No tax jurisdiction on the shores of Caspian Sea – Alyat Free Trade Zone

On June 4, 2018 the Azerbaijani President signed into the law important piece of legislation – the Law On Alyat Economic ZoneThis is a unique law, at least as far as Azerbaijan’s legal system is concerned.  Under the law all businesses in the Zone are exempt from taxes and state duties (including import duties).  The administration of the Zone will be setting forth its own rules on, among other things, employment, migration as well as dispute resolution, which will include commercial arbitration.  The intention is to create a place with minimal government intervention and maximum flexibility and protection for businesses.  Read more blow for more information on what Alyat Free Zone has to offer.

Alyat Free Zone

The Free Zone is based off of the port located at the shores of Caspian Sea, just few miles away from Azerbaijan’s capital city – Baku.  Alyat’s proximity to Baku and the fact it is located at the Caspian Sea is meant to attract attention and foreign investment. More information can be obtained from this website: http://portofbaku.com/en/FTZ/

Economic Benefits

The new law provides for exemption from taxes and all government duties, which are applicable in the main territory of Azerbaijan. Therefore, companies operating in Alyat will be exempt from profit or income tax, VAT and other taxes, as well as customs duties upon import of their products into the Zone’s territory.  Apart from corporate taxes, the law also exempts companies and individuals from employment related taxes.  Consequently, Alyat is meant to become a no tax jurisdiction. 

Investor Protection

Article 24 of the law provides for protection of investor assets.  In particular, the law prohibits nationalization or confiscation of investor assets.  It allows for free exchange and transfer of foreign currencies.  Investors are free to transfer their profit or any funds from outside Alyat’s to a foreign country.

Dispute Resolution

Perhaps one of the key elements in the law is the part on dispute resolution in Alyat’s territory.  Under the law, there are two types of dispute resolution bodies: (i) Arbitration center and (ii) other dispute resolution agencies, which may be set up by Alyat’s administration.  All decisions issued by Alyat’s dispute resolution bodies must be executed not just in the Zone, but also in the entire territory of Azerbaijan.  Alyat’s administration is yet to adopt rules more specifically governing dispute resolution in its territory.