgments 0.5 4.a Are judgments rendered in commercial cases at all levels made available to the No general public through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme Yes court level made available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 0.0 1. Arbitration 0.0 Page 47 Doing Business 2019 Azerbaijan 1.a. Is domestic commercial arbitration governed by a consolidated law or No consolidated chapter or section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public n.a. order or public policy—that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? n.a. 2. Mediation/Conciliation 0.0 2.a. Is voluntary mediation or conciliation available? No 2.b. Are mediation, conciliation or both governed by a consolidated law or n.a. consolidated chapter or section of the applicable code of civil procedure encompassing substantially all their aspects? 2.c. Are there financial incentives for parties to attempt mediation or conciliation n.a. (i.e., if mediation or conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 48 Doing Business 2019 Azerbaijan Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s - The value of the hotel is 100% of the income per capita or the equivalent in local estate) currency of USD 200,000, whichever is greater. - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s • Measured as percentage of estate value real estate. The hotel cannot pay back the loan, but makes enough money to • Court fees operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to • Lawyers’ fees judicial liquidation and reorganization proceedings and the extent to which best • Assessors’ and auctioneers’ fees insolvency practices have been implemented in each economy covered. • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 49 Doing Business 2019 Azerbaijan Resolving Insolvency - Azerbaijan Indicator Azerbaijan Europe & OECD high Best Regulatory Central Asia income Performance Recovery rate (cents on the dollar) 40.1 38.6 70.5 None in 2017/18 Time (years) 1.5 2.3 1.7 0.4 (Ireland) Cost (% of estate) 12.0 13.2 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going 0 .. .. .. concern) Strength of insolvency framework index (0-16) 13.5 11.1 11.9 None in 2017/18 Figure – Resolving Insolvency in Azerbaijan and comparator economies – Ranking and Score DB 2019 Resolving Insolvency Score 0 100 76.48: Poland (Rank: 25) 63.79: Azerbaijan (Rank: 45) 59.87: Romania (Rank: 52) 58.61: Russian Federation (Rank: 55) 57.52: Bulgaria (Rank: 56) 55.58: Regional Average (Europe & Central Asia) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Figure – Resolving Insolvency in Azerbaijan – Time and Cost Time (years) Cost (% of estate) 3.5 3.3 15.0 3.3 16 13.2 3.0 14 Cost (% of estate) 3 12.0 12 Time (years) 2.5 2.3 10.5 9.0 9.3 2.0 9.0 10 2 1.7 1.5 8 1.5 6 1 4 0.5 2 0 0 Azerbaijan Bulgaria Europe OECD Poland Romania Russian & high Federation Central income Asia Page 50 Doing Business 2019 Azerbaijan Figure – Resolving Insolvency in Azerbaijan and comparator economies – Measure of Quality Azerbaijan 6 3 3 1.5 Bulgaria 3 2.5 4 2.5 Poland 6 3 2 3 Romania 6 2.5 2 2.5 Russian Federation 5 2.5 3 1 OECD high income 5.3 2.8 2.2 1.9 Europe & Central Asia 4.5 2.6 2.3 1.8 0 2 4 6 8 10 12 14 16 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Azerbaijan and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 100 80 60.8 60 40.1 42.1 37.2 35.8 38.6 40 20 0 Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Page 51 Doing Business 2019 Azerbaijan Details – Resolving Insolvency in Azerbaijan Indicator Answer Score Proceeding foreclosure BizBank will initiate foreclosure proceeding because it is cheaper and faster than insolvency proceeding. Additionally, secured creditors have the right to enforce their security interest even if other parties (debtor, unsecured creditors) start insolvency proceedings. Outcome piecemeal sale In case of foreclosure, the hotel will stop operating as it will be difficult to find a buyer willing to purchase the hotel as a going concern. Time (in years) 1.5 Before BizBank can initiate foreclosure proceedings, it must wait at least two months after the debtor fails to pay and then give one month notice of default to the debtor. The debtor or any other interested party may appeal the notice of default in court within 21 days from the date of service. The creditor must register the notice of default with the State Register Service of Immovable Property within 7 days from its service upon the debtor. Once the notice of default is registered, BizBank may apply to court for a judgment to foreclose upon the secured assets. During a preliminary hearing (0.5-1 month after filing), the judge reviews materials and accepts Bizbank's case for consideration. A hearing will take place where Mirage and BizBank will present their claims. The court will issue a decision in Bank’s favor within several months. Mirage will likely appeal the decision (within 30 days), and the appeal will be decided within a few months and the decision becomes effective immediately. Within 3 days of receipt of the effective court judgment, the court bailiff must send an order on foreclosure to a specialized auctioneer. The entire adjudication process will take about 1 