Doing Business 2018 Azerbaijan Economy Pro le of Azerbaijan Doing Business 2018 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction Procedures, time and cost to complete all formalities to build a warehouse and the quality control and permits safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time and total tax rate for a firm to comply with all tax regulations as well as post-filing processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Labor market regulation Flexibility in employment regulation and aspects of job quality About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local rms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of labor market regulation. Although Doing Business does not present rankings of economies on the labor market regulation indicators or include the topic in the aggregate distance to frontier score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more e cient regulation; o ers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business o ers detailed subnational reports, which exhaustively cover business regulation and reform in di erent cities and regions within a nation. These reports provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The rst Doing Business report, published in 2003, covered 5 indicator sets and 133 economies. This year’s report covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business, also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has bene ted from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. Page 2   for insolvency Doing Business Labor market 2018 regulation Azerbaijan Flexibility in employment regulation and aspects of job quality About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local rms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of labor market regulation. Although Doing Business does not present rankings of economies on the labor market regulation indicators or include the topic in the aggregate distance to frontier score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more e cient regulation; o ers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business o ers detailed subnational reports, which exhaustively cover business regulation and reform in di erent cities and regions within a nation. These reports provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The rst Doing Business report, published in 2003, covered 5 indicator sets and 133 economies. This year’s report covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business, also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has bene ted from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. The distance to frontier (DTF) measure shows the distance of each economy to the “frontier,” which represents the best performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s distance to frontier is re ected on a scale from 0 to 100, where 0 represents the lowest performance and 100 represents the frontier. The ease of doing business ranking ranges from 1 to 190. The ranking of 190 economies is determined by sorting the aggregate distance to frontier scores, rounded to two decimals. More about Doing Business (PDF, 5MB) Ease of Doing Business in Region Europe & Central Asia DB 2018 Rank 190 1 Azerbaijan Income Category Upper middle income 57 Population 9,762,274 DB 2018 Distance to Frontier (DTF) GNI Per Capita (US$) 4,760 0 100 70.19 City Covered Baku DB 2018 Distance to Frontier (DTF) 0 100 77.30: Poland (Rank: 27) 75.50: Russian Federation (Rank: 35) 72.87: Romania (Rank: 45) 71.91: Bulgaria (Rank: 50) 71.33: Regional Average (Europe & Central Asia) Page 3   70.19: Azerbaijan (Rank: 57) aggregate distance to frontier scores, rounded to two decimals. More Doingabout 2018 (PDF, Doing Business Business 5MB) Azerbaijan Ease of Doing Business in Region Europe & Central Asia DB 2018 Rank 190 1 Azerbaijan Income Category Upper middle income 57 Population 9,762,274 DB 2018 Distance to Frontier (DTF) GNI Per Capita (US$) 4,760 0 100 70.19 City Covered Baku DB 2018 Distance to Frontier (DTF) 0 100 77.30: Poland (Rank: 27) 75.50: Russian Federation (Rank: 35) 72.87: Romania (Rank: 45) 71.91: Bulgaria (Rank: 50) 71.33: Regional Average (Europe & Central Asia) 70.19: Azerbaijan (Rank: 57) Note: The distance to frontier (DTF) measure shows the distance of each economy to the “frontier,” which represents the best performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s distance to frontier is re ected on a scale from 0 to 100, where 0 represents the lowest performance and 100 represents the frontier. The ease of doing business ranking ranges from 1 to 190. Rankings on Doing Business topics - Azerbaijan 1 10 18 21 28 35 38 47 55 83 82 Rank 102 109 122 136 161 163 190 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Distance to Frontier (DTF) on Doing Business topics - Azerbaijan 100 94.36 82.07 84.21 80 75.00 73.56 67.98 67.51 62.27 60 54.90 DTF 40.00 40 20 0 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Change:+0.03 Change:-0.04 Change:0.00 Investors Change:0.00 Borders Change:+1.85 Change:+20.63 Change:+0.02 Permits Change:+8.33 Change:0.00 Change:+0.39 Starting a Business Page 4   This topic measures the paid-in minimum capital requirement, number of procedures, time and cost for a small- to medium-sized a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Change:+0.03 Change:-0.04 Change:0.00 Investors Change:0.00 Borders Change:+1.85 Change:+20.63 Change:+0.02 Permits Change:+8.33 Change:0.00 Doing Business 2018 Azerbaijan Change:+0.39 Starting a Business This topic measures the paid-in minimum capital requirement, number of procedures, time and cost for a small- to medium-sized limited liability company to start up and formally operate in economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The distance to frontier score for each indicator is the average of the scores obtained for each of the component indicators. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and operate a To make the data comparable across economies, several assumptions company (number) about the business and the procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay Pre-registration (for example, name verification no bribes. or reservation, notarization) Registration in economy’s largest business city The business: - Is a limited liability company (or its legal equivalent). If there is more than Post-registration (for example, social security one type of limited liability company in the economy, the most common registration, company seal) among domestic rms is chosen. Information on the most common form is Obtaining approval from spouse to start business obtained from incorporation lawyers or the statistical o ce. or leave home to register company - Operates in the economy’s largest business city and the entire o ce Obtaining any gender-specific permission that space is approximately 929 square meters (10,000 square feet). For 11 can impact company registration, company economies the data are also collected for the second largest business city. operations and process of getting national - Is 100% domestically owned and has ve owners, none of whom is a legal identity card entity; and has a start-up capital of 10 times income per capita and has a Time required to complete each procedure turnover of at least 100 times income per capita. (calendar days) - Performs general industrial or commercial activities, such as the production or sale of goods or services to the public. The business does Does not include time spent gathering not perform foreign trade activities and does not handle products subject information to a special tax regime, for example, liquor or tobacco. It does not use Each procedure starts on a separate day (2 heavily polluting production processes. procedures cannot start on the same day) - Leases the commercial plant or o ces and is not a proprietor of real Procedures fully completed online are recorded estate and the amount of the annual lease for the o ce space is equivalent as ½ day to 1 times income per capita. Procedure is considered completed once final - Does not qualify for investment incentives or any special bene ts. document is received - Has at least 10 and up to 50 employees one month after the commencement of operations, all of whom are domestic nationals. No prior contact with officials - Has a company deed 10 pages long. Cost required to complete each procedure (% of The owners: income per capita) - Have reached the legal age of majority. If there is no legal age of majority, Official costs only, no bribes they are assumed to be 30 years old. No professional fees unless services required by - Are sane, competent, in good health and have no criminal record. law or commonly used in practice - Are married and the marriage is monogamous and registered with the authorities. Paid-in minimum capital (% of income per capita) - Where the answer di ers according to the legal system applicable to the Funds deposited in a bank or with third party woman or man in question (as may be the case in economies where there before registration or up to 3 months after is legal plurality), the answer used will be the one that applies to the incorporation majority of the population. Standardized Company Page 5   before registration or up to 3 months after is legal plurality), the answer used will be the one that applies to the incorporation majority of the population. Doing Business 2018 Azerbaijan Standardized Company Legal form Limited Liability Company (LLC) Paid-in minimum capital requirement AZN 0 City Covered Baku Europe & OECD high Indicator Azerbaijan Central Asia income Overall Best Performer Procedure – Men (number) 4 5.2 4.9 1.00 (New Zealand) Time – Men (days) 4.5 10.1 8.5 0.50 (New Zealand) Cost – Men (% of income per capita) 1.8 4.4 3.1 0.00 (United Kingdom) Procedure – Women (number) 4 5.2 4.9 1.00 (New Zealand) Time – Women (days) 4.5 10.1 8.5 0.50 (New Zealand) Cost – Women (% of income per capita) 1.8 4.4 3.1 0.00 (United Kingdom) Paid-in min. capital (% of income per capita) 0.0 3.4 8.7 0.00 (113 Economies) Figure – Starting a Business in Azerbaijan and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 94.36: Azerbaijan (Rank: 18) 93.03: Russian Federation (Rank: 28) 90.62: Regional Average (Europe & Central Asia) 89.67: Romania (Rank: 64) 85.37: Bulgaria (Rank: 95) 82.78: Poland (Rank: 120) Note: The ranking of economies on the ease of starting a business is determined by sorting their distance to frontier scores for starting a business. These scores are the simple average of the distance to frontier scores for each of the component indicators. Figure – Starting a Business in Azerbaijan – Procedure, Time and Cost Time Cost 4.5 2 4 ost (% of income per capita) 3.5 1.5 3 Time (days) 2.5 1 2 1.5 Page 6   0.5 1 starting a business. These scores are the simple average of the distance to frontier scores for each of the component indicators. Doing Business 2018 Azerbaijan Figure – Starting a Business in Azerbaijan – Procedure, Time and Cost Time Cost 4.5 2 4 Cost (% of income per capita) 3.5 1.5 3 Time (days) 2.5 1 2 1.5 0.5 1 0.5 0 0 1 *2 3 4 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a di erent procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://www.doingbusiness.org/methodology). For details on the procedures re ected here, see the summary below. Details – Starting a Business in Azerbaijan – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Obtain electronic signature for online registration 1 day AZN 18 (e-signature Agency : Data Processing Center under the Ministry of Transport, per person) + AZN 13 Communication and High Technologies (card reader) An electronic signature is a pre-requisite to online registration. An electronic signature is issued by Data Processing Center under the Ministry of Transport, Communication and High Technologies (http://www.e-imza.az). E- signature for individual/physical person costs AZN 18 and is valid for 3 years. Each founder is required to obtain e-signature (alternatively, a PoA needs to be issued and notarized, which will then require only one person to obtain e- signature). E-signature for an LLC costs AZN 72. A card reader is required in order to use e-signature. Card reader costs AZN 13. Starting from January 2014, it takes 1 day to get an e-signature. 2 Notarize lease agreement 1 day AZN 2 Agency : ASAN or notary public According to Art. 19.1 of the Law of Azerbaijan on the “State registration of the immovable property”, if lease term exceeds, 11 months, it s mandatory to notarize such agreement. Notarization at ASAN costs AZN 2. In order to register the address of a company, it is required to submit a Page 7   notarized copy of lease agreement. This can be done by submitting the (http://www.doingbusiness.org/methodology). For details on the procedures re ected here, see the summary below. Doing Business 2018 Azerbaijan Details – Starting a Business in Azerbaijan – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Obtain electronic signature for online registration 1 day AZN 18 (e-signature Agency : Data Processing Center under the Ministry of Transport, per person) + AZN 13 Communication and High Technologies (card reader) An electronic signature is a pre-requisite to online registration. An electronic signature is issued by Data Processing Center under the Ministry of Transport, Communication and High Technologies (http://www.e-imza.az). E- signature for individual/physical person costs AZN 18 and is valid for 3 years. Each founder is required to obtain e-signature (alternatively, a PoA needs to be issued and notarized, which will then require only one person to obtain e- signature). E-signature for an LLC costs AZN 72. A card reader is required in order to use e-signature. Card reader costs AZN 13. Starting from January 2014, it takes 1 day to get an e-signature. 2 Notarize lease agreement 1 day AZN 2 Agency : ASAN or notary public According to Art. 19.1 of the Law of Azerbaijan on the “State registration of the immovable property”, if lease term exceeds, 11 months, it s mandatory to notarize such agreement. Notarization at ASAN costs AZN 2. In order to register the address of a company, it is required to submit a notarized copy of lease agreement. This can be done by submitting the document at the moment of registration, or by submitting it to the Ministry of Taxes within 2-3 months after registration. 3 Apply for registration online; obtain TIN number and register for VAT 2 days no charge Agency : One Stop Shop, Ministry of Taxes Online application for registration is available at https://www.e-taxes.gov.az/ as of December 2011 (Article 5-1. has been added to the Law of Azerbaijan Republic "On state registration of legal entities and state registry.") Online application for registration is exempted from state fee and is completely free (Article 20-1.3 of the Law of Azerbaijan Republic “On State Fee”). Details are available at http://www.taxes.gov.az/modules/birpencere/eng/1.html The time limit for online application for registration is 1 day. A hard copy of registration documents are obtained from the Tax O ce the day after application was submitted. Having a registration number is su cient to start operation. Expedited registration is available for companies that have one founder. Page 8   For online application for registration, it is required to have e-signature. The document at the moment of registration, or by submitting it to the Ministry Doing of Taxes within Business 20182-3 months after registration. Azerbaijan 3 Apply for registration online; obtain TIN number and register for VAT 2 days no charge Agency : One Stop Shop, Ministry of Taxes Online application for registration is available at https://www.e-taxes.gov.az/ as of December 2011 (Article 5-1. has been added to the Law of Azerbaijan Republic "On state registration of legal entities and state registry.") Online application for registration is exempted from state fee and is completely free (Article 20-1.3 of the Law of Azerbaijan Republic “On State Fee”). Details are available at http://www.taxes.gov.az/modules/birpencere/eng/1.html The time limit for online application for registration is 1 day. A hard copy of registration documents are obtained from the Tax O ce the day after application was submitted. Having a registration number is su cient to start operation. Expedited registration is available for companies that have one founder. For online application for registration, it is required to have e-signature. The only document required to be submitted online is the charter. Documents required for paper registration include the following: -Standard application form -Founding documents – the charter of the entity approved by the founder or his/her legal representative, minutes of the foundation meeting; -Resolution of establishment -If the founder is an individual – copy of his/her identity card (notarization of the signature is optional); -A document con rming the legal address of the entity. 