Information and support for businesses

According to the Action Plan approved by the Cabinet of Ministers on April 4, 2020, tax benefits and holidays will be provided to businesses operating in areas affected by the pandemic. In this regard, a draft of major changes to the tax and social legislation has been prepared to provide tax benefits and holidays to businesses operating in areas affected by the pandemic (including small and medium enterprises). After reconsideration by the government, the draft documents included in the package of proposals were submitted to the Milli Majlis. Tax benefits and holidays will reduce the burden on taxpayers.

Mechanism of Tax Benefits and Holidays

Source: Ministry of Economy of Azerbaijan Republic

I. SUPPORT FOR ECONOMIC GROWTH AND ENTREPRENEURSHIP

A. Measures to reduce the negative impact of the pandemic on the country's economy in the near future

a. Emergency coordination of the activities of economic entities

b. Protection of jobs and social stability (AZN 295 million)

• Payment of a part of the salary of employees working in the areas affected by the pandemic (300 thousand people, AZN 215 million)
• Providing financial support to individual (micro) entrepreneurs operating in areas affected by the pandemic (300 thousand people, AZN 80 million)

c. Increasing transparency in the economy

d. Tax incentives to protect economic activity (AZN 115 million)

• Provision of the tax benefits and holidays to business entities (including small and medium enterprises) operating in the areas affected by the pandemic

e. State credit and guarantee support to the economy and entrepreneurship (AZN 440 million)

• Issuance of state guarantee on bank loans in the amount of AZN 0.5 billion and subsidization of loan interest to be issued
• Subsidisation of interest rates on the existing loan portfolio in the amount of AZN 1 billion

f. Expanding access to credit resources at favourable conditions

g. Implementation of additional support measures in areas affected by the pandemic  

• application of customs duty exemptions on the relevant list
• temporary reduction of import duties on products deemed necessary to “0” percent
• inclusion in the Tax Code of the new customs mechanism applicable to sale of goods used in international practice with export mark
• exemption from the state rent fees by the end of 2020
• additional measures to support small and medium enterprises in the public procurement procedures
• elimination of fees paid by professional participants of the banking and insurance market to the financial market supervisory authority

B. Measures to implement a New Model of Economic growth in the post-pandemic period

II. EMPLOYMENT AND SOCIAL WELFARE SUPPORT

a. in the field of protection and social protection of public sector employees from unemployment risk (910 thousand people, April-May 2020)

b. Protection and social protection of employees in the private sector from the risk of unemployment (664 thousand people)

c. in the field of employment and social protection of unemployed and dismissed persons (283 thousand people)

d. strengthening the social protection of vulnerable groups

III. MACROECONOMIC AND FINANCIAL STABILITY

a. Development of macroeconomic policy framework reflecting new economic realities (April 2020)

b. Expansion of the sterilization portfolio depending on the monetary situation

c. Issuance of a regular strike to credit institutions in order to regulate the obligations of entrepreneurs operating in areas affected by the pandemic during the quarantine regime (April 2020)

d. Taking comprehensive measures and strengthening control over the movement of capital and increasing the efficiency of the currency regime

Source: Cabinet of Ministers of the Republic of Azerbaijan

The Ministry of Economy presented the framework document describing the main directions of the envisaged state support to the economy, businesses and entrepreneurs negatively affected by the coronavirus pandemic. According to the Ministry, the execution of the program is envisaged to start by 4 April 2020. Here is a brief overview of the key support tools for economic growth and entrepreneurship with a total volume of 2.5 billion AZN accounting for 3% of GDP:

1. Financial support to be provided to pay the salaries of 304,000 employees in the affected spheres of the economy, including trade, industry, services, transport and other sectors to avoid the job cuts.
2. Financial assistance to be provided to 292,000 individual micro-entrepreneurs affected by the pandemic to protect jobs.
3. Tax benefits, privileges and holidays are envisaged for business entities operating in the areas affected by the pandemic:

Simplified tax

• Provision of simplified tax exemptions to micro-enterprises for a specific time;
• Reduction of simplified tax for persons engaged in catering activities.

