Study of Small and Medium Enterprises in Azerbaijan - IFC

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Box 4.3 General and specific documents required to issue a license General documents: a) Application form. The following shall be stated in the application form: • for legal entities: its name, organizational and legal form, legal address, number of account and the name of the bank, type of activity; • for natural persons – name, surname, patronymic name, information on identity card (series, number, the date of issue and issuing authority, address), type of activity. b) Copy of the state registration certificate of the legal entity; c) Copy of the tax registration certificate; d) Copy of a lease agreement or ownership certificate confirming the right to use the premises mentioned in the application; e) Receipt confirming the payment of the state license fee. Specific documents: Subject to the type of activity specific documents are defined by the Cabinet of Ministers (i.e. Cabinet of Ministers’ Decree No. 174). For example: to obtain a customs broker license, the applicant must also submit: (i) an official document which confirms that the applicant employs certified customs clearance specialists; (ii) information confirming that an insurance contract has been concluded in connection with its activity and a copy of the insurance contract; and (iii) information about the conditions which confirm that he/she can engage in customs brokerage. 4.3.1 Duration of the application process Upon filing an application, the application itself and the accompanying documents must be registered in a special journal kept by each license-issuing authority. After review and absent any deficiencies or grounds for rejection, a decision to issue the license must be adopted within fifteen days from the date of acceptance of the application. If the documents are in any way deficient, the applicant should be informed of the deficiencies in writing within five days. After the deficiencies are eliminated and the documents are re-submitted, the new application is reviewed within five days, after which an appropriate decision should be issued. The survey data shows that in practice individual entrepreneurs spend on overage 10 days to obtain a license, while small and medium enterprises spend on average 15 days (see Chart 4.3). However, to complete the licensing procedures whether within 10 or 15 days, requires entrepreneurs to use in some cases unofficial solutions 24 . Chart 4.3 The number of days required to receive a license (means days) 20 15 10 15 10 5 0 To receive a license by SME To receive a license by IE 24 For further details see the next section. 68 St u d y o f Sma l l a n d Me d i u m Ent e r p r i s es in Az e r b a i j a n
While the Rules specify limits for the amount of time agencies may take to process applications, they do not provide for any sanctions for non-observance of the deadlines by licensors during the application process nor do they establish the “silence is consent” principle. This in turn negatively affects the overall application review process. Therefore, it is advisable to introduce the “silence is consent” principle, which can prevent delays and unofficial payments during the application process and reduce the processing time. The principle is based on the following assumption: government officials have to respond to the application of a citizen or entrepreneur in a fixed time period, otherwise the applying citizen/entrepreneur is endowed with the right to the service (license) without a decision from the government official (i.e. tacit authorization). Moreover, pursuant to the Rules, where deemed necessary, a license-issuing authority can apply to other government agencies for an opinion in connection with the specificities of a licensed activity. This request must be (i) reviewed by the authority receiving the request for the opinion within 5 days and (ii) followed by the issue of an official opinion. However, the circumstances in which this official opinion may be required are not provided for by the rules and leave this matter at the discretion of licensing agencies. 4.3.2 Cost of licensing According to the survey results, the average cost of licensing (including official and unofficial payments) varies between the individual entrepreneurs and small and medium enterprises (for a detailed breakdown of the surveyed companies and respective sectors, please consult Table 1.1). Individual entrepreneurs spend on average 276 Azerbaijani manats ($340) while small and medium enterprises spend on average 564 Azerbaijani manats ($696) for receiving a license (see Chart 4.4). Moreover, nearly 39 percent of individual entrepreneurs and 25 percent of surveyed SME’s who obtained a license in 2007 resorted to unofficial payments (see Chart 4.5). These figures confirm the assumptions that licensing procedures are unclear and some cases of unofficial payments still exist in the licensing procedure. It is worth noting that the high volume of unofficial payments for licensing can be significant hindrance for startup entrepreneurs to entry into business. Chart 4.4 The average amount of money spent for obtaining a license 800 600 564 696 400 200 276 340 Azerbaijani manat USD 0 Individual entrepreneurs SMEs 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 69
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Study of Small and Medium Enterpris
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Study of Small and Medium Enterpris
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5. Business Permits................