4 Register employees with the Ministry of Labor and Social Protection Less than one day no charge Agency : Ministry of Labor and Social Protection (online procedure) As of February 9, 2014, all employment agreements must be registered with the Ministry of Labor and Social Protection. Registration is done at the website of the Ministry of Labor and Social Protection (accessible through www.e-gov.az). After that, immediate con rmation is obtained and employees can start actual employment. A ne of AZN 25 000 AZN applies if employment agreements were not registered. Applies to women only. Takes place simultaneously with previous procedure. Page 9   Dealing with Construction Permits Applies to women only. Takes place simultaneously with previous procedure. Doing Business 2018 Azerbaijan Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required noti cations, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certi cation requirements. The most recent round of data collection was completed in June 2017. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse (number) To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility Submitting all relevant documents and obtaining connections are used. all necessary clearances, licenses, permits and certificates The construction company (BuildCo): Submitting all required notifications and - Is a limited liability company (or its legal equivalent) and operates in the receiving all necessary inspections economy’s largest business city. For 11 economies the data are also collected for the second largest business city. Obtaining utility connections for water and - Is 100% domestically and privately owned; has ve owners, none of whom sewerage is a legal entity. Has a licensed architect and a licensed engineer, both Registering and selling the warehouse after its registered with the local association of architects or engineers. BuildCo is completion not assumed to have any other employees who are technical or licensed Time required to complete each procedure experts, such as geological or topographical experts. (calendar days) - Owns the land on which the warehouse will be built and will sell the warehouse upon its completion. Does not include time spent gathering information The warehouse: Each procedure starts on a separate day— - Will be used for general storage activities, such as storage of books or though procedures that can be fully completed stationery. online are an exception to this rule - Will have two stories, both above ground, with a total constructed area of Procedure is considered completed once final approximately 1,300.6 square meters (14,000 square feet). Each oor will document is received be 3 meters (9 feet, 10 inches) high and will be located on a land plot of No prior contact with officials approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita. Cost required to complete each procedure (% of - Will have complete architectural and technical plans prepared by a warehouse value) licensed architect. If preparation of the plans requires such steps as Official costs only, no bribes obtaining further documentation or getting prior approvals from external agencies, these are counted as procedures. Building quality control index (0-15) - Will take 30 weeks to construct (excluding all delays due to administrative Sum of the scores of six component indices: and regulatory requirements). Quality of building regulations (0-2) The water and sewerage connections: Quality control before construction (0-1) - Will be 150 meters (492 feet) from the existing water source and sewer Quality control during construction (0-3) tap. If there is no water delivery infrastructure in the economy, a borehole Quality control after construction (0-3) will be dug. If there is no sewerage infrastructure, a septic tank in the smallest size available will be installed or built. Liability and insurance regimes (0-2) - Will have an average water use of 662 liters (175 gallons) a day and an Professional certifications (0-4) average wastewater ow of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and a peak wastewater ow of 1,136 liters (300 gallons) a day. - Will have a constant level of water demand and wastewater ow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Standardized Warehouse Page 10   and 4 inches in diameter for the sewerage connection. Doing Business 2018 Azerbaijan Standardized Warehouse Estimated value of warehouse AZN 289,201.30 City Covered Baku Europe & OECD high Indicator Azerbaijan Central Asia income Overall Best Performer Procedures (number) 21 16.0 12.5 7.00 (Denmark) Time (days) 242 168.3 154.6 27.5 (Korea, Rep.) Cost (% of warehouse value) 6.8 4.0 1.6 0.10 (5 Economies) Building quality control index (0-15) 12.0 11.4 11.4 15.00 (3 Economies) Figure – Dealing with Construction Permits in Azerbaijan and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 75.16: Poland (Rank: 41) 73.35: Bulgaria (Rank: 51) 68.09: Regional Average (Europe & Central Asia) 65.25: Russian Federation (Rank: 115) 58.13: Romania (Rank: 150) 54.90: Azerbaijan (Rank: 161) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their distance to frontier scores for dealing with construction permits. These scores are the simple average of the distance to frontier scores for each of the component indicators. Figure – Dealing with Construction Permits in Azerbaijan – Procedure, Time and Cost Time Cost 4 3.5 200 Cost (% of warehouse value) 3 150 2.5 Time (days) 2 100 1.5 1 50 0.5 0 0 1 2 3 4 *5 *6 *7 8 9 10 11 12 13 14 15 * 16 17 18 19 20 21 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Page 11   component indicators. Doing Business 2018 Azerbaijan Figure – Dealing with Construction Permits in Azerbaijan – Procedure, Time and Cost Time Cost 4 3.5 200 Cost (% of warehouse value) 3 150 2.5 Time (days) 2 100 1.5 1 50 0.5 0 0 1 2 3 4 *5 *6 *7 8 9 10 11 12 13 14 15 * 16 17 18 19 20 21 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a di erent procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://www.doingbusiness.org/methodology). For details on the procedures re ected here, see the summary below. Figure – Dealing with Construction Permits in Azerbaijan and comparator economies – Measure of Quality 14 13.0 13.0 12.0 12 11.4 10.0 10.0 10 Index score 8 6 4 2 0 Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Details – Dealing with Construction Permits in Azerbaijan – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Apply and obtain the allotment of land for construction from the Baku 30 days AZN 1,100 City Executive Authority Agency : Baku City Executive Authority An application is required for the allotment of land for the construction only if that land is already owned by a builder. A preliminary permit for the project is granted and eligibility of the land plot for construction is determined. The application for the allotment of land must include the following information, as applicable to BuildCo: • Architectural peculiarities of the planned construction. Page 12   • Scope and terms of the planned construction. Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Doing Business 2018 Azerbaijan Details – Dealing with Construction Permits in Azerbaijan – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Apply and obtain the allotment of land for construction from the Baku 30 days AZN 1,100 City Executive Authority Agency : Baku City Executive Authority An application is required for the allotment of land for the construction only if that land is already owned by a builder. A preliminary permit for the project is granted and eligibility of the land plot for construction is determined. The application for the allotment of land must include the following information, as applicable to BuildCo: • Architectural peculiarities of the planned construction. • Scope and terms of the planned construction. • Dimensions of the land. • Land ownership documents. Note that these informational requirements are based on the assumption that the land is already legally owned by and registered in BuildCo’s name. The application must also include an attestation to BuildCo’s legal status and to its land plot ownership -- the “certi cate of state registration.” 2 Obtain geotechnical study / soil test 14 days AZN 1,750 Agency : Private licensed company The soil investigation helps to determine the bearing capacity of the land, which in turn helps to determine the load capability, the type and depth of foundation, in order to make sure to select a suitable construction technique. After obtaining the soil test, BuildCo submits it for an approval to the Ministry for Emergency Situations, which takes 4 days to provide its opinion. 3 Obtain engineering-geological opinion from the Ministry of Emergencies 4 days no charge Agency : Ministry for Emergency Situations The engineering/geological opinion is a prerequisite for preparing the project design and for submitting the project for approval. 4 Obtain technical conditions from the Baku City Sanitation and 15 days no charge Epidemiology Center Agency : Baku City Sanitation and Epidemiology Center Technical conditions from the Baku City Sanitation and Epidemiology Center are required for the preparation of the project. According to the new Building Code, the Baku city executive authority will have to obtain all technical conditions and approvals on behalf of BuildCo. However, in practice building companies obtain the technical conditions directly from the issuing authorities. 5 Obtain technical conditions from the State Fire Control Service of the 15 days no charge Ministry for Emergency Situations (MES) Agency : Fire Department (Ministry for Emergency Situations) Under the law “On Fire Safety” and according to other norms of Azerbaijan, Page 13   the authorities (taking into account prohibitions and limitations) shall grant However, in practice building companies obtain the technical conditions Doing directly Business from the issuing 2018 authorities. Azerbaijan 5 Obtain technical conditions from the State Fire Control Service of the 15 days no charge Ministry for Emergency Situations (MES) Agency : Fire Department (Ministry for Emergency Situations) Under the law “On Fire Safety” and according to other norms of Azerbaijan, the authorities (taking into account prohibitions and limitations) shall grant a permit and, if necessary, present speci c guidelines for the construction design and implementation phases. A re inspection must be carried out. According to the new Building Code, the Baku city executive authority will have to obtain all technical conditions and approvals on behalf of BuildCo. However, in practice building companies obtain the technical conditions and project approvals directly from the issuing authorities. 6 Obtain technical conditions from the Ministry of Ecology and Natural 15 days no charge Resources Agency : Ministry of Ecology and Natural Resources According to the law “On Environmental Protection”, a permit shall be granted and the conditions adjusted to meet environmental protection regulations, land reclamation, rehabilitation and e cient use of natural resources, improvement of territories, and enhancement of the environment. According to the new Building Code, the Baku city executive authority will have to obtain all technical conditions and approvals on behalf of BuildCo. However, in practice building companies obtain the technical conditions and project approvals directly from the issuing authorities. 7 Obtain technical conditions from the water and sewage authority 10 days no charge (Azersu OJSC) Agency : Azersu OJSC Under the law “On Water Supply and Waste Waters”, the water and sewage authority will grant a permit and issue guidelines for the construction design and implementation phases. In doing so, the authorities must consider prohibitions and limitations for the water system and wastes. Connection to the main lines is permitted after construction is done. According to the new Building Code, the Baku city executive authority will have to obtain all technical conditions and approvals on behalf of BuildCo. However, in practice building companies obtain the technical conditions and project approvals directly from the issuing authorities. 8 Register construction passport at Baku City Executive Authority 1 day no charge Agency : Baku City Executive Authority (Department of Architecture and City Building) Based on the technical conditions and the opinions received from the various agencies, BuildCo creates a construction passport that will allow for the project design phased to begin. Once the passport is registered at the Baku City Executive Authority (Department of Architecture and City Building), BuildCo obtains a number assigned to the project. The project must be registered this way for all of the agencies involved to have access to the information. 9 Submit the project documentation to the single-window for a 20 days AZN 5,784 comprehensive project expertise Agency : Single window for construction permitting at the Ministry of Page 14   Emergency Situations registered this way for all of the agencies involved to have access to the Doing information. Business 2018 Azerbaijan 9 Submit the project documentation to the single-window for a 20 days AZN 5,784 comprehensive project expertise Agency : Single window for construction permitting at the Ministry of Emergency Situations The project documentation is submitted to the Single Window for approval from various agencies. The Single Window was established in order to streamline evaluation of construction projects in accordance with the requirements of “Rules on Examination of construction projects” based on the President’s Decree dated November 17, 2014. 6 services relevant to the evaluation of the construction projects are represented under the Ministry of Emergency Situation Single Window for Construction Permitting: State Examination Head O ce, State Fire Control Service, Mining Control State Agency, Engineering Geological Center, Ministry of Ecology and Natural resources, Ecological safety service and Ministry of Public Health Hygiene and Epidemiology Center. 10 Obtain building permit from the Department of Architecture and City 90 days AZN 10,000 Building of the Baku City Executive Authority Agency : Baku City Executive Authority (Department of Architecture and City Building) The building permit passport application includes the following: • An evaluation of the construction work. BuildCo inquires with di erent local executive authorities and supply and supervisory organizations to assess their opinions and conclusions. • Architectural and planning instructions, including information on land surface, existing buildings, plants, communication and utilities lines, scope of the project, and other construction speci cations. • The drawing of the land plot, indicating adjacent streets and crossroads. The drawing must be extracted from the city’s General Plan and from the district’s Development Plan. • The locations and directions of the engineering communication lines (utilities and the like), indicating their marking and placement on existing buildings, streets, crossroads, and so forth • A topographic plan of the land plot BuildCo gets the building permit together with a mark for construction (i.e. signing board with all the relevant information about construction: the name of the construction company, the duration of construction, the area of construction, etc) which will be placed at the site to inform the neighbors and public about the construction. 11 Receive inspection of foundation works 1 day no charge Agency : Chief Agency for Construction Supervision and Safety According to the Article 96.2.1 of the Building Code of the Republic of Azerbaijan, the competent state bodies have to conduct supervision of construction. State supervision of construction is carried out in the order stipulated in the "Rules of state supervision of construction", approved by Presidential Decree of November 17, 2014, № 349". The inspections are conducted in all major phases of the construction and inspection results are recorded in the Registry of State Supervision in Construction. 12 Receive inspection of structural works 1 day no charge Agency : Chief Agency for Construction Supervision and Safety According to the Article 96.2.1 of the Building Code of the Republic of Azerbaijan, the competent state bodies have to conduct supervision of Page 15   construction. State supervision of construction is carried out in the order conducted in all major phases of the construction and inspection results are Doing recorded Businessin the 2018Registry of State Supervision in Construction. Azerbaijan 12 Receive inspection of structural works 1 day no charge Agency : Chief Agency for Construction Supervision and Safety According to the Article 96.2.1 of the Building Code of the Republic of Azerbaijan, the competent state bodies have to conduct supervision of construction. State supervision of construction is carried out in the order stipulated in the "Rules of state supervision of construction", approved by Presidential Decree of November 17, 2014, № 349". The inspections are conducted in all major phases of the construction and inspection results are recorded in the Registry of State Supervision in Construction. 