Legislation
General social, economic and legal conditions of investment activity (capital investment) in the territory of the Republic of Azerbaijan and legal, economic principles of foreign investment are determined by the Laws of the Republic of Azerbaijan on "Investment activity" and on "Protection of foreign investments”, relevantly.

"Single window" system
The President of Azerbaijan Republic issued the Order on "Ensuring measures of organization of entrepreneurship subjects' activity on "single window" principle" dated October 25, 2007, for taking necessary measures to accelerate development of entrepreneurship, to simplify starting procedures of business and to increase suitableness of business climate. Pursuant to the Order, the Ministry of Taxes of Azerbaijan Republic was appointed as single state registration body on "one window" principle and the application of this system was started on January 1, 2008. After applying "one window" system, entrepreneurs desiring to register their businesses required number of procedures has been reduced from 15 to 1 and time for this reduced from 30 days to 3.

Privatization
Foreign investors can participate in privatization process. In order to participate in privatization, foreign investors must obtain privatization option while privatization checks are in circulation. (Privatization options - is type of securities that gives legal permission to foreign investors to purchase necessary checks for privatization).

Currency regulation
Azerbaijan Central Bank has been authorized to determine exchange policy on currency regulation and to accept instructions.
Unless a special license issued by the Central Bank, all payments will be carried out with AZN. Central Bank abolished money restrictions on advances sent by residents and non-residents due to import of goods and services to Azerbaijan. Despite of the cancellation of restrictions, goods must be carried to Azerbaijan within 180 days after paying the advance.

Real estate
Legislation of Azerbaijan provides following rights on real estate:
- property
- lease
- use
Entrepreneurship concept considers property right, use and making profit and transferring land to the third party. The Republic of Azerbaijan, municipalities and individuals or legal entities of Azerbaijan can act in the capacity of landowner. Foreigners (individuals and legal entities) and persons without citizenship can't be landowners. Foreigners must handover property rights to 3rd party within 1 year, if land is obtained through collateral loan, gift or inheritance.
Otherwise, land will pass to the property of state or relevant municipality. However, foreigners can lease land for a long term.

Taxation
There are following changes in the tax system in order to increase economic activity and dynamic development of entrepreneurship:
- Income tax of enterprises and organizations to transit from progressive system to proportional system, and gradually to decrease tax rates from 35% to 20%, VAT rate from 28% to 18%, cancel number of taxes, to reduce maximum limit of income tax rate from 55% to 35%.

Customs regime
Legislation of Azerbaijan applies number of customs regimes to imported goods Followings are necessary for foreign investors:
-transit, customs storage, customs storehouse, temporary import, entrance and exit to customs zone.
-Duties are taken from goods imported to Azerbaijan (ad valorem duties - 0-15% corresponds to unit and measurement duty). Excise tax is applied to some types of goods (tobacco and alcohol products). Azerbaijan has adopted purposely VAT principle (currently 18%), that is taken from customs value of any goods (depending on applied customs regime, as well as import duty and excise tax). Certain categories and types of goods are not applied VAT or 0% rate is applied. Exports are exempt from state tax (except metal exporting).
Contractors, subcontractors and their agents can re-export and import oil and gas industry goods to Azerbaijan without obstacles and paying import duty within the framework of agreements and projects on pipeline and Production Sharing Agreements (PSA). Imported goods under PSA regime is applied 0% VAT. Simultaneously, pursuant to the Law on "Application of special economic regime to export targeted oil and gas activity" export targeted activity of the contractors and subcontractors in the oil and gas sectors is applied 0% VAT rate.

State Registration
State register on legal entities engaged in non-entrepreneurship activity includes general information about legal persons and their founders. According to the provisions of Civil Code, state register on legal entities was declared open and every interested party can obtain copy of the documents submitted for registration.
State registration is carried out within 5 days.
Legal entities engaged in commercial activity have to be registered at the Ministry of Taxes in accordance with "single window" system.

Licensing
It was necessary to obtain special licenses from various state agencies for some commercial activities till 2002. According to decree of the President of Azerbaijan Republic dated September 3, 2002, licensing for most commercial activities was abolished. License is required for activities on banking, insurance, audit, deliveries, and securities and other. Extension period of the license is 5 years.

Azerbaijan investment climate in the reports of international organizations
Azerbaijan was declared most reformer country in the field of improving of the business climate in the "Doing Business 2009" report prepared by the World Bank and the International Finance Corporation. Our country preserved its position in the "Doing Business 2010" report, implemented measures in the direction of improving the business environment in Azerbaijan are appreciated as positive. Azerbaijan increased by 18 stages and figured out in the 51st place among the 133 countries and 1st place among CIS countries in the "Global competitiveness report" prepared for 2009-2010.

Fitch Ratings (as of 06.09.2011)
Sovereign foreign currency ratings (LT/Outlook/ST)                 BBB-/Positive/F3
Sovereign local currency ratings (LT/Outlook)                          BBB-/Positive

Standard & Poor's (as of 23.12.2011)
Sovereign local currency ratings (LT/Outlook/ST)                     BBB-/Stable/A3
Sovereign foreign currency ratings (LT/Outlook/ST)                  BBB-/Stable/A3
Transfer and convertibility assessment                                      BBB-