year. After that, a specialized auctioneer must publish two announcements – 30 days and 15 days before the proposed public auction sale. The first auction requires the property be sold for at least 70% of the starting price. The second auction allows the sale of the foreclosed property at a price which covers the auction expenses and the secured obligations to the mortgagee and any senior mortgagee(s). In our case, it is likely that there will be two auctions, as it will not be easy to find a buyer. The entire process will take approximately 6 months until the proceeds are paid to BizBank. Cost (% of 12.0 The total cost of the proceedings would amount to approximately 12% of the value of the estate. estate) Main expenses will include attorneys' fees - around 4%; fees of the auctioneer - around 3%; fees of accountants and other professionals involved in the case - around 2%; and other fees related to execution of the sale - 3%. Recovery rate 40.1 (cents on the dollar) Page 52 Doing Business 2019 Azerbaijan Details – Resolving Insolvency in Azerbaijan – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 13.5 Commencement of proceedings index (0-3) 3.0 What procedures are available to a DEBTOR when commencing insolvency proceedings? (a) Debtor may 1.0 file for both liquidation and reorganization Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (a) Yes, a creditor 1.0 may file for both liquidation and reorganization What basis for commencement of the insolvency proceedings is allowed under the (a) Debtor is 1.0 insolvency framework? generally unable to pay its debts as they mature Management of debtor's assets index (0-6) 6.0 Does the insolvency framework allow the continuation of contracts supplying essential goods Yes 1.0 and services to the debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome Yes 1.0 contracts? Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after Yes 1.0 commencement of insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (b) Yes over 1.0 ordinary unsecured creditors but not over secured creditors Reorganization proceedings index (0-3) 1.5 Which creditors vote on the proposed reorganization plan? (a) All creditors 0.5 Does the insolvency framework require that dissenting creditors in reorganization receive at Yes 1.0 least as much as what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, No 0.0 does each class vote separately and are creditors in the same class treated equally? Creditor participation index (0-4) 3.0 Does the insolvency framework require approval by the creditors for selection or Yes 1.0 appointment of the insolvency representative? Does the insolvency framework require approval by the creditors for sale of substantial No 0.0 assets of the debtor? Does the insolvency framework provide that a creditor has the right to request information Yes 1.0 from the insolvency representative? Does the insolvency framework provide that a creditor has the right to object to decisions Yes 1.0 accepting or rejecting creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 53 Doing Business 2019 Azerbaijan Labor Market Regulation Doing Business presents detailed data for the labor market regulation indicators on the Doing Business website (http://www.doingbusiness.org). The report does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the (i) whether fixed-term contracts are prohibited for worker and the business are used. permanent tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the The worker: probationary period; (iv) minimum wage. - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. Working hours - Is a full-time employee. (i) maximum number of working days allowed per - Is not a member of the labor union, unless membership is mandatory. week; (ii) premiums for work: at night, on a weekly rest day and overtime; (iii) whether there are The business: restrictions on work at night, work on a weekly rest - Is a limited liability company (or the equivalent in the economy). day and for overtime work; (iv) whether - Operates a supermarket or grocery store in the economy’s largest business city. nonpregnant and nonnursing women can work For 11 economies the data are also collected for the second largest business city. same night hours as men; (v) length of paid annual - Has 60 employees. leave. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the food retail sector and they apply even to firms that are not party to them. Redundancy rules - Abides by every law and regulation but does not grant workers more benefits than (i) whether redundancy can be basis for terminating those mandated by law, regulation or (if applicable) collective bargaining workers; (ii) whether employer needs to notify agreements. and/or get approval from third party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments due when terminating a redundant worker. Job quality (i) whether law mandates equal remuneration for work of equal value and nondiscrimination based on gender in hiring; (ii) whether law mandates paid or unpaid maternity leave; (iii) length of paid maternity leave; (iv) whether employees on maternity leave receive 100% of wages; (v) availability of five fully paid days of sick leave a year; (vi) eligibility