13 Receive inspection of plumbing works 1 day no charge Agency : Chief Agency for Construction Supervision and Safety According to the Article 96.2.1 of the Building Code of the Republic of Azerbaijan, the competent state bodies have to conduct supervision of construction. State supervision of construction is carried out in the order stipulated in the "Rules of state supervision of construction", approved by Presidential Decree of November 17, 2014, № 349". The inspections are conducted in all major phases of the construction and inspection results are recorded in the Registry of State Supervision in Construction. 14 Receive inspection of roo ng works 1 day no charge Agency : Chief Agency for Construction Supervision and Safety According to the Article 96.2.1 of the Building Code of the Republic of Azerbaijan, the competent state bodies have to conduct supervision of construction. State supervision of construction is carried out in the order stipulated in the "Rules of state supervision of construction", approved by Presidential Decree of November 17, 2014, № 349. The inspections are conducted in all major phases of the construction and inspection results are recorded in the Registry of State Supervision in Construction. 15 Receive examination from Labor Inspection and other state authorities 1 day no charge during construction works Agency : Ministry of Economic Development All examinations, except for tax, may be carried out only with the participation of a representative from the Azerbaijan Republic Ministry of Economic Development. Pursuant to the Labor Code and its implementing rules and regulations, the state labor authorities may examine the workplace and labor protection and technical security policies. A report is issued with the examination results. Receive inspection from Ministry of Ecology and Natural Resources 1 day no charge 16 Agency : Ministry of Ecology and Natural Resources If environmental standards were not in full compliance during construction, the Ministry of Ecology and Natural Resources could inspect the site. An act or statement is issued with the examination results. This procedure involves facilitation fees. 17 Receive inspection from State Fire Control Service of the Ministry of 1 day no charge Emergency Situations Agency : Ministry for Emergency Situations (Chief Agency of Supervision on Safety at Construction) Fire inspections could be conducted to check if re prevention measures are in order. A report is issued with the examination results. 18 Obtain water and sewage connection 7 days AZN 200 Page 16   or statement is issued with the examination results. This procedure involves Doing facilitation Business fees. 2018 Azerbaijan 17 Receive inspection from State Fire Control Service of the Ministry of 1 day no charge Emergency Situations Agency : Ministry for Emergency Situations (Chief Agency of Supervision on Safety at Construction) Fire inspections could be conducted to check if re prevention measures are in order. A report is issued with the examination results. 18 Obtain water and sewage connection 7 days AZN 200 Agency : AzerSu (State Water Agency) Connecting to the water supply and sewage systems is done in accordance with the "Rules of issuing of technical speci cations and connection of consumers to the water supply and sewage", approved by the Cabinet of Ministers of Azerbaijan Republic dated August 13, 2014, № 275. The fee to obtain a water and sewage connection is AZN 2.00 multiplied by the water volume to be delivered in 24 hours (based on the connected pipe’s diameter). In this case, it is assumed that 100 cubic meters can be delivered in 24 hours. 19 Receive nal inspection 1 day no charge Agency : Chief Agency for Construction Supervision and Safety and Baku City Executive Authority (Department of Architecture and City Building) Once the building is complete and the water and sewage connection is obtained, a nal inspection is performed by representatives from the Chief Agency for Construction Supervision and Safety and the Baku City Executive Authority (Department of Architecture and City Building), with the investor and BuildCo present. Only after the nal inspection may BuildCo apply for an occupancy permit. 20 Request and obtain occupancy permit 30 days no charge Agency : State control authorities: Architecture and City Building Department and ecology, energy, sanitation, re inspection, and supply organizations After BuildCo completes construction, a commission will examine the building quality and determine the feasibility of putting the building into operation. The commission consists of representatives from the state control authorities, especially the Architecture and City Building Department, and representatives of organizations for ecology, energy, sanitation, supply, and re inspection. 21 Register building with Real Estate Registry 21 days AZN 930 Agency : Real Estate Registry This procedure is governed by the Civil Code of the Azerbaijan Republic and the Law of the Azerbaijan Republic on State Registry of Real Estate. Attached to the application must be the documents de ning the company status, construction documents, and a copy of the act or the statement on the operation license. Relevant fees must also be paid. The State Registry of Real Estate registers the building (warehouse) within 20 days and provides the company with a private property right certi cate. BuildCo will obtain the complete property right (ownership, order, and use) over the building (warehouse) from the date the certi cate is registered. Takes place simultaneously with previous procedure. Details – Dealing with Construction Permits in Azerbaijan – Measure of Quality Page 17   Takes place simultaneously with previous procedure. Doing Business 2018 Azerbaijan Details – Dealing with Construction Permits in Azerbaijan – Measure of Quality Answer Score Building quality control index (0-15) 12.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; 1.0 Free of charge; In o cial gazette. Which requirements for obtaining a building permit are clearly speci ed in the building List of required 1.0 regulations or on any accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in Licensed 1.0 compliance with existing building regulations? (0-1) architect; Licensed engineer. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during Inspections by 1.0 construction? (0-2) in-house engineer; Inspections at various phases. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice. Quality control after construction index (0-3) 3.0 Is there a nal inspection required by law to verify that the building was built in Yes, nal 2.0 accordance with the approved plans and regulations? (0-2) inspection is done by government agency; Yes, in- house engineer submits report for nal inspection. Do legally mandated nal inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 0.0 Which parties (if any) are held liable by law for structural aws or problems in the No party is held 0.0 building once it is in use (Latent Defect Liability or Decennial Liability)? (0-1) liable under the law. Page 18   Takes place simultaneously with previous procedure. Doing Business 2018 Azerbaijan Details – Dealing with Construction Permits in Azerbaijan – Measure of Quality Answer Score Building quality control index (0-15) 12.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; 1.0 Free of charge; In o cial gazette. Which requirements for obtaining a building permit are clearly speci ed in the building List of required 1.0 regulations or on any accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in Licensed 1.0 compliance with existing building regulations? (0-1) architect; Licensed engineer. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during Inspections by 1.0 construction? (0-2) in-house engineer; Inspections at various phases. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice. Quality control after construction index (0-3) 3.0 Is there a nal inspection required by law to verify that the building was built in Yes, nal 2.0 accordance with the approved plans and regulations? (0-2) inspection is done by government agency; Yes, in- house engineer submits report for nal inspection. Do legally mandated nal inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 0.0 Which parties (if any) are held liable by law for structural aws or problems in the No party is held 0.0 building once it is in use (Latent Defect Liability or Decennial Liability)? (0-1) liable under the law. Page 19   Liability Doing 2018 regimes and insurance Business index (0-2) Azerbaijan 0.0 Which parties (if any) are held liable by law for structural aws or problems in the No party is held 0.0 building once it is in use (Latent Defect Liability or Decennial Liability)? (0-1) liable under the law. Which parties (if any) are required by law to obtain an insurance policy to cover No party is 0.0 possible structural aws or problems in the building once it is in use (Latent Defect required by law Liability Insurance or Decennial Insurance)? (0-1) to obtain insurance . Professional certi cations index (0-4) 4.0 What are the quali cation requirements for the professional responsible for verifying Minimum 2.0 that the architectural plans or drawings are in compliance with existing building number of years regulations? (0-2) of experience; University degree in architecture or engineering; Passing a certi cation exam. What are the quali cation requirements for the professional who supervises the Minimum 2.0 construction on the ground? (0-2) number of years of experience; University degree in engineering, construction or construction management; Passing a certi cation exam. Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tari s index measures reliability of supply, transparency of tari s and the price of electricity. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection To make the data comparable across economies, several assumptions are (number) used. Submitting all relevant documents and obtaining The warehouse: all necessary clearances and permits - Is owned by a local entrepreneur and is used for storage of goods. Completing all required notifications and - Is located in the economy’s largest business city. For 11 economies the receiving all necessary inspections data are also collected for the second largest business city. Obtaining external installation works and possibly - Is located in an area where similar warehouses are typically located and is purchasing material for these works in an area with no physical constraints. For example, the property is not Concluding any necessary supply contract and near a railway. obtaining final supply - Is a new construction and is being connected to electricity for the rst time. Page 20   Time required to complete each procedure - Has two stories with a total surface area of approximately 1,300.6 square certi cation exam. Doing Business 2018 Azerbaijan Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tari s index measures reliability of supply, transparency of tari s and the price of electricity. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection To make the data comparable across economies, several assumptions are (number) used. Submitting all relevant documents and obtaining The warehouse: all necessary clearances and permits - Is owned by a local entrepreneur and is used for storage of goods. Completing all required notifications and - Is located in the economy’s largest business city. For 11 economies the receiving all necessary inspections data are also collected for the second largest business city. Obtaining external installation works and possibly - Is located in an area where similar warehouses are typically located and is purchasing material for these works in an area with no physical constraints. For example, the property is not Concluding any necessary supply contract and near a railway. obtaining final supply - Is a new construction and is being connected to electricity for the rst time. Time required to complete each procedure - Has two stories with a total surface area of approximately 1,300.6 square (calendar days) meters (14,000 square feet). The plot of land on which it is built is 929 Is at least 1 calendar day square meters (10,000 square feet). Each procedure starts on a separate day Does not include time spent gathering The electricity connection: information - Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140-kilo-volt-ampere (kVA) with a power factor of 1, Reflects the time spent in practice, with little when 1 kVA = 1 kilowatt (kW). follow-up and no prior contact with officials - Has a length of 150 meters. The connection is to either the low- or Cost required to complete each procedure (% of medium-voltage distribution network and is either overhead or income per capita) underground, whichever is more common in the area where the Official costs only, no bribes warehouse is located and requires works that involve the crossing of a 10- meter road (such as by excavation or overhead lines) but are all carried out Value added tax excluded on public land. There is no crossing of other owners’ private property The reliability of supply and transparency of because the warehouse has access to a road. tari s index (0-8) - Does not require work to install the internal wiring of the warehouse. This has already been completed up to and including the customer’s service Duration and frequency of power outages (0–3) panel or switchboard and the meter base. Tools to monitor power outages (0–1) Tools to restore power supply (0–1) The monthly consumption: Regulatory monitoring of utilities’ performance - It is assumed that the warehouse operates 30 days a month from 9:00 (0–1) a.m. to 5:00 p.m. (8 hours a day), with equipment utilized at 80% of capacity Financial deterrents limiting outages (0–1) on average and that there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours Transparency and accessibility of tariffs (0–1) (kWh); hourly consumption is 112 kWh. Price of electricity (cents per kilowatt-hour)* - If multiple electricity suppliers exist, the warehouse is served by the Price based on monthly bill for commercial cheapest supplier. warehouse in case study - Tari s e ective in March of the current year are used for calculation of the price of electricity for the warehouse. Although March has 31 days, for * N o t e : Doing Business m e a s u r e s t h e p r i c e o f calculation purposes only 30 days are used. electricity, but it is not included in the distance to frontier score nor the ranking on the ease of getting electricity. Page 21   Standardized Connection frontier score nor the ranking on the ease of getting electricity. Doing Business 2018 Azerbaijan Standardized Connection Price of electricity (US cents per kWh) 6.1 Name of utility Azerishiq OJSC City Covered Baku Europe & OECD high Indicator Azerbaijan Central Asia income Overall Best Performer Procedures (number) 7 5.4 4.7 2 (United Arab Emirates) Time (days) 69 113.7 79.1 10 (United Arab Emirates) Cost (% of income per capita) 141.4 344.3 63.0 0.00 (Japan) Reliability of supply and transparency of tariff 5 5.3 7.4 8.00 (28 Economies) index (0-8) Figure – Getting Electricity in Azerbaijan and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 92.81: Russian Federation (Rank: 10) 81.35: Poland (Rank: 54) 70.35: Regional Average (Europe & Central Asia) 67.98: Azerbaijan (Rank: 102) 54.80: Bulgaria (Rank: 141) 53.34: Romania (Rank: 147) Note: The ranking of economies on the ease of getting electricity is determined by sorting their distance to frontier scores for getting electricity. These scores are the simple average of the distance to frontier scores for each of the component indicators. Figure – Getting Electricity in Azerbaijan – Procedure, Time and Cost Time Cost 160 60 140 Cost (% of income per capita) 120 50 100 Time (days) 40 80 30 60 20 40 10 Page 22   20 getting electricity. These scores are the simple average of the distance to frontier scores for each of the component indicators. Doing Business 2018 Azerbaijan Figure – Getting Electricity in Azerbaijan – Procedure, Time and Cost Time Cost 160 60 140 Cost (% of income per capita) 120 50 100 Time (days) 40 80 30 60 20 40 10 20 0 0 1 *2 3 4 5 6 7 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a di erent procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://www.doingbusiness.org/methodology). For details on the procedures re ected here, see the summary below. Figure – Getting Electricity in Azerbaijan and comparator economies – Measure of Quality 9 8 8 7 7 7 6 6 Index score 5 5.3 5 4 3 2 1 0 Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Details – Getting Electricity in Azerbaijan – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Submit application and receive technical conditions from Azerishiq OJSC 12 calendar days AZN 0 Agency : Azerishiq OJSC The customer submits application for a new electricity connection to Azerishiq OJSC. The following documents must also be submitted in paper format: • copy of state registration certi cate of legal entity; • copy of document proving the right of ownership or use of a facility and a land plot where the facility is situated; • the permit of local executive power authority on the construction of a facility; Page 23   • break down of the power load required; Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Doing Business 2018 Azerbaijan Details – Getting Electricity in Azerbaijan – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Submit application and receive technical conditions from Azerishiq OJSC 12 calendar days AZN 0 Agency : Azerishiq OJSC The customer submits application for a new electricity connection to Azerishiq OJSC. The following documents must also be submitted in paper format: • copy of state registration certi cate of legal entity; • copy of document proving the right of ownership or use of a facility and a land plot where the facility is situated; • the permit of local executive power authority on the construction of a facility; • break down of the power load required; 2 Receive site inspection by Azerishiq OJSC for preparing technical 1 calendar day AZN 0 conditions Agency : Azerishiq OJSC A network engineer from Baku Electric Shabaka will visit the site to determine the arrangements for an optimal connection and aid the preparation of technical conditions. It is required that someone from the applicant’s party is present at the site during the inspection. 