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Foreword and Acknowledgements IFC,
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critically examines all areas of op
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of each formality. Special attentio
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Policy Recommendations Business Reg
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Problems Sources of Problem Recomme
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Problems Sources of Problem Recomme
Page 19 and 20: Business Taxation Problems Sources
Page 21 and 22: Problems Sources of Problem Recomme
Page 23 and 24: Problems Sources of Problem Recomme
Page 25 and 26: Capital: Baku Country’s populatio
Page 27 and 28: The state, ultimately responsible f
Page 29 and 30: 1. Methodology 1.1 Background The s
Page 31 and 32: the share of economically active co
Page 33 and 34: Scope of activity Official statisti
Page 35 and 36: 2. SMEs in Azerbaijan The aim of th
Page 37 and 38: Meanwhile, the number of small and
Page 39 and 40: Table 2.2 Statistical information o
Page 41 and 42: The “typical” small enterprise
Page 43 and 44: According to the IFC survey, more t
Page 45 and 46: 2.5.3 Legal disputes Most entrepren
Page 47 and 48: 3. Business Registration In January
Page 49 and 50: According to the law previously in
Page 51 and 52: 3.4 Economic impact estimate Accord
Page 53 and 54: tion duplicate is addressed to the
Page 55 and 56: the local tax inspectorate for regi
Page 57 and 58: 3.10.3 Introduce the electronic reg
Page 59 and 60: 3.10.7 Simplify the liquidation pro
Page 61 and 62: Business registration before ‘one
Page 63 and 64: Process map of one-stop-shop busine
Page 65 and 66: Registration for individual entrepr
Page 67 and 68: 4.1 Licensing: the legal framework
Page 69: Chart 4.1 Number of activities requ
Page 73 and 74: Chart 4.6 Economic impact of licens
Page 75 and 76: Annex 4.1 Checklist of issues for d
Page 77 and 78: Based on the IFC survey estimates,
Page 79 and 80: 5.2 Permits coverage The Azerbaijan
Page 81 and 82: Box 5.4 An example of overlapping p
Page 83 and 84: 5.4 Permit expenses Azerbaijani leg
Page 85 and 86: Chart 5.9 40% Average percentage of
Page 87 and 88: 2.4. Specifying in the law a unifor
Page 89 and 90: Annex 5.1 Procedure for obtaining c
Page 91 and 92: Annex 5.2 Checklist of issues for d
Page 93 and 94: The most significant legal act in i
Page 95 and 96: 6.1.2 There is no effective mechani
Page 97 and 98: 6.1.4 Entrepreneurs are not aware o
Page 99 and 100: IFC’s analysis showed that only h
Page 101 and 102: 6.2.2.1 The inspections process and
Page 103 and 104: View from an entrepreneur: “The s
Page 105 and 106: Chart 6.11 Average registration in
Page 107 and 108: going in the opposite direction. In
Page 109 and 110: clearly defined circumstances, or a
Page 111 and 112: Annex 6.2 Presidential Decree No. 7
Page 113 and 114: The bulk of individual entrepreneur
Page 115 and 116: Items 1-9 are collected at the firs
Page 117 and 118: The IFC survey reveals that one in
Page 119 and 120: Table 7.5 Main tax obligations of a
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Chart 7.3 IFC Survey: Complexity of
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7.3.2 Tax inspections negatively af
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7.3.5 The cumbersome VAT administra
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• Introducing clearer and more el
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Chart 8.1 Development of Credit Ins
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More than 90 percent of entrepreneu
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Chart 8.9 The loan interest rates o
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Case study of a Baku-based glass an
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View from a bank employee: “One p
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Box 8.2 Examples of a successful cr
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Box 8.3 Examples of alternative mec
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9. Foreign Trade The volume of fore
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Box 9.1 Customs regimes under the C
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As Chart 9.1 illustrates, 98 percen
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Table 9.1 A comparison of the proce
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The comprehensive system of mandato
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Table 9.2 Average costs for imports
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Box 9.5 Customs payments The Custom
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Box 9.8 An excessive number of docu
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Moreover, due to the underdeveloped
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Expected impact More comprehensible
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9.5.6 Accelerate WTO accession of A
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Chart 9.5 Goods importable upon app
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Azerbaijan has been long pending a
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List of Laws 1. The Tax Code of the
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Statistical Annexes Aze r b a i j a
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Chart A1.3 Individual Entrepreneurs
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Chart A1.7 Individual Entrepreneurs
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Chart A1.14 Three Major Types of Ob
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Registration Chart A2.1 Entrepreneu
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Chart A2.8 Three Major Problems Occ
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Chart A3.3 Existence of Licenses by
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Chart A3.9 Three Major Obstacles to
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Chart A4.4 Obtaining of Any Permits
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Chart A4.10 Time Required to Obtain
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Chart A5.4 Application for Credit o
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Chart A5.12 Average Interest Rate (
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Chart A6.3 Entrepreneurs That Under
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Chart A6.8 Authorities That Made In
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Chart A6.13 Breakdown of Number of
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Chart A6.19 Average Duration of One
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Chart A6.25 Small and Medium Enterp
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Chart A7.3 Small and Medium Enterpr
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Chart A7.8 Reported Share of Busine
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Chart A8.3 Usage of Optional (not c
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Azerbaijan Business Enabling Enviro
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Study of Small and Medium Enterprises in Azerbaijan - IFC

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