requirements for unemployment protection. Page 54 Doing Business 2019 Azerbaijan Labor Market Regulation - Azerbaijan Details – Labor Market Regulation in Azerbaijan Answer Hiring Fixed-term contracts prohibited for permanent tasks? No Maximum length of a single fixed-term contract (months) 60.0 Maximum length of fixed-term contracts, including renewals (months) 60.0 Minimum wage applicable to the worker assumed in the case study (US$/month) 77.9 Ratio of minimum wage to value added per worker 0.2 Maximum length of probationary period (months) 3.0 Working hours Standard workday 8.0 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 40.0 Premium for work on weekly rest day (% of hourly pay) 100.0 Premium for overtime work (% of hourly pay) 100.0 Restrictions on night work? Yes Whether nonpregnant and nonnursing women can work the same night hours as men No Restrictions on weekly holiday? No Restrictions on overtime work? Yes Paid annual leave for a worker with 1 year of tenure (working days) 15.0 Paid annual leave for a worker with 5 years of tenure (working days) 17.0 Paid annual leave for a worker with 10 years of tenure (working days) 19.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 17.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? Yes Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? Yes Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? Yes Priority rules for reemployment? No Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure 4.0 Notice period for redundancy dismissal for a worker with 5 years of tenure 6.0 Notice period for redundancy dismissal for a worker with 10 years of tenure 9.0 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 6.3 Severance pay for redundancy dismissal for a worker with 1 year of tenure 6.1 Page 55 Doing Business 2019 Azerbaijan Severance pay for redundancy dismissal for a worker with 5 years of tenure 7.4 Severance pay for redundancy dismissal for a worker with 10 years of tenure 8.7 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 7.4 Job quality Equal remuneration for work of equal value? No Gender nondiscrimination in hiring? Yes Paid or unpaid maternity leave mandated by law? Yes Minimum length of maternity leave (calendar days)? 126.0 Receive 100% of wages on maternity leave? Yes Five fully paid days of sick leave a year? Yes Unemployment protection after one year of employment? Yes Minimum contribution period for unemployment protection (months)? 6.5 Page 56 Doing Business 2019 Azerbaijan Business Reforms in Azerbaijan In the past year, Doing Business observed a peaking of reform activity worldwide. From June 2, 2017, to May 1, 2018, 128 economies implemented a record 314 regulatory reforms improving the business climate. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. = Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2019 Dealing with Construction Permits: Azerbaijan streamlined its construction permitting process as construction permits are now solely obtained through the single-window of the Baku City Executive Office. Getting Electricity: Azerbaijan improved the reliability of power supply by investing in grid infrastructure and establishing a national regulator to monitor power outages. Azerbaijan also made getting electricity faster and less costly by establishing a single window. Registering Property: Azerbaijan made registering property easier by increasing the transparency of the land administration system. Getting Credit: Azerbaijan strengthened access to credit by introducing a new secured transactions law and insolvency law, which implemented a functional secured transactions system, broadened the scope of assets that can be used as collateral and provided secured creditors with grounds for relief and time limits during an automatic stay. Azerbaijan also set up a unified, modern and notice-based collateral registry, and improved access to credit information by establishing a new credit bureau. Protecting Minority Investors: Azerbaijan strengthened minority investor protections by increasing shareholders’ rights and role in major corporate decisions, clarifying ownership and control structures and requiring greater corporate transparency. Paying Taxes: Azerbaijan made paying taxes easier by introducing electronic invoicing (e-invoicing) and a unified tax return for social security contributions and enhancing the online platform for filing corporate income tax. Trading across Borders: Azerbaijan made trading across borders faster by streamlining electronic customs procedures and fully implementing the “green corridor” gating system. Resolving Insolvency: Azerbaijan made resolving insolvency easier by providing for the avoidance of preferential transactions. Labor Market Regulation: Azerbaijan changed regulations pertaining to the notice period for redundancy dismissals and severance payments. DB2018 Getting Electricity: Azerbaijan made getting electricity faster by allowing customers to choose private contractors to carry out the external connection works. Getting Credit: Azerbaijan improved access to credit information by adopting a law allowing the establishment of credit bureaus. Protecting Minority Investors: Azerbaijan strengthened minority investor