3 Await completion and approval of design of external connection 15 calendar days AZN 377.33 Agency : Project planning organization The customer hires a project planning organization to design the external electrical connection plans based on the technical conditions issued by Azerishiq OJSC. a. The fee for the design varies depending on the project. The project design rm obtains all the approval from Azerishiq OJSC. 4 Obtain excavation permit 13 calendar days AZN 0 Agency : Ministry of Transport Depending on the connection contract or agreement either the utility or the electrical contractor obtains an excavation permit. In addition and depending on where the road is, it might be required to get other permits from the municipality (if in the center of the city), communal services, gas, water, etc. 5 Await completion of external works 20 calendar days AZN 7,802 Agency : Azerishiq OJSC/Electrical contractor The customer has a choice of hiring a licensed electrical installation organization or signing a contract with the utility to carry out the external connection works. 6 Receive external and internal inspections and obtain operation permit 2 calendar days AZN 0 Agency : Energonadzor (State Energy Inspectorate) After the completion of the external connection works there is a nal inspection by Energonadzor (State Energy Inspectorate) which issues an operation permit. Energonadzor checks the compliance of the installation with the technical conditions. 7 Conclude supply contract with Azerishiq OJSC and await nal 7 calendar days AZN 0 Page 24   organization or signing a contract with the utility to carry out the external Business works. Doing connection 2018 Azerbaijan 6 Receive external and internal inspections and obtain operation permit 2 calendar days AZN 0 Agency : Energonadzor (State Energy Inspectorate) After the completion of the external connection works there is a nal inspection by Energonadzor (State Energy Inspectorate) which issues an operation permit. Energonadzor checks the compliance of the installation with the technical conditions. 7 Conclude supply contract with Azerishiq OJSC and await nal 7 calendar days AZN 0 connection Agency : Azerishiq OJSC The customer must submit the operation permit to the utility and concludes a supply contract. Once this is completed, the customer is connected to the electrical network and the electricity starts owing. Takes place simultaneously with previous procedure. Details – Getting Electricity in Azerbaijan – Measure of Quality Answer Reliability of supply and transparency of tari index (0-8) 5 Total duration and frequency of outages per customer a year (0-3) 2 System average interruption duration index (SAIDI) 1.0 System average interruption frequency index (SAIFI) 1.7 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 3.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 0 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on No reliability of supply? Financial deterrents aimed at limiting outages (0-1) 0 Does the utility either pay compensation to customers or face nes by the regulator (or both) if outages No exceed a certain cap? Communication of tari s and tari changes (0-1) 1 Are e ective tari s available online? Yes Link to the website, if available online http://www.tari cou ncil.gov.az/documen ts/N17-EE.pdf Are customers noti ed of a change in tari ahead of the billing cycle? Yes Page 25   Note: Takes place simultaneously with previous procedure. Doing Business 2018 Azerbaijan Details – Getting Electricity in Azerbaijan – Measure of Quality Answer Reliability of supply and transparency of tari index (0-8) 5 Total duration and frequency of outages per customer a year (0-3) 2 System average interruption duration index (SAIDI) 1.0 System average interruption frequency index (SAIFI) 1.7 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 3.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 0 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on No reliability of supply? Financial deterrents aimed at limiting outages (0-1) 0 Does the utility either pay compensation to customers or face nes by the regulator (or both) if outages No exceed a certain cap? Communication of tari s and tari changes (0-1) 1 Are e ective tari s available online? Yes Link to the website, if available online http://www.tari cou ncil.gov.az/documen ts/N17-EE.pdf Are customers noti ed of a change in tari ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tari index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has ve dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. Page 26   What the indicators measure Case study assumptions If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Doing Business 2018 Azerbaijan Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has ve dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on immovable To make the data comparable across economies, several assumptions property (number) about the parties to the transaction, the property and the procedures are used. Preregistration procedures (for example, checking for liens, notarizing sales agreement, The parties (buyer and seller): paying property transfer taxes) - Are limited liability companies (or the legal equivalent). Registration procedures in the economy's largest - Are located in the periurban area of the economy’s largest business city. business citya. For 11 economies the data are also collected for the second largest Postregistration procedures (for example, filling business city. title with municipality) - Are 100% domestically and privately owned. Time required to complete each procedure - Have 50 employees each, all of whom are nationals. (calendar days) - Perform general commercial activities. Does not include time spent gathering information The property (fully owned by the seller): - Has a value of 50 times income per capita, which equals the sale price. Each procedure starts on a separate day - though - Is fully owned by the seller. procedures that can be fully completed online - Has no mortgages attached and has been under the same ownership for are an exception to this rule the past 10 years. Procedure is considered completed once final - Is registered in the land registry or cadastre, or both, and is free of title document is received disputes. No prior contact with officials - Is located in a periurban commercial zone, and no rezoning is required. Cost required to complete each procedure (% of - Consists of land and a building. The land area is 557.4 square meters property value) (6,000 square feet). A two-story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in Official costs only (such as administrative fees, good condition, has no heating system and complies with all safety duties and taxes). standards, building codes and legal requirements. The property, Value Added Tax, Capital Gains Tax and illicit consisting of land and building, will be transferred in its entirety. payments are excluded - Will not be subject to renovations or additional construction following the Quality of land administration index (0-30) purchase. - Has no trees, natural water sources, natural reserves or historical Reliability of infrastructure index (0-8) monuments of any kind. Transparency of information index (0–6) - Will not be used for special purposes, and no special permits, such as for Geographic coverage index (0–8) residential use, industrial plants, waste storage or certain types of agricultural activities, are required. Land dispute resolution index (0–8) - Has no occupants, and no other party holds a legal interest in it. Equal access to property rights index (-2–0) Standard Property Transfer Property value AZN 289,201.30 City Covered Baku Page 27   Europe & OECD high Doing Business 2018 Azerbaijan Standard Property Transfer Property value AZN 289,201.30 City Covered Baku Europe & OECD high Indicator Azerbaijan Central Asia income Overall Best Performer Procedures (number) 3 5.3 4.6 1.00 (4 Economies) Time (days) 5.5 20.4 22.3 1.00 (3 Economies) Cost (% of property value) 0.2 2.5 4.2 0.00 (5 Economies) Quality of the land administration index (0-30) 14.5 19.8 22.7 29.00 (Singapore) Figure – Registering Property in Azerbaijan and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 88.72: Russian Federation (Rank: 12) 82.07: Azerbaijan (Rank: 21) 76.49: Poland (Rank: 38) 76.02: Regional Average (Europe & Central Asia) 74.70: Romania (Rank: 45) 69.30: Bulgaria (Rank: 67) Note: The ranking of economies on the ease of registering property is determined by sorting their distance to frontier scores for registering property. These scores are the simple average of the distance to frontier scores for each of the component indicators. Figure – Registering Property in Azerbaijan – Procedure, Time and Cost Time Cost 0.12 5 0.1 Cost (% of property value) 4 0.08 Time (days) 3 0.06 2 0.04 1 0.02 0 0 1 2 3 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Page 28   Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a di erent procedure list for registering property. These scores are the simple average of the distance to frontier scores for each of the component indicators. Doing Business 2018 Azerbaijan Figure – Registering Property in Azerbaijan – Procedure, Time and Cost Time Cost 0.12 5 0.1 Cost (% of property value) 4 0.08 Time (days) 3 0.06 2 0.04 1 0.02 0 0 1 2 3 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a di erent procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://www.doingbusiness.org/methodology). For details on the procedures re ected here, see the summary below. Figure – Registering Property in Azerbaijan and comparator economies – Measure of Quality 30 26.0 25 19.0 19.5 19.8 20 Index score 17.0 14.5 15 10 5 0 Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Details – Registering Property in Azerbaijan – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Veri cation of title and obtaining non-encumbrance certi cate Less than a day AZN 31 Agency : Notary (online procedure) According to the Law of the Republic of Azerbaijan "On introduction of changes into the Civil Code of the Republic of Azerbaijan" and the Law of the Republic of Azerbaijan "On introduction of changes into the Law on the State Registry of Real estate" (both dated December 27, 2013) starting from March 3, 2014, notaries in Azerbaijan are now responsible for checking against encumbrances. Notaries now have an access to the database of SSRRE under SCPI and can get information about encumbrances on real estate and issue non-encumbrance certi cates online. Page 29   The new online service provided by the State Property Committee is Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Doing Business 2018 Azerbaijan Details – Registering Property in Azerbaijan – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Veri cation of title and obtaining non-encumbrance certi cate Less than a day AZN 31 Agency : Notary (online procedure) According to the Law of the Republic of Azerbaijan "On introduction of changes into the Civil Code of the Republic of Azerbaijan" and the Law of the Republic of Azerbaijan "On introduction of changes into the Law on the State Registry of Real estate" (both dated December 27, 2013) starting from March 3, 2014, notaries in Azerbaijan are now responsible for checking against encumbrances. Notaries now have an access to the database of SSRRE under SCPI and can get information about encumbrances on real estate and issue non-encumbrance certi cates online. The new online service provided by the State Property Committee is available at www. e-emdk.gov.az. The cost of online procedure is AZN 31. Territorial o ces of SSRRE under SCPI provide this services to applicants via electronic system connected with electronic system of notaries. " 2 Notarization of sale-purchase agreement 1 day AZN 200 (notary fee) Agency : State Notary + AZN 30 (official serves fee) Under the law, the sale-purchase agreement and the transfer and acceptance act duly signed by both parties must be notarized. In order to get the agreement notarized the seller must provide evidence of his title to the property, i.e. registration certi cates . In addition to the above, both the seller and the buyer must provide the notary public with other documents certifying their powers to enter into the sale-purchase agreement (e.g. corporate documents, powers of attorney). There is no legal requirement for the agreement to be prepared by a lawyer. Accordingly, the parties are free to prepare the agreement themselves. The stamp duty is paid to the notary, which in turn he shall transfer to the Treasury within two banking days since the date of receipt of the duty. However, in practice the stamp duty can be paid at a commercial bank. If the parties pay at the bank, receipt of payment should be submitted. The documentation shall include: • Sale-purchase agreement and transfer and acceptance act • Registration certi cates • Seller’s cadastral package of documents • Corporate documents of the parties (e.g. charters, foundation agreements, powers of attorney) • Technical passport of the property (according to Article 144.2 of the Civil Code, amended by the law of the Republic of Azerbaijan No. 201-IVQD dated September 30, 2011 "On Making Amendments to the Civil Code of the Republic of Azerbaijan", the notary certi es the agreement, which transfers immovable property in accordance with the technical speci cations of such immovable property as recorded in the Real Estate State Registrar Service) • Deposit slip (the buyer presents the deposit slip from the bank, con rming that the funds were properly deposited before notary notarizes the transfer agreement. After the completion of transaction, the notary write a cheque payable to the seller to be presented to the bank to collect the purchase price for the property) 3 The buyer applies to the state register service to register property Regular Procedure: AZN 277.88, whereas: 10 business days Page 30   Agency : Real Estate State Register Service under State Committee on payable to the seller to be presented to the bank to collect the purchase Doing price property) for the2018 Business Azerbaijan 3 The buyer applies to the state register service to register property Regular Procedure: AZN 277.88, whereas: Agency : Real Estate State Register Service under State Committee on 10 business days Property Issues (14 calendar days) - AZN 159.48 payable Faster Procedure: 7 for the registration Registration of the land as well as the property takes place simultaneously at business days (9 of a title transfer for the State Committee on Property Issues of the Republic of Azerbaijan. calendar days the warehouse of Fastest Procedure: 929 square meters of In accordance with Resolution of Cabinet of Ministers of the Republic of Azerbaijan No. 266 dated 31 July 2014, the electronic service on "receipt of 3 business days (4 the total area; applications and documents for issuance of technical documents (passport calendar days) - AZN 18.4 payable and plan) regarding real estate registered in state registry of real estate at for the registration the discretion of owner" added to the list of electronic services provided by of a title transfer for State Registry Service of Real Estate. the land of 557.4 square meters of the Collegium of State Committee on Property Issues approved on 18 November total land area; 2014 the administrative regulation on receipt of applications and documents - AZN state duty for for issue of technical documents (passport and plan) regarding real estate technical passport; registered in state registry of real estate at the discretion of owner. On basis - AZN 30 state duty of these documents, it has become possible to apply for technical for an extract; documents (passport and plan) via online procedure. - AZN 20 official service fee Takes place simultaneously with previous procedure. Details – Registering Property in Azerbaijan – Measure of Quality Answer Score Quality of the land administration index (0-30) 14.5 Reliability of infrastructure index (0-8) 6.0 What is the institution in