Study of Small and Medium Enterprises in Azerbaijan - IFC

According to the law previously in place, on average the overall registration of legal entities
should have been completed within 30-34 days and included almost 33 documents.
However, survey and focus groups results illustrated that in practice it took around 11
days. For example, confirmation of the legal address, notarization of documents, depositing
the charter capital in a bank, and payment of the state registration fee (steps 1-3)
could have been completed in one day. Moreover, the possibility of making unofficial
payments could also speed up the registration process significantly (see Box 3.2). The
average cost (including official and unofficial payments) for business registration was
approximately 270 Azerbaijani manats ($333) while the approximate portion of official
payments varied from 130-150 Azerbaijani manats ($160-185).
Box 3.2 According to surveyed entrepreneurs, unofficial payments and personal relationships between
entrepreneurs and officials may speed up the registration process as follows:
1. In case of unofficial payment, registration with the Ministry of Justice (step 4) could have been completed within one-two days instead
of five days;
2. Although not required by law, in practice the draft seal approved by the Ministry of Justice should have also been submitted to the seal
producing company, and therefore step 5 could have been completed simultaneously with step 4;
3. In case of unofficial payment, registration with the State Statistics Committee (step 6) could have been completed within one-two days
instead of five days;
4. In case of unofficial payment, registration with the tax authorities (step 7) could have been completed within one-two days instead of
five days;
5. In case of unofficial payment, registration with the Social Protection Fund (step 8) could have been completed one-two days instead of
five days;
6. As survey data confirmed, most of the small and medium companies in Azerbaijan were not VAT payers, therefore, these type of
companies usually did not need to register as VAT payers with the tax authorities. Moreover, in case of unofficial payment, step 10 could
have been completed in one-three days instead of seven days;
7. Opening a permanent bank account and returning the notification duplicate(s) to the tax office and the Social Protection Fund (steps 11
and 12) sometimes could have been completed in one day.
As survey results reveal, entrepreneurs usually hired specialized lawyers providing
assistance with registration by means of unofficial payments. Though the majority
of entrepreneurs registering their business resorted to unofficial payments, almost 41
percent of respondents considered the overall procedures as not complicated. This
result also confirmed the need to increase the legal awareness of entrepreneurs.
View from an entrepreneur:
“To be honest, it is easier to pay some money to the practicing lawyers or officials to speed
up the registration process. Although it is more expensive for me, at least I don’t have the
headache of trying to convince officials to accept my documents…”
According to the survey results, among other key issues, the entrepreneurs indicated
the extensive number of required documents (29 percent), the extensive number of
various procedures (25 percent) and the lengthy registration process (12 percent)
as troublesome (see Chart 3.1).
Aze r b a i j a n Bu s i n e s s En a b l i n g En v i r o n m e n t Pr o j e c t 47