protections by increasing shareholder rights and role in major corporate decisions, clarifying ownership and control structures and requiring greater corporate transparency. Enforcing Contracts: Azerbaijan made enforcing contracts easier by introducing a system that allows users to pay court fees electronically. Resolving Insolvency: Azerbaijan made resolving insolvency easier by making insolvency proceedings more accessible for creditors and granting them greater participation in the proceedings, improving provisions on the treatment of contracts during insolvency and introducing the possibility to obtain post-commencement financing. DB2017 Getting Electricity: Azerbaijan streamlined the process of obtaining a new electricity connection by introducing an electronic capacity/availability of connection map, which reduced the time needed to determine new customer connection points. Paying Taxes: Azerbaijan made paying taxes easier by abolishing vehicle tax for residents. Trading across Borders: Azerbaijan facilitated international trade processes by introducing an electronic system for submitting export and import declarations. DB2016 Starting a Business: Azerbaijan made starting a business easier by abolishing the requirement to use a corporate seal. Dealing with Construction Permits: Azerbaijan made dealing with construction permits easier by establishing a one-stop shop for issuing preapprovals for project documentation. Protecting Minority Investors: Azerbaijan strengthened minority investor protections by introducing requirements that related-party transactions undergo external review and be voted on by disinterested shareholders. Page 57 Doing Business 2019 Azerbaijan DB2015 Starting a Business: Azerbaijan made starting a business easier by reducing the time to obtain an electronic signature for online tax registration. Registering Property: Azerbaijan made transferring property easier by introducing an online procedure for obtaining the nonencumbrance certificate. Paying Taxes: Azerbaijan made paying taxes easier for companies by introducing an electronic system for filing and paying social insurance contributions. DB2014 Starting a Business: Azerbaijan made starting a business easier by introducing free online registration services and eliminating preregistration formalities. Dealing with Construction Permits: Azerbaijan adopted a new construction code that streamlined procedures relating to the issuance of building permits and established official time limits for some procedures. Trading across Borders: Azerbaijan made trading across borders easier by streamlining internal customs procedures. DB2011 Getting Credit: Azerbaijan improved access to credit by establishing an online platform allowing financial institutions to provide information to, and retrieve it from, the public credit registry. Paying Taxes: A revision of Azerbaijan’s tax code lowered several tax rates, including the profit tax rate, and simplified the process of paying corporate income tax and value added tax. DB2010 Getting Credit: Azerbaijan’s public credit registry improved the credit information system by providing banks with online access to its database, increasing the data available on borrowers and introducing penalties for banks that send information that is late or incorrect. Trading across Borders: Azerbaijan reduced the clearance and border crossing time for goods by streamlining and regrouping agencies behind a single customs service window. DB2009 Starting a Business: Azerbaijan reduced the time, cost and number of procedures to start a business by establishing a one-stop shop for completing registration requirements. Registering Property: Azerbaijan made registering property easier and less time consuming by introducing a unified property registry. Getting Credit: Azerbaijan improved access to credit information by eliminating the minimum threshold for loans reported to the public credit registry. Protecting Minority Investors: Azerbaijan strengthened investor protections by introducing requirements on the approval of related-party transactions and expanding remedies available against liable directors. Paying Taxes: Azerbaijan made paying taxes easier for companies by introducing an online filing and payment system with advanced accounting software and providing computer stations for users without computer facilities. Enforcing Contracts: Azerbaijan speeded up contract enforcement by creating a second commercial court in Baku, thereby increasing the number of specialized judges from 5 to 9. Labor Market Regulation: Azerbaijan allowed fixed-term contracts to be concluded for permanent tasks, eliminated the requirements to notify third parties in cases of redundancy dismissals, and repealed a retraining or reassignment obligation before an employer can make a worker redundant. DB2008 Starting a Business: Azerbaijan made starting a business easier by abolishing the requirement to obtain approval from the Ministry of Justice for the company seal design. Paying Taxes: Azerbaijan made paying taxes easier and less costly for companies by introducing electronic filing and payment and by reducing the corporate income tax rate. Page 58 Doing Business 2019 Azerbaijan Page 59