charge of immovable property registration? Baku City Territorial O ce of SSRRE under SCPI In what format are the majority of title or deed records kept in the largest business city Computer/Scann 1.0 Page 31   Takes place simultaneously with previous procedure. Doing Business 2018 Azerbaijan Details – Registering Property in Azerbaijan – Measure of Quality Answer Score Quality of the land administration index (0-30) 14.5 Reliability of infrastructure index (0-8) 6.0 What is the institution in charge of immovable property registration? Baku City Territorial O ce of SSRRE under SCPI In what format are the majority of title or deed records kept in the largest business city Computer/Scann 1.0 —in a paper format or in a computerized format (scanned or fully digital)? ed Is there an electronic database for checking for encumbrances (liens, mortgages, Yes 1.0 restrictions and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Real Estate Cadastre and Address Register Service In what format are the majority of maps of land plots kept in the largest business city— Computer/Scann 1.0 in a paper format or in a computerized format (scanned or fully digital)? ed Is there an electronic database for recording boundaries, checking plans and providing Yes 1.0 cadastral information (geographic information system)? Is the information recorded by the immovable property registration agency and the Di erent 1.0 cadastral or mapping agency kept in a single database, in di erent but linked databases databases but or in separate databases? linked Do the immovable property registration agency and cadastral or mapping agency use Yes 1.0 the same identi cation number for properties? Transparency of information index (0–6) 2.5 Who is able to obtain information on land ownership at the agency in charge of Only 0.0 immovable property registration in the largest business city? intermediaries and interested parties Is the list of documents that are required to complete any type of property transaction Yes, online 0.5 made publicly available–and if so, how? Link for online access: http://e- emdk.gov.az/ho me/instructions Is the applicable fee schedule for any property transaction at the agency in charge of Yes, online 0.5 immovable property registration in the largest business city made publicly available– and if so, how? Link for online access: http://www.e- emdk.gov.az/Ho me/Tari 2  Does the agency in charge of immovable property registration commit to delivering a Yes, online 0.5 Page 32   immovable property registration in the largest business city made publicly available– and if Doing so, how? 2018 Business Azerbaijan Link for online access: http://www.e- emdk.gov.az/Ho me/Tari 2  Does the agency in charge of immovable property registration commit to delivering a Yes, online 0.5 legally binding document that proves property ownership within a speci c time frame– and if so, how does it communicate the service standard? Link for online access: http://www.e- emdk.gov.az/Ho me/Reqlament Is there a speci c and separate mechanism for ling complaints about a problem that No 0.0 occurred at the agency in charge of immovable property registration? Contact information: Are there publicly available o cial statistics tracking the number of transactions at the No 0.0 immovable property registration agency? Number of property transfers in the largest business city in 2015: 0.0 Who is able to consult maps of land plots in the largest business city? Only 0.0 intermediaries and interested parties Is the applicable fee schedule for accessing maps of land plots made publicly available Yes, online 0.5 —and if so, how? Link for online access: http://e- emdk.gov.az/Ho me/Customs, and  http://e- emdk.gov.az/Ho me/Tari Does the cadastral or mapping agency commit to delivering an updated map within a Yes, online 0.5 speci c time frame—and if so, how does it communicate the service standard? Link for online access: http://www.e- emdk.gov.az/Ho me/Reqlament Is there a speci c and separate mechanism for ling complaints about a problem that No 0.0 occurred at the cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 0.0 Are all privately held land plots in the economy formally registered at the immovable No 0.0 property registry? Are all privately held land plots in the largest business city formally registered at the No 0.0 immovable property registry? Are all privately held land plots in the economy mapped? No 0.0 Are all privately held land plots in the largest business city mapped? No 0.0 Page 33   Are all privately held land plots in the largest business city formally registered at the No 0.0 immovable Doing property Business 2018 registry? Azerbaijan Are all privately held land plots in the economy mapped? No 0.0 Are all privately held land plots in the largest business city mapped? No 0.0 Land dispute resolution index (0–8) 6.0 Does the law require that all property sale transactions be registered at the immovable Yes 1.5 property registry to make them opposable to third parties? Is the system of immovable property registration subject to a state or private Yes 0.5 guarantee? Is there a speci c compensation mechanism to cover for losses incurred by parties who No 0.0 engaged in good faith in a property transaction based on erroneous information certi ed by the immovable property registry? Does the legal system require a control of legality of the documents necessary for a Yes 0.5 property transaction (e.g., checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Notary. Does the legal system require veri cation of the identity of the parties to a property Yes 0.5 transaction? If yes, who is responsible for verifying the identity of the parties? Notary. Is there a national database to verify the accuracy of identity documents? No 0.0 For a standard land dispute between two local businesses over tenure rights of a Baku property worth 50 times gross national income (GNI) per capita and located in the Administrative- largest business city, what court would be in charge of the case in the rst instance? Economic Court No1 or No2 (depending on territorial jurisdiction) How long does it take on average to obtain a decision from the rst-instance court for Less than a year 3.0 such a case (without appeal)? Are there any statistics on the number of land disputes in the rst instance? No 0.0 Number of land disputes in the largest business city in 2015: Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes 0.0 Do married men and married women have equal ownership rights to property? Yes 0.0 Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the e ectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Page 34   Do married men and married women have equal ownership rights to property? Yes 0.0 Doing Business 2018 Azerbaijan Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the e ectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions Rights of borrowers and lenders through through 2 sets of indicators. The depth of credit information index collateral laws (0-10) measures rules and practices a ecting the coverage, scope and Protection of secured creditors’ rights through accessibility of credit information available through a credit registry or a bankruptcy laws (0-2) credit bureau. The strength of legal rights index measures the degree to Depth of credit information index (0–8) which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined Scope and accessibility of credit information whether a unitary secured transactions system exists. Then two case distributed by credit bureaus and credit scenarios, case A and case B, are used to determine how a nonpossessory registries (0-8) security interest is created, publicized and enforced according to the law. Credit bureau coverage (% of adults) Special emphasis is given to how the collateral registry operates (if Number of individuals and firms listed in largest registration of security interests is possible). The case scenarios involve a credit bureau as a percentage of adult population secured borrower, company ABC, and a secured lender, BizBank. Credit registry coverage (% of adults) In some economies the legal framework for secured transactions will allow Number of individuals and firms listed in credit only case A or case B (not both) to apply. Both cases examine the same set registry as a percentage of adult population of legal provisions relating to the use of movable collateral. Several assumptions about the secured borrower (ABC) and lender (BizBank) are used: - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Europe & OECD high Indicator Azerbaijan Central Asia income Overall Best Performer Strength of legal rights index (0-12) 2 6.6 6.0 12.00 (4 Economies) Depth of credit information index (0-8) 6 6.3 6.6 8.00 (34 Economies) Page 35   Credit registry coverage (% of adults) 37.5 22.2 18.3 100.00 (3 Economies) possible). ABC keeps ownership and possession of the assets. Doing Business 2018 Azerbaijan Europe & OECD high Indicator Azerbaijan Central Asia income Overall Best Performer Strength of legal rights index (0-12) 2 6.6 6.0 12.00 (4 Economies) Depth of credit information index (0-8) 6 6.3 6.6 8.00 (34 Economies) Credit registry coverage (% of adults) 37.5 22.2 18.3 100.00 (3 Economies) Credit bureau coverage (% of adults) 0.0 42.8 63.7 100.00 (23 Economies) Figure – Getting Credit in Azerbaijan and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 80.00: Romania (Rank: 20) 75.00: Poland (Rank: 29) 75.00: Russian Federation (Rank: 29) 70.00: Bulgaria (Rank: 42) 64.58: Regional Average (Europe & Central Asia) 40.00: Azerbaijan (Rank: 122) Note: The ranking of economies on the ease of getting credit is determined by sorting their distance to frontier scores for getting credit. These scores are the distance to frontier score for the sum of the strength of legal rights index and the depth of credit information index. Figure – Legal Rights in Azerbaijan and comparator economies 10 9 9 9 8 8 7 7 6.6 Index score 6 5 4 3 2 2 1 0 Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Details – Legal Rights in Azerbaijan Strength of legal rights index (0-12) 2 Does an integrated or uni ed legal framework for secured transactions that extends to the creation, publicity and No enforcement of functional equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without No requiring a speci c description of collateral? Page 36   Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Doing Business 2018 Azerbaijan Details – Legal Rights in Azerbaijan Strength of legal rights index (0-12) 2 Does an integrated or uni ed legal framework for secured transactions that extends to the creation, publicity and No enforcement of functional equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without No requiring a speci c description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring No a speci c description of collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds No or replacements of the original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and No obligations be secured between parties; and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is uni ed geographically No and by asset type, with an electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be No performed online by any interested third party? Are secured creditors paid rst (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency Yes procedure? Are secured creditors paid rst (i.e. before tax claims and employee claims) when a business is liquidated? Yes Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised No reorganization procedure? Does the law protect secured creditors’ rights by providing clear grounds for relief from the stay and/or sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law No allow the secured creditor to sell the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Azerbaijan and comparator economies 10 8 8 7 7 6.3 Index score 6 6 5 4 2 0 Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Details – Credit Information in Azerbaijan Page 37   0 Azerbaijan Doing Business 2018 Bulgaria Azerbaijan Poland Romania Russian Federation Europe & Central Asia Details – Credit Information in Azerbaijan Credit Credit Depth of credit information index (0-8) bureau registry Score Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative credit data distributed? No Yes 1 Are data from retailers or utility companies - in addition to data from banks and financial institutions - No No 0 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more No Yes 1 than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? No Yes 1 By law, do borrowers have the right to access their data in the credit bureau or credit registry? No Yes 1 Can banks and financial institutions access borrowers’ credit information online (for example, No Yes 1 through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help banks and financial No No 0 institutions assess the creditworthiness of borrowers? Score ("yes" to either public bureau or private registry) 6 Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 0 2,585,264 Number of firms 0 38,164 Total 0 2,623,428 Percentage of adult population 0.0 37.5 Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Extent of disclosure index (0–10): Review and To make the data comparable across economies, a case study uses several approval requirements for related-party assumptions about the business and the transaction. transactions; Disclosure requirements for related-party transactions The business (Buyer): Extent of director liability index (0–10): Ability of - Is a publicly traded corporation listed on the economy’s most important minority shareholders to sue and hold interested stock exchange. If the number of publicly traded companies listed on that directors liable for prejudicial related-party exchange is less than 10, or if there is no stock exchange in the economy, it is assumed that Buyer is a large private company with multiple Page 38   transactions; Available legal remedies (damages, Percentage of adult population 0.0 37.5 Doing Business 2018 Azerbaijan Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Extent of disclosure index (0–10): Review and To make the data comparable across economies, a case study uses several approval requirements for related-party assumptions about the business and the transaction. transactions; Disclosure requirements for related-party transactions The business (Buyer): Extent of director liability index (0–10): Ability of - Is a publicly traded corporation listed on the economy’s most important minority shareholders to sue and hold interested stock exchange. If the number of publicly traded companies listed on that directors liable for prejudicial related-party exchange is less than 10, or if there is no stock exchange in the economy, it transactions; Available legal remedies (damages, is assumed that Buyer is a large private company with multiple disgorgement of profits, fines, imprisonment, shareholders. rescission of the transaction) - Has a board of directors and a chief executive o cer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not speci cally Ease of shareholder suits index (0–10): Access to required by law. internal corporate documents; Evidence - Has a supervisory board (applicable to economies with a two-tier board obtainable during trial and allocation of legal system) on which 60% of the shareholder-elected members have been expenses appointed by Mr. James, who is Buyer’s controlling shareholder and a Extent of conflict of interest regulation index member of Buyer’s board of directors. (0–10): Simple average of the extent of disclosure, - Has not adopted any bylaws or articles of association that di er from extent of director liability and ease of default minimum standards and does not follow any nonmandatory codes, shareholder indices principles, recommendations or guidelines relating to corporate Extent of shareholder rights index (0-10): governance. Shareholders’ rights and role in major corporate - Is a manufacturing company with its own distribution network. decisions Extent of ownership and control index (0-10): The transaction involves the following details: Governance safeguards protecting shareholders - Mr. James owns 60% of Buyer and elected two directors to Buyer’s ve- from undue board control and entrenchment member board. Extent of corporate transparency index (0-10): - Mr. James also owns 90% of Seller, a company that operates a chain of Corporate transparency on ownership stakes, retail hardware stores. Seller recently closed a large number of its stores. compensation, audits and financial prospects - Mr. James proposes that Buyer purchase Seller’s unused eet of trucks to expand Buyer’s distribution of its food products, a proposal to which Buyer Extent of shareholder governance index (0–10): agrees. The price is equal to 10% of Buyer’s assets and is higher than the Simple average of the extent of shareholders market value. rights, extent of ownership and control and - The proposed transaction is part of the company’s ordinary course of extent of corporate transparency indices business and is not outside the authority of the company. Strength of minority investor protection index - Buyer