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Azerbaijan Creates Free Economic Zone Offering Competitive Advantages

By Mushvig Mehdiyev May 26, 2020

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President Ilham Aliyev (second from left) and Azerbaijani state officials attend the opening of the first phase of the Baku International Sea Trade Port in the Alat settlement, May 14, 2018 / President.Az

Plans have been unveiled for Azerbaijan's new free trade zone, Alat Free Economic Zone, as part of the emerging trade and logistics hub in the Alat settlement on the Caspian Sea coast.

A decree signed by Azerbaijan's President Ilham Aliyev on May 22 addresses the establishment of the new free trade zone and organization of its activities, as well as the establishment of the zone's authorized body and removal of the temporary administration that was operating over the last two years.

The decree orders documentation of the lands located in the administrative territory of Garadagh district 65 kilometers south of capital Baku, which Alat settlement is part of, as the territory of the newly created free economic zone. The Baku International Sea Trade Port, the largest Caspian port in the settlement of Alat, is ordered to include the land allocated for its utilization to the territory of the Alat Free Economic Zone.

The law pertaining to the Alat free economic zone was adopted by Milli Mejlis, the parliament of Azerbaijan on May 18, 2018. According to the document, the free zone is created to promote business practices, as well as investment and development activities around the Alat settlement.

The law defines a special tax and customs regime to be applied for the companies operating within the free economic zone. No value-added tax will be imposed on the goods, works and services imported to the zone, while they will also be exempted from customs fees, according to the document. However, when goods, works, and services are exported from the free zone to the mainland economy, the provisions of the basic economic legislation will be applied to such exported goods, works and services.

The overall turnover from supplied goods, performed services and works in the free economic zone is expected to be subject to 0.5 percent tax. Meanwhile, authorities and administrative enterprises of the free zone, legal entities operating in the zone, and their employees, as well as free Zone residents are exempt from all taxes related to their activities.

No nationalization, confiscation measures, or any other restriction on private property may be applied to the free zone legal entities that operate legally. Investors, shareholders, free zone residents and legal entities alongside their employees are allowed to invest in the free zone and transfer funds from their activities abroad without restrictions. They have also the right to work and conduct transactions in any foreign currency of their choice.

There are no restrictions on the 100 percent ownership of the charter capital and investments of companies in the free zone by foreign legal entities and individuals.

In the meantime, a Business Services Center, to be established in the Alat Free Economic Zone, will issue licenses, visas and other official documents.

Today, Alat settlement is extensively developing under the aegis of the government of Azerbaijan, who intends to build a major trading hub that connects Europe and Asia via key structures such as a port, international logistics centers, and an airport. The ambitious intercontinental North-South and East-West corridors intersect by road and rail transport lines in Alat.

The Baku International Sea Trade Port, also known as Port of Baku, is currently the most developed structure in the Alat settlement. Despite being under construction, the port operates within its first phase development. The largest maritime port in the Caspian Sea has today a throughput capacity of up to 15 million tons of cargo, including 10,000 twenty-equivalent units (TEU). After the completion of the second phase, the port will be able to handle 25 million tons of cargo, including 500,000 TEU.

An airport is expected to come online in the Alat Settlement as part of the development plans.