Profit (income) tax

• Exemption of profit (income) tax for payers engaged in catering activities;
• Deduction for tax purposes of donations made by individuals and legal entities to the Coronavirus Support Fund;
• Exemption of taxpayers from profit (income) tax for the relevant amount and period.

VAT

• VAT exemption of some tax payers for the specific period;
• Temporary exemption from VAT of some products necessary for food and medical needs of the population (VAT exemption on import and sale of some products);
• VAT exemption of raw materials related to the production of food, medicine and other essential products to satisfy the population's demand for food, medicine and other necessary products in a timely and more flexible manner;
• Application of zero (0) rate VAT to the supply of free services provided by the taxpayer in connection with the prevention of the epidemic.

Other privileges 

• Exemption from the property and land taxes for the relevant period;
• Extension of the deadline for payment of profit (income) tax due on the results of 2019;
• Extension of the deadline for submission of tax returns as well as the deadline for payment of taxes;
• Exemption from current tax payments for the relevant period for the specific industries. 

4. Credit-guarantee support program for new bank loans to businesses operating in the areas affected by the pandemic (0.5 billion AZN): 

• State guarantee for 60% of new loans in the amount of 500 million AZN;
• The maximum interest rate on loans not more than 15% and loan term up to 3 years;
• Subsidising half of the interest on guaranteed loans (7% out of 15%) from the state budget;
• Allocation of additional funds to the Entrepreneurship Development Fund. 

5. Credit-guarantee support program on the existing loan portfolio of business entities operating in the areas affected by the pandemic (1 billion AZN):

• Subsidization of 10% interest rate item for the first year on existing bank loans in the amount of 1 billion AZN without state guarantee (regardless of the term and interest rate of loans);
• Allocation of special funds for this purpose;
• Implementation of subsidies through the Entrepreneurship Development Fund.

6. Social package to support the financial situation of the population, including tuition support program for students from socially vulnerable families, financial support program for mortgage and credit guarantee mechanism, program to support utility payments for electricity consumption of the population and support program for vital passenger transport activities.

For more detailed information and Azerbaijani text, please visit the official website of the Republic of Azerbaijan Ministry of Economy here.

On 19 March 2020, President Ilham Aliyev signed a Decree on the establishment of the Coronavirus Response Fund. The Fund aims at providing financial assistance to the support measures to tackle the pandemic and its negative implications in the country. The activity period of the Fund covers up to 31 December 2020, with the possibility of the extension by the President.

The Fund is formed through the following sources:

• Funds of the state budget of the Republic of Azerbaijan;
• Voluntary payments of legal entities and individuals;
• Other sources not prohibited by the law.

The financial resources of the Fund will be spent on:

• Remuneration of medical workers and provision of material assistance to them;
• Improvement of the infrastructure and material and technical capacity of medical institutions;
• Establishment of medical institutions of special regime;
• Organisation and implementation of control and monitoring;
• Financing researches in the medical field;
• Training of specialists in the medical field;
• Awareness-raising activities;
• Other counter-measures against the Coronavirus.

* The Fund cannot be used for the purposes not stated in the Regulation.  Link

After the completion of the Fund's activity, unspent resources remaining in the special treasury account will be directed to the financing of the works provided for in sub-item 2.7.1 of these Rules or returned to the state budget. More

Management of the Fund: The Cabinet of Ministers of the Republic of Azerbaijan

• Initially, the government allocated $11.7 million to the fund and the President and the First lady donated their annual salaries to the fund;
• According to the presidential decree the Cabinet of Ministers received a $1 billion allocation from the state budget;
• As of 07 May 2020, 3.318 legal entities and 11.5490 individuals have donated to the Fund.
• Accurate information about the account details of the Coronavirus Response Fund in manat and foreign currencies can be found here.
• The council publishes information on the use of the fund’s resources twice a month on the official Website.

Important activities so far:

• On 06 April 2020, the Baku Textile Factory LLC inaugurated a new facemask plant in the Sumgait Chemical Industrial Park. The plant has a daily production capacity of 120,000 up to 250,000 facemasks.
• “Yeni klinika" state-of-the-art hospital with the capacity of 575 bed, 21 operating rooms, and 70 emergency rooms started to operate in Baku. Until the end of the pandemic, only patients infected with coronavirus will be treated in this hospital.