A summary of Azerbaijan's laws and regulations on agriculture. Useful to those foreign companies interested in investing in agriculture-related business in Azerbaijan.
Over the years, the government of Azerbaijan has been keeping special attention on agriculture. In particular, most small government loans, which are issued through National Fund for Support of Entrepreneurship, have been issued to agro businesses. The government owned “Agrolizinq” OJSC leases agriculture related equipment to agro businesses on preferential terms. Further, the President of Azerbaijan declared the year of 2015 the Year of Agriculture.
The Ministry of Agriculture of Azerbaijan is the main regulatory body. It forms and implements the state policy in agriculture. It includes national and regional programs, social sectors, rural infrastructure, land reclamation, water economy, irrigation, research programs in plant growing and cattle-implementation, veterinary services, product processing, sustainability in biological diversity, realization of unified scientific policy in agriculture etc. The Ministry registers of veterinary drugs and other medications.
The primary crops produced in Azerbaijan are grapes, cotton, tobacco, citrus fruits and vegetables. Livestock, wheat, rice, dairy products, wine and alcohol also make up a considerable part of farm products.
In Azerbaijan land had been privatized in 1996 with the adoption of the Law On Land Reforms, dated July 16, 1996. The Parliament adopted new Land Code in 1999. Following are some of the key principles of land ownership and use in Azerbaijan:
- In terms of ownership land can be government owned, municipality owned or privately owned. Most agricultural land either municipality owned or privately owned. From time to time municipalities auction sale or leasing of agricultural land through organized auctions.
- Foreign persons (individuals or legal entities) may not own land in Azerbaijan. They may either lease land or own it indirectly through a local legal person – i.e., they can be a shareholder in a local legal person, which owns the land.
- Land are categorized based on their designation of use. There are, for instance, land for industrial use and residential use. There are also land for agriculture use. Only the Cabinet of Ministers of Azerbaijan may change the land designation. Generally, changing designation of a land is a long and cumbersome process, unless the project has the government backing.
Natural persons’ income derived directly from production of agricultural products is free from income tax (Section 102.1.11 of the Tax Code). Starting from January 1, 2014 and for the period of 5 years from then profit of companies from activities in agricultural production is exempt from profit tax (Section 106.1.14 of the Tax Code).
Legal and physical persons, who are eligible for simplified tax are exempt from tax – i.e., they are except from simplified tax (Section 219.1.7 of the Tax Code). These taxpayers are also exempt from VAT from trading in agricultural products, and the property tax from property that they use for agricultural production (Sections 164.1.18 and 199.9 of the Tax Code). This exception is effective for five years starting from January 2014.
The land tax for agricultural land is calculated as 0.06 AZN for 1 conditional point. Conditional points are determined by the Ministry of Agriculture by administrative regions taking into account the allocation, geographical location and quality of agricultural lands (Section 206 of the Tax Code)
In 2002 the government adopted the Law On Incentivizing Insurance in Agriculture to boost development of insurance in agriculture sector. The Law aims to cover (i) agricultural plant products that are not genetically modified, (ii) agricultural livestock, domestic birds, wild animals with fur, bee families, (iii) buildings, equipment, devices, vehicles for use in agriculture etc. These are to be insured from natural catastrophes, such as fire, hail, flood, storm, frost, thunderstorm, earthquake, landslide, drought in arid lands. Non-genetically modified agricultural products, agricultural livestock, domestic birds, rabbits, wild animals with fur, bee families are to be insured from expansion or attack of harmful pests, epidemics. Buildings equipment, devices, vehicles of agricultural allocation are to be insured from accidents.
If the insured procures insurance for the property but does not use the insurance amount during three consecutive years, the insured is entitled to discount of 10% for the fourth year, 20% for the fifth year, and 30 % for each subsequent years after that.
The insurance amount is 70% of the product value of (i) group, 80% of the product value of (ii) group, and full value of property of (iii) group.