enters into the transaction. All required approvals are obtained, (0–10): Simple average of the extent of conflict of and all required disclosures made (that is, the transaction is not interest regulation and extent of shareholder fraudulent). governance indices - The transaction causes damages to Buyer. Shareholders sue Mr. James and the other parties that approved the transaction. Europe & OECD high Indicator Azerbaijan Central Asia income Overall Best Performer Extent of conflict of interest regulation index (0- 7.7 6.3 6.4 9.3 (New Zealand) 10) Extent of shareholder governance index (0-10) 7.3 6.6 6.4 Page 39   9.00 (Kazakhstan) and the other parties that approved the transaction. Doing Business 2018 Azerbaijan Europe & OECD high Indicator Azerbaijan Central Asia income Overall Best Performer Extent of conflict of interest regulation index (0- 7.7 6.3 6.4 9.3 (New Zealand) 10) Extent of shareholder governance index (0-10) 7.3 6.6 6.4 9.00 (Kazakhstan) Figure – Protecting Minority Investors in Azerbaijan and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 75.00: Azerbaijan (Rank: 10) 70.00: Bulgaria (Rank: 24) 64.31: Regional Average (Europe & Central Asia) 61.67: Poland (Rank: 51) 61.67: Russian Federation (Rank: 51) 60.00: Romania (Rank: 57) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their distance to frontier scores for protecting minority investors. These scores are the simple average of the distance to frontier scores for the extent of con ict of interest regulation index and the extent of shareholder governance index. Figure – Protecting Minority Investors in Azerbaijan and comparator economies – Measure of Quality Azerbaijan 8 5 10 6 8 8 Bulgaria 9 2 10 5 8 8 Poland 8 2 7 5 6 9 Romania 7 4 9 5 6 5 Russian Federation 8 2 6 5 9 7 OECD high income 7.3 5.6 6.5 5.2 6.3 7.4 Europe & Central Asia 7.4 4.6 7 5.5 7.2 6.8 0 5 10 15 20 25 30 35 40 45 50 Sub-Indicator Score Extent of corporate transparency index (0­10) Extent of director liability index (0­10) Extent of disclosure index (0­10) Extent of ownership and control index (0­10) Extent of shareholder rights index (0­10) Ease of shareholder suits index (0­10) Details – Protecting Minority Investors in Azerbaijan – Measure of Quality Answer Score Page 40   Extent of ownership and control index (0­10) Extent of shareholder rights index (0­10) Ease of shareholder suits index (0­10) Doing Business 2018 Azerbaijan Details – Protecting Minority Investors in Azerbaijan – Measure of Quality Answer Score Extent of con ict of interest regulation index (0-10) 7.7 Extent of disclosure index (0-10) 10 Which corporate body is legally su cient to approve the Buyer-Seller transaction? (0-3) Shareholders 3.0 excluding interested parties Must an external body review the terms of the transaction before it takes place? (0-1) Yes 1.0 Must Mr. James disclose his con ict of interest to the board of directors? (0-2) Full disclosure of 2.0 all material facts Must Buyer disclose the transaction in published periodic lings (annual reports)? (0-2) Disclosure on 2.0 the transaction and on the con ict of interest Must Buyer immediately disclose the transaction to the public and/or shareholders? (0- Disclosure on 2.0 2) the transaction and on the con ict of interest Extent of director liability index (0-10) 5 Can shareholders representing 10% of Buyer's share capital sue directly or derivatively Yes 1.0 for the damage the transaction caused to Buyer? (0-1) Can shareholders hold the interested director liable for the damage the transaction Liable if negligent 1.0 caused to Buyer? (0-2) Can shareholders hold the other directors liable for the damage the transaction caused Liable if negligent 1.0 to Buyer (0-2) Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by Yes 1.0 shareholders? (0-1) Must Mr. James repay pro ts made from the transaction upon a successful claim by Yes 1.0 shareholders? (0-1) Is Mr. James disquali ed or ned and imprisoned upon a successful claim by No 0.0 shareholders? (0-1) Can a court void the transaction upon a successful claim by shareholders? (0-2) Only in case of 0.0 fraud or bad faith Ease of shareholder suits index (0-10) 8 Before suing can shareholders representing 10% of Buyer's share capital inspect the Yes 1.0 transaction documents? (0-1) Can the plainti obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 Page 41   shareholder Ease ofBusiness Doing suits index 2018 (0-10) Azerbaijan 8 Before suing can shareholders representing 10% of Buyer's share capital inspect the Yes 1.0 transaction documents? (0-1) Can the plainti obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 document Can the plainti request categories of documents from the defendant without No 0.0 identifying speci c ones? (0-1) Can the plainti directly question the defendant and witnesses at trial? (0-2) Yes 2.0 Is the level of proof required for civil suits lower than that of criminal cases? (0-1) Yes 1.0 Can shareholder plainti s recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-10) 7.3 Extent of shareholder rights index (0-10) 8 Does the sale of 51% of Buyer's assets require shareholder approval? Yes 1.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of Yes 1.0 shareholders? Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Do shareholders automatically receive preemption rights every time Buyer issues new Yes 1.0 shares? Must shareholders approve the election and dismissal of the external auditor? Yes 1.0 Are changes to the rights of a class of shares only possible if the holders of the a ected Yes 1.0 shares approve? Assuming that Buyer is a limited company, does the sale of 51% of its assets require No 0.0 member approval? Assuming that Buyer is a limited company, can members representing 10% call for a Yes 1.0 meeting of members? Assuming that Buyer is a limited company, must all members consent to add a new Yes 1.0 member? Assuming that Buyer is a limited company, must a member rst o er to sell their No 0.0 interest to the existing members before they can sell to non-members? Extent of ownership and control index (0-10) 6 Is it forbidden to appoint the same individual as CEO and chair of the board of Yes 1.0 directors? Must the board of directors include independent and nonexecutive board members? Yes 1.0 Can shareholders remove members of the board of directors without cause before the Yes 1.0 end of their term? Must the board of directors include a separate audit committee exclusively comprising No 0.0 board members? Must a potential acquirer make a tender o er to all shareholders upon acquiring 50% Yes 1.0 Page 42   of Buyer? Must the board of directors include a separate audit committee exclusively comprising No 0.0 board Doing members? Business 2018 Azerbaijan Must a potential acquirer make a tender o er to all shareholders upon acquiring 50% Yes 1.0 of Buyer? Must Buyer pay declared dividends within a maximum period set by law? Yes 1.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? Yes 1.0 Assuming that Buyer is a limited company, must Buyer have a mechanism to resolve No 0.0 disagreements among members? Assuming that Buyer is a limited company, must a potential acquirer make a tender No 0.0 o er to all shareholders upon acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer distribute pro ts within a No 0.0 maximum period set by law? Extent of corporate transparency index (0-10) 8 Must Buyer disclose direct and indirect bene cial ownership stakes representing 5%? Yes 1.0 Must Buyer disclose information about board members’ primary employment and Yes 1.0 directorships in other companies? Must Buyer disclose the compensation of individual managers? No 0.0 Must a detailed notice of general meeting be sent 21 days before the meeting? Yes 1.0 Can shareholders representing 5% of Buyer’s share capital put items on the general Yes 1.0 meeting agenda? Must Buyer's annual nancial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Assuming that Buyer is a limited company, must members meet at least once a year? Yes 1.0 Assuming that Buyer is a limited company, can members representing 5% put items on No 0.0 the meeting agenda? Assuming that Buyer is a limited company, must Buyer's annual nancial statements be Yes 1.0 audited by an external auditor? Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as measures the administrative burden in paying taxes and contributions. The most recent round of data collection for the project was completed on June 30, 2017 covering for the Paying Taxes indicator calendar year 2016 (January 1, 2016 – December 31, 2016). Last year (Doing Business 2017) the scope of data collection was expanded to better understand the overall tax environment in an economy. The questionnaire was expanded to include new questions on post- ling processes: VAT refund and tax audit. The data shows where post ling processes and practices work e ciently and what drives the di erences in the overall tax compliance cost across economies. The new section covers both the legal framework and the administrative burden on businesses to comply with post ling processes. See the methodology for more information. What the indicators measure Case study assumptions Page 43   Tax payments for a manufacturing company in Using a case scenario, Doing Business records taxes and mandatory Assuming that Buyer is a limited company, must Buyer's annual nancial statements be Yes 1.0 audited by an external auditor? Doing Business 2018 Azerbaijan Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as measures the administrative burden in paying taxes and contributions. The most recent round of data collection for the project was completed on June 30, 2017 covering for the Paying Taxes indicator calendar year 2016 (January 1, 2016 – December 31, 2016). Last year (Doing Business 2017) the scope of data collection was expanded to better understand the overall tax environment in an economy. The questionnaire was expanded to include new questions on post- ling processes: VAT refund and tax audit. The data shows where post ling processes and practices work e ciently and what drives the di erences in the overall tax compliance cost across economies. The new section covers both the legal framework and the administrative burden on businesses to comply with post ling processes. See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in Using a case scenario, Doing Business records taxes and mandatory 2016 (number per year adjusted for electronic and contributions a medium size company must pay in a year, and measures joint ling and payment) the administrative burden of paying taxes, contributions and dealing with post ling processes. Information is also compiled on frequency of ling Total number of taxes and contributions paid, and payments, time taken to comply with tax laws, time taken to comply including consumption taxes (value added tax, with the requirements of post ling processes and time waiting. sales tax or goods and service tax) Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: Time required to comply with 3 major taxes - TaxpayerCo is a medium-size business that started operations on January (hours per year) 1, 2015. It produces ceramic flowerpots and sells them at retail. All taxes Collecting information, computing tax payable and contributions recorded are paid in the second year of operation Completing tax return, filing with agencies (calendar year 2016). Taxes and mandatory contributions are measured at all levels of government. Arranging payment or withholding Preparing separate tax accounting books, if The VAT refund process: required - In June 2016, TaxpayerCo. makes a large capital purchase: the value of the Total tax and contribution rate (% of pro t before machine is 65 times income per capita of the economy. Sales are equally all taxes) spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income per Profit or corporate income tax capita divided by 12). The machinery seller is registered for VAT and excess Social contributions, labor taxes paid by input VAT incurred in June will be fully recovered after four consecutive employer months if the VAT rate is the same for inputs, sales and the machine and Property and property transfer taxes the tax reporting period is every month. Input VAT will exceed Output VAT Dividend, capital gains, financial transactions in June 2016. taxes The corporate income tax audit process: Waste collection, vehicle, road and other taxes - An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, or incorrectly treating an expense as tax deductible) Post ling Index leads to an incorrect income tax return and a corporate income Time to comply with a VAT refund tax underpayment. TaxpayerCo. discovered the error and voluntarily Time to receive a VAT refund noti ed the tax authority. The value of the underpaid income tax liability is Time to comply with a corporate income tax audit 5% of the corporate income tax liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax Time to complete a corporate income tax audit return, but within the tax assessment period. Europe & OECD high Indicator Azerbaijan Central Asia income Overall Best Performer Payments (number per year) 6 16.5 10.9 3 (Hong Kong SAR, China) Page 44   return, but within the tax assessment period. Doing Business 2018 Azerbaijan Europe & OECD high Indicator Azerbaijan Central Asia income Overall Best Performer Payments (number per year) 6 16.5 10.9 3 (Hong Kong SAR, China) Time (hours per year) 195 218.4 160.7 55 (Luxembourg) Total tax and contribution rate (% of profit) 39.8 33.1 40.1 18.47% (32 Economies) Postfiling index (0-100) 83.79 65.20 83.45 99.38 (Estonia) Figure – Paying Taxes in Azerbaijan and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 84.21: Azerbaijan (Rank: 35) 80.86: Romania (Rank: 42) 79.42: Poland (Rank: 51) 79.29: Russian Federation (Rank: 52) 75.78: Regional Average (Europe & Central Asia) 71.78: Bulgaria (Rank: 90) Note: The ranking of economies on the ease of paying taxes is determined by sorting their distance to frontier scores on the ease of paying taxes. These scores are the simple average of the distance to frontier scores for each of the four component indicators – number of tax payments. time, total tax rate and post ling index – with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax rate. The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power of 0.8. The threshold is de ned as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax rate below this threshold receive the same score as the economy at the threshold. Figure – Paying Taxes in Azerbaijan and comparator economies – Measure of Quality 90 83.79 77.36 76.82 80 73.14 69.30 70 65.20 60 Index score 50 40 30 20 10 0 Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Details – Paying Taxes in Azerbaijan Tax or Total tax and mandatory Payments Notes on Time Statutory contribution rate (% Notes on contribution (number) Payments (hours) tax rate Tax base of profit) TTR Page 45   Social security 1 online 78 22% gross salaries 24.82 Doing Business 2018 Azerbaijan Figure – Paying Taxes in Azerbaijan and comparator economies – Measure of Quality 90 83.79 77.36 76.82 80 73.14 69.30 70 65.20 60 Index score 50 40 30 20 10 0 Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Details – Paying Taxes in Azerbaijan Tax or Total tax and mandatory Payments Notes on Time Statutory contribution rate (% Notes on contribution (number) Payments (hours) tax rate Tax base of profit) TTR Social security 1 online 78 22% gross salaries 24.82 contributions Corporate 1 online 60 20% taxable profit 12.95 income tax Property Tax 1 online 1% Annual average tax written 1.97 down value of Fixed Assets Tax on interest 0 10% interest income 0.26 included in other taxes Land tax 1 online AZN 10 land area per 100 square 0.02 meters Employee paid - 0 jointly 14%-25% gross salaries 0.00 withheld labor tax Employee paid - 0 jointly 3% gross salaries 0.00 withheld Social security Fuel tax 1 included in price of fuel 0.00 small amount Value added tax 1 online 57 18% goods and services 0.00 not (VAT) included Totals 6 195 39.8 Details – Paying Taxes in Azerbaijan – Tax by Type Taxes by type Answer Profit tax (% of profit) 13.0 Page 46   Labor tax and contributions (% of profit) 24.8 Totals 6 195 39.8 Doing Business 2018 Azerbaijan Details – Paying Taxes in Azerbaijan – Tax by Type Taxes by type Answer Profit tax (% of profit) 13.0 Labor tax and contributions (% of profit) 24.8 Other taxes (% of profit) 2.0 Details – Paying Taxes in Azerbaijan – Measure of Quality Answer Score Post ling index (0-100) 83.79 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? Yes Restrictions on VAT refund process Carry forward for 3 months Percentage of cases exposed to a VAT audit (%) 50% - 74% Is there a mandatory carry forward period? Yes Time to comply with VAT refund (hours) 7.5 85 Time to obtain a VAT refund (weeks) 27.6 52.9 Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 0% - 24% Time to comply with a corporate income tax audit (hours) 3.0 97.25 Time to complete a corporate income tax audit (weeks) No tax audit per 100 case study scenario Notes: Names of taxes have been standardized. For instance income tax, pro t tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The post ling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax audit and time to complete a corporate income tax audit. N/A = Not applicable. Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tari s) associated with three sets of procedures—documentary compliance, border Page 47   compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent a corporate income tax audit and time to complete a corporate income tax audit. N/A = Not applicable. Doing Business 2018 Azerbaijan Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tari s) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. Given the importance of trade digitalization, in Doing Business 2018, the Trading across Borders questionnaire included research questions on the availability and status of implementation of Electronic Data Interchange (EDI) and Single Window (SW) systems. With this information, Doing Business built a comprehensive dataset on the adoption and level of sophistication of electronic platforms in 190 economies. These data are not used to compute the distance to frontier score or ranking of the ease of doing business. The new dataset on EDI and SW systems is available here. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: Obtaining, preparing and submitting documents during transport, clearance, inspections and port Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 or border handling in origin economy days are recorded as 22×24=528 hours). If customs clearance takes 7.5 Obtaining, preparing and submitting documents hours, the data are recorded as is. Alternatively, suppose documents are required by destination economy and any transit submitted to a customs agency at 8:00a.m., are processed overnight and economies can be picked up at 8:00a.m. the next day. The time for customs clearance Covers all documents required by law and in would be recorded as 24 hours because the actual procedure took 24 practice, including electronic submissions of hours. information Border compliance Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the costs recorded. Costs are reported in U.S. dollars. Customs clearance and inspections Contributors are asked to convert local currency into U.S. dollars based on Inspections by other agencies (if applied to more the exchange rate prevailing on the day they answer the questionnaire. than 20% of shipments) Contributors are private sector experts in international trade logistics and Handling and inspections that take place at the are informed about exchange rates. economy’s port or border Assumptions of the case study: - For all 190 economies covered by Doing Domestic transport Business, it is assumed a shipment is in a warehouse in the largest Loading or unloading of the shipment at the business city of the exporting economy and travels to a warehouse in the warehouse or port/border largest business city of the importing economy. - It is assumed each Transport between warehouse and port/border economy imports 15 metric tons of containerized auto parts (HS 8708) from its natural import partner—the economy from which it imports the Traffic delays and road police checks while shipment is en route largest value (price times quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (de ned by the largest export value) to its natural export partner—the economy that is the largest purchaser of this product. Shipment value is assumed to be $50,000. - The mode of transport is the one most widely used for the chosen export or import product and the trading partner, as is the seaport, or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport, airport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 48   of agriculture or industry, national security agencies and any other Doing Business 2018 Azerbaijan government authorities. Europe & OECD high Indicator Azerbaijan Central Asia income Overall Best Performer Time to export: Border compliance (hours) 29 28.0 12.7 0 (17 Economies) Cost to export: Border compliance (USD) 214 191.4 149.9 0.00 (19 Economies) Time to export: Documentary compliance 33 27.9 2.4 1.0 (25 Economies) (hours) Cost to export: Documentary compliance (USD) 300 113.8 35.4 0.00 (19 Economies) Time to import: Border compliance (hours) 30 25.9 8.7 0.00 (21 Economies) Cost to import: Border compliance (USD) 300 185.1 111.6 0.00 (27 Economies) Time to import: Documentary compliance 38 27.3 3.5 1.0 (30 Economies) (hours) Cost to import: Documentary compliance (USD) 200 94.7 25.6 0.00 (30 Economies) Figure – Trading across Borders in Azerbaijan and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 97.41: Bulgaria (Rank: 21) 83.96: Regional Average (Europe & Central Asia) 73.56: Azerbaijan (Rank: 83) 69.20: Russian Federation (Rank: 100) 100.00: Poland (Rank: 1) 100.00: Romania (Rank: 1) Note: The ranking of economies on the ease of trading across borders is determined by sorting their distance to frontier scores for trading across borders. These scores are the simple average of the distance to frontier scores for the time and cost for documentary compliance and border compliance to export and import (domestic transport is not used for calculating the ranking). Figure – Trading across Borders in Azerbaijan – Time and Cost Time Cost 40 38 350 33 300 300 35 300 29 30 30 250 214 Time (hours) 200 Cost (USD) 25 200 20 150 15 100 10 5 50 0 0 Export - Border Compliance Export - Documentary Compliance Import - Border Compliance Import - Documentary CompliancePage 49   Doing Business 2018 Azerbaijan Figure – Trading across Borders in Azerbaijan – Time and Cost Time Cost 40 38 350 33 300 300 35 300 29 30 30 250 214 Time (hours) 200 Cost (USD) 25 200 20 150 15 100 10 5 50 0 0 Export - Border Compliance Export - Documentary Compliance Import - Border Compliance Import - Documentary Compliance Details – Trading across Borders in Azerbaijan Characteristics Export Import Product HS 17 : Sugars and sugar confectionery HS 8708: Parts and accessories of motor vehicles Trade partner Iraq Russian Federation Border Astara border crossing Samur border crossing Distance (km) 520 204 Domestic transport time (hours) 8 6 Domestic transport cost (USD) 500 400 Details – Trading across Borders in Azerbaijan – Components of Border Compliance Time to Complete Associated Costs (hours) (USD) Export: Clearance and inspections required by customs authorities 24.0 177.0 Export: Clearance and inspections required by agencies other than customs 2.4 37.1 Export: Port or border handling 3.0 0.0 Import: Clearance and inspections required by customs authorities 26.0 300.0 Import: Clearance and inspections required by agencies other than customs 0.0 0.0 Import: Port or border handling 4.1 0.0 Details – Trading across Borders in Azerbaijan – Trade Documents Export Import Commercial invoice Commercial invoice Certificate of origin Certificate of origin Page 50   Domestic transport cost (USD) 500 400 Doing Business 2018 Azerbaijan Details – Trading across Borders in Azerbaijan – Components of Border Compliance Time to Complete Associated Costs (hours) (USD) Export: Clearance and inspections required by customs authorities 24.0 177.0 Export: Clearance and inspections required by agencies other than customs 2.4 37.1 Export: Port or border handling 3.0 0.0 Import: Clearance and inspections required by customs authorities 26.0 300.0 Import: Clearance and inspections required by agencies other than customs 0.0 0.0 Import: Port or border handling 4.1 0.0 Details – Trading across Borders in Azerbaijan – Trade Documents Export Import Commercial invoice Commercial invoice Certificate of origin Certificate of origin Contract Contract with supplier Customs Export Declaration Customs Import Declaration Certificate of quality CMR waybill Phytosanitary certificate CMR waybill Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local rst-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and e ciency in the court system. The most recent round of data collection was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the The dispute in the case study involves the breach of a sales contract courts (calendar days) between 2 domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes Time to file and serve the case the case from simple debt enforcement. Time for trial and to obtain the judgment To make the data comparable across economies, Doing Business uses Time to enforce the judgment several assumptions about the case: Cost required to enforce a contract through the - The dispute concerns a lawful transaction between two businesses (Seller courts (% of claim) and Buyer), both located in the economy’s largest business city. For 11 Attorney fees economies the data are also collected for the second largest business city. - The buyer orders custom-made goods, then fails to pay. Court fees - The value of the dispute is 200% of the income per capita Page 51   or the Enforcement fees CMR waybill Doing Business 2018 Azerbaijan Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local rst-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and e ciency in the court system. The most recent round of data collection was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the The dispute in the case study involves the breach of a sales contract courts (calendar days) between 2 domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes Time to file and serve the case the case from simple debt enforcement. Time for trial and to obtain the judgment To make the data comparable across economies, Doing Business uses Time to enforce the judgment several assumptions about the case: Cost required to enforce a contract through the - The dispute concerns a lawful transaction between two businesses (Seller courts (% of claim) and Buyer), both located in the economy’s largest business city. For 11 Attorney fees economies the data are also collected for the second largest business city. - The buyer orders custom-made goods, then fails to pay. Court fees - The value of the dispute is 200% of the income per capita or the Enforcement fees equivalent in local currency of USD 5,000, whichever is greater. Quality of judicial processes index (0-18) - The seller sues the buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000. Court structure and proceedings (-1-5) - The seller requests a pretrial attachment to secure the claim. Case management (0-6) - The dispute on the quality of the goods requires an expert opinion. Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. Alternative dispute resolution (0-3) - The seller enforces the judgment through a public sale of the buyer’s movable assets. Standardized Case Claim value AZN 10,876.00 Court name Baku Administrative Commercial Court City Covered Baku Europe & OECD high Indicator Azerbaijan Central Asia income Overall Best Performer Time (days) 277 489.9 577.8 164.00 (Singapore) Cost (% of claim value) 18.5 26.2 21.5 9.00 (Iceland) Quality of judicial processes index (0-18) 6.5 10.0 11.0 15.50 (Australia) Figure – Enforcing Contracts in Azerbaijan and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 72.25: Romania (Rank: 17) 72.18: Russian Federation (Rank: 18) 67.51: Azerbaijan (Rank: 38) Page 52   of judicial processes Quality Business Doing index (0-18) 2018 Azerbaijan 6.5 10.0 11.0 15.50 (Australia) Figure – Enforcing Contracts in Azerbaijan and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 72.25: Romania (Rank: 17) 72.18: Russian Federation (Rank: 18) 67.51: Azerbaijan (Rank: 38) 67.04: Bulgaria (Rank: 40) 65.38: Regional Average (Europe & Central Asia) 63.44: Poland (Rank: 55) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their distance to frontier scores for enforcing contracts. These scores are the simple average of the distance to frontier scores for each of the component indicators. Figure – Enforcing Contracts in Azerbaijan – Time and Cost Time Cost 800 30 26.2 685 25.8 700 25 Cost (% of claim value) 564 577.8 21.5 600 18.5 18.6 489.9 19.4 512 20 Time (days) 500 16.5 400 337 15 277 300 10 200 5 100 0 0 Azerbaijan Bulgaria Europe & OECD high income Poland Romania Russian Federation Central Asia Figure – Enforcing Contracts in Azerbaijan and comparator economies – Measure of Quality Azerbaijan 0 2 1.5 3 Bulgaria 2.5 2.5 2 3.5 Poland 3 1.5 1.5 4.5 Romania 3 4 2 5 Russian Federation 2.5 4 0 3 OECD high income 2.5 2.9 2 3.6 Europe & Central Asia 2.1 2.9 1.5 3.5 0 2 4 6 8 10 12 14 Page 53   16 Azerbaijan Bulgaria Europe & OECD high income Poland Romania Russian Federation Central Asia Doing Business 2018 Azerbaijan Figure – Enforcing Contracts in Azerbaijan and comparator economies – Measure of Quality Azerbaijan 0 2 1.5 3 Bulgaria 2.5 2.5 2 3.5 Poland 3 1.5 1.5 4.5 Romania 3 4 2 5 Russian Federation 2.5 4 0 3 OECD high income 2.5 2.9 2 3.6 Europe & Central Asia 2.1 2.9 1.5 3.5 0 2 4 6 8 10 12 14 16 Sub-Indicator Score Alternative dispute resolution (0­3) Case management (0­6) Court automation (0­4) Court structure and proceedings (­1­5) Details – Enforcing Contracts in Azerbaijan Indicator Time (days) 277 Filing and service 27 Trial and judgment 160 Enforcement of judgment 90 Cost (% of claim value) 18.5 Attorney fees 16.4 Court fees 1.1 Enforcement fees 1 Quality of judicial processes index (0-18) 6.5 Court structure and proceedings (-1-5) 3.0 Case management (0-6) 2.0 Court automation (0-4) 1.5 Alternative dispute resolution (0-3) 0.0 Details – Enforcing Contracts in Azerbaijan – Measure of Quality Page 54   Alternative dispute resolution (0-3) 0.0 Doing Business 2018 Azerbaijan Details – Enforcing Contracts in Azerbaijan – Measure of Quality Answer Score Quality of judicial processes index (0-18) 6.5 Court structure and proceedings (-1-5) 3.0 1. Is there a court or division of a court dedicated solely to hearing commercial cases? Yes 1.5 2. Small claims court 0.0 2.a. Is there a small claims court or a fast-track procedure for small claims? No 2.b. If yes, is self-representation allowed? n.a. 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, but manual 0.5 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 2.0 1. Time standards 0.0 1.a. Are there laws setting overall time standards for key court events in a civil case? Yes 1.b. If yes, are the time standards set for at least three court events? No 1.c. Are these time standards respected in more than 50% of cases? Yes 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be No granted? 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) Yes 1.0 time to disposition report; (ii) clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the Yes 1.0 competent court? 5. Are there any electronic case management tools in place within the competent court No 0.0 for use by judges? 6. Are there any electronic case management tools in place within the competent court No 0.0 for use by lawyers? Court automation (0-4) 1.5 1. Can the initial complaint be led electronically through a dedicated platform within No 0.0 the competent court? 2. Is it possible to carry out service of process electronically for claims led before the No 0.0 competent court? Page 55   1. Can the initial complaint be led electronically through a dedicated platform within No 0.0 Businesscourt? the competent Doing 2018 Azerbaijan 2. Is it possible to carry out service of process electronically for claims led before the No 0.0 competent court? 3. Can court fees be paid electronically within the competent court? Yes 1.0 4. Publication of judgments 0.5 4.a Are judgments rendered in commercial cases at all levels made available to the No general public through publication in o cial gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme Yes court level made available to the general public through publication in o cial gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 0.0 1. Arbitration 0.0 1.a. Is domestic commercial arbitration governed by a consolidated law or No consolidated chapter or section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public n.a. order or public policy—that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? n.a. 2. Mediation/Conciliation 0.0 2.a. Is voluntary mediation or conciliation available? No 2.b. Are mediation, conciliation or both governed by a consolidated law or n.a. consolidated chapter or section of the applicable code of civil procedure encompassing substantially all their aspects? 2.c. Are there nancial incentives for parties to attempt mediation or conciliation (i.e., n.a. if mediation or conciliation is successful, a refund of court ling fees, income tax credits or the like)? Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are Measured in calendar years used: Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 Cost required to recover debt (% of debtor’s estate) suppliers. The hotel experiences nancial di culties. Page 56   Measured as percentage of estate value - The value of the hotel is 100% of the income per capita or the equivalent if mediation or conciliation is successful, a refund of court ling fees, income tax credits or the like)? Doing Business 2018 Azerbaijan Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are Measured in calendar years used: Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 Cost required to recover debt (% of debtor’s estate) suppliers. The hotel experiences nancial di culties. Measured as percentage of estate value - The value of the hotel is 100% of the income per capita or the equivalent Court fees in local currency of USD 200,000, whichever is greater. - The hotel has a loan from a domestic bank, secured by a mortgage over Fees of insolvency administrators the hotel’s real estate. The hotel cannot pay back the loan, but makes Lawyers’ fees enough money to operate otherwise. Assessors’ and auctioneers’ fees In addition, Doing Business evaluates the adequacy and integrity of the Other related fees existing legal framework applicable to liquidation and reorganization Outcome proceedings through the strength of insolvency framework index. The index tests whether economies adopted internationally accepted good Whether business continues operating as a going practices in four areas: commencement of proceedings, management of concern or business assets are sold piecemeal debtor’s assets, reorganization proceedings and creditor participation. Recovery rate for creditors Measures the cents on the dollar recovered by secured creditors Outcome for the business (survival or not) determines the maximum value that can be recovered Official costs of the insolvency proceedings are deducted Depreciation of furniture is taken into account Present value of debt recovered Strength of insolvency framework index (0- 16) Sum of the scores of four component indices: Commencement of proceedings index (0-3) Management of debtor’s assets index (0-6) Reorganization proceedings index (0-3) Creditor participation index (0-4) Europe & OECD high Indicator Azerbaijan Central Asia income Overall Best Performer Recovery rate (cents on the dollar) 40.2 38.0 71.2 93.1 (Norway) Time (years) 1.5 2.3 1.7 0.4 (Ireland) Page 57   Cost (% of estate) 12.0 13.1 9.1 1.00 (Norway) Creditor participation index (0-4) Doing Business 2018 Azerbaijan Europe & OECD high Indicator Azerbaijan Central Asia income Overall Best Performer Recovery rate (cents on the dollar) 40.2 38.0 71.2 93.1 (Norway) Time (years) 1.5 2.3 1.7 0.4 (Ireland) Cost (% of estate) 12.0 13.1 9.1 1.00 (Norway) Outcome (0 as piecemeal sale and 1 as going 0 .. .. .. concern) Strength of insolvency framework index (0-16) 13.0 10.8 12.1 15.00 (6 Economies) Figure – Resolving Insolvency in Azerbaijan and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 77.71: Poland (Rank: 22) 62.27: Azerbaijan (Rank: 47) 60.02: Bulgaria (Rank: 50) 59.78: Romania (Rank: 51) 57.83: Russian Federation (Rank: 54) 54.19: Regional Average (Europe & Central Asia) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their distance to frontier scores for resolving insolvency. These scores are the simple average of the distance to frontier scores for the recovery rate and the strength of insolvency framework index. Figure – Resolving Insolvency in Azerbaijan – Time and Cost Time Cost 3.5 3.3 15.0 3.3 16 3.0 3 13.1 14 12.0 12 2.5 2.3 10.5 Cost (% of estate) Time (years) 9.0 9.1 2.0 9.0 10 2 1.7 1.5 8 1.5 6 1 4 0.5 2 0 0 Azerbaijan Bulgaria Europe & OECD high income Poland Romania Russian Federation Central Asia Figure – Resolving Insolvency in Azerbaijan and comparator economies – Measure of Quality Azerbaijan 5 3 3 2 Page 58   Bulgaria 4 2.5 4 2.5 Azerbaijan Bulgaria Europe & OECD high income Poland Romania Russian Federation Central Asia Doing Business 2018 Azerbaijan Figure – Resolving Insolvency in Azerbaijan and comparator economies – Measure of Quality Azerbaijan 5 3 3 2 Bulgaria 4 2.5 4 2.5 Poland 6 3 2 3 Romania 6 2.5 2 2.5 Russian Federation 5 2.5 3 1 OECD high income 5.4 2.8 2.3 1.9 Europe & Central Asia 4.4 2.6 2.1 1.8 0 2 4 6 8 10 12 14 16 Sub-Indicator Score Management of debtor's assets index (0­6) Commencement of proceedings index (0­3) Creditor participation index (0­4) Reorganization proceedings index (0­3) Figure – Resolving Insolvency in Azerbaijan and comparator economies – Recovery Rate Recovery Rate (cents on the dollar) 70 63.1 60 50 40.2 40.7 36.0 38.0 40 35.6 30 20 10 0 Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Details – Resolving Insolvency in Azerbaijan Indicator Answer Explanation Proceeding foreclosure BizBank will initiate foreclosure proceeding, because it is cheaper and faster than insolvency proceeding. Additionally, secured creditors have the right to enforce their security interest even if other parties (debtor, unsecured creditors) start insolvency proceedings. Outcome piecemeal sale It will be difficult to find a buyer willing to purchase the hotel as a going concern. Time (in years) 1.5 Before BizBank can initiate foreclosure proceedings, it must give at least two months after the debtor fails to pay and then give one month notice of default to the debtor. The debtor or any other interested party may appeal the notice of default in the court within 21 days from the date of service. The creditor must register the notice of default with the State Register Service of Immovable Property within 7 days from its service upon the debtor. Once the notice of default is registered, BizBank may apply to a court for a judgment to foreclose Page 59   upon the secured assets. During a preliminary hearing (0.5-1 month after filing), the judge Azerbaijan Bulgaria Poland Romania Russian Federation Europe & Central Asia Doing Business 2018 Azerbaijan Details – Resolving Insolvency in Azerbaijan Indicator Answer Explanation Proceeding foreclosure BizBank will initiate foreclosure proceeding, because it is cheaper and faster than insolvency proceeding. Additionally, secured creditors have the right to enforce their security interest even if other parties (debtor, unsecured creditors) start insolvency proceedings. Outcome piecemeal sale It will be difficult to find a buyer willing to purchase the hotel as a going concern. Time (in years) 1.5 Before BizBank can initiate foreclosure proceedings, it must give at least two months after the debtor fails to pay and then give one month notice of default to the debtor. The debtor or any other interested party may appeal the notice of default in the court within 21 days from the date of service. The creditor must register the notice of default with the State Register Service of Immovable Property within 7 days from its service upon the debtor. Once the notice of default is registered, BizBank may apply to a court for a judgment to foreclose upon the secured assets. During a preliminary hearing (0.5-1 month after filing), the judge reviews material and accepts Bizbank's case for consideration. A hearing will take place where Mirage and BizBank will present their claims. The court will issue a decision in Bank’s favor within several months. Mirage will likely appeal the decision (within 30 days), and the appeal will be decided within a few months and the decision becomes effective immediately. Within 3 days of receipt of the effective court judgment, the court bailiff must send an order on foreclosure to a specialized auctioneer. The entire adjudication process will take about 1 year. After that, a specialized auctioneer must publish two announcements – 30 days and 15 days before the proposed public auction sale. The first auction requires that the property be sold for at least 70% of the starting price. The second auction allows the sale of the foreclosed property at a price which covers the auction expenses and the secured obligations to the mortgagee and any senior mortgagee(s). In our case, it is likely that there will be two auctions, as it will not be easy to find a buyer. The entire process will take approximately 6 months until the proceeds are paid to BizBank. Cost (% of 12.0 The total cost of the proceedings would amount to approximately 12% of the value of the estate) estate. Main expenses will include attorneys' fees - around 5%; fees of the auctioneer - around 4%; and fees of accountants and other professionals involved in the case - around 3%. Recovery rate (cents on the 40.2 dollar) Details – Resolving Insolvency in Azerbaijan – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 13.0 Commencement of proceedings index (0-3) 3.0 What procedures are available to a DEBTOR when commencing insolvency (a) Debtor may 1.0 proceedings? le for both liquidation and reorganization Does the insolvency framework allow a CREDITOR to le for insolvency of the debtor? (a) Yes, a creditor 1.0 may le for both liquidation and reorganization Page 60   dollar) Doing Business 2018 Azerbaijan Details – Resolving Insolvency in Azerbaijan – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 13.0 Commencement of proceedings index (0-3) 3.0 What procedures are available to a DEBTOR when commencing insolvency (a) Debtor may 1.0 proceedings? le for both liquidation and reorganization Does the insolvency framework allow a CREDITOR to le for insolvency of the debtor? (a) Yes, a creditor 1.0 may le for both liquidation and reorganization What basis for commencement of the insolvency proceedings is allowed under the (a) Debtor is 1.0 insolvency framework? generally unable to pay its debts as they mature Management of debtor's assets index (0-6) 5.0 Does the insolvency framework allow the continuation of contracts supplying essential Yes 1.0 goods and services to the debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome Yes 1.0 contracts? Does the insolvency framework allow avoidance of preferential transactions? No 0.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit Yes 1.0 after commencement of insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (b) Yes over 1.0 ordinary unsecured creditors but not over secured creditors Reorganization proceedings index (0-3) 2.0 Which creditors vote on the proposed reorganization plan? (b) Only creditors 1.0 whose rights are a ected by the proposed plan Does the insolvency framework require that dissenting creditors in reorganization Yes 1.0 receive at least as much as what they would obtain in a liquidation? Are the creditors devided into classes for the purposes of voting on the reorganization No 0.0 plan, does each class vote separately and are creditors in the same class treated equally? Creditor participation index (0-4) 3.0 Page 61   Does the insolvency framework require that dissenting creditors in reorganization Yes 1.0 receive Doing at least as Business much as 2018 what they would obtain in a liquidation? Azerbaijan Are the creditors devided into classes for the purposes of voting on the reorganization No 0.0 plan, does each class vote separately and are creditors in the same class treated equally? Creditor participation index (0-4) 3.0 Does the insolvency framework require approval by the creditors for selection or Yes 1.0 appointment of the insolvency representative? Does the insolvency framework require approval by the creditors for sale of substantial No 0.0 assets of the debtor? Does the insolvency framework provide that a creditor has the right to request Yes 1.0 information from the insolvency representative? Does the insolvency framework provide that a creditor has the right to object to Yes 1.0 decisions accepting or rejecting creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice”. Labor Market Regulation Doing Business presents the data for the labor market regulation indicators in an annex. The report does not present rankings of economies on these indicators or include the topic in the aggregate distance to frontier score or ranking on the ease of doing business. Detailed data collected on labor market regulation are available on the Doing Business website (http://www.doingbusiness.org/data/exploretopics/labor-market-regulation). The most recent round of data collection was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions (i) whether xed-term contracts are prohibited for about the worker and the business are used. permanent tasks; (ii) maximum cumulative duration of xed-term contracts; (iii) length of the The worker: probationary period; (iv) minimum wage. - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. Working hours - Is a full-time employee. (i) maximum number of working days allowed per - Is not a member of the labor union, unless membership is mandatory. week; (ii) premiums for work: at night, on a weekly rest day and overtime; (iii) whether there are The business: restrictions on work at night, work on a weekly rest - Is a limited liability company (or the equivalent in the economy). day and for overtime work; (iv) whether nonpregnant - Operates a supermarket or grocery store in the economy’s largest and nonnursing women can work same night hours business city. For 11 economies the data are also collected for the second as men; (v) length of paid annual leave. largest business city. - Has 60 employees. Redundancy rules - Is subject to collective bargaining agreements if such agreements cover (i) whether redundancy can be basis for terminating more than 50% of the food retail sector and they apply even to rms that workers; (ii) whether employer needs to notify are not party to them. and/or get approval from third party to terminate 1 - Abides by every law and regulation but does not grant workers more redundant worker and a group of 9 redundant bene ts than those mandated by law, regulation or (if applicable) collective workers; (iii) whether law requires employer to bargaining agreements. reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost Page 62   (i) notice period for redundancy dismissal; (ii) the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice”. Doing Business 2018 Azerbaijan Labor Market Regulation Doing Business presents the data for the labor market regulation indicators in an annex. The report does not present rankings of economies on these indicators or include the topic in the aggregate distance to frontier score or ranking on the ease of doing business. Detailed data collected on labor market regulation are available on the Doing Business website (http://www.doingbusiness.org/data/exploretopics/labor-market-regulation). The most recent round of data collection was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions (i) whether xed-term contracts are prohibited for about the worker and the business are used. permanent tasks; (ii) maximum cumulative duration of xed-term contracts; (iii) length of the The worker: probationary period; (iv) minimum wage. - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. Working hours - Is a full-time employee. (i) maximum number of working days allowed per - Is not a member of the labor union, unless membership is mandatory. week; (ii) premiums for work: at night, on a weekly rest day and overtime; (iii) whether there are The business: restrictions on work at night, work on a weekly rest - Is a limited liability company (or the equivalent in the economy). day and for overtime work; (iv) whether nonpregnant - Operates a supermarket or grocery store in the economy’s largest and nonnursing women can work same night hours business city. For 11 economies the data are also collected for the second as men; (v) length of paid annual leave. largest business city. - Has 60 employees. Redundancy rules - Is subject to collective bargaining agreements if such agreements cover (i) whether redundancy can be basis for terminating more than 50% of the food retail sector and they apply even to rms that workers; (ii) whether employer needs to notify are not party to them. and/or get approval from third party to terminate 1 - Abides by every law and regulation but does not grant workers more redundant worker and a group of 9 redundant bene ts than those mandated by law, regulation or (if applicable) collective workers; (iii) whether law requires employer to bargaining agreements. reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments due when terminating a redundant worker. Job quality (i) whether law mandates equal remuneration for work of equal value and nondiscrimination based on gender in hiring; (ii) whether law mandates paid or unpaid maternity leave; (iii) length of paid maternity leave; (iv) whether employees on maternity leave receive 100% of wages; (v) availability of ve fully paid days of sick leave a year; (vi) eligibility requirements for unemployment protection. Details – Labor Market Regulation in Azerbaijan Answer Hiring Page 63   Fixed-term contracts prohibited for permanent tasks? No days of sick leave a year; (vi) eligibility requirements for unemployment protection. Doing Business 2018 Azerbaijan Details – Labor Market Regulation in Azerbaijan Answer Hiring Fixed-term contracts prohibited for permanent tasks? No Maximum length of a single xed-term contract (months) 60.0 Maximum length of xed-term contracts, including renewals (months) 60.0 Minimum wage applicable to the worker assumed in the case study (US$/month) 95.5 Ratio of minimum wage to value added per worker 0.2 Maximum length of probationary period (months) 3.0 Working hours Standard workday 8.0 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 40.0 Premium for work on weekly rest day (% of hourly pay) 100.0 Premium for overtime work (% of hourly pay) 100.0 Restrictions on night work? Yes Whether nonpregnant and nonnursing women can work the same night hours as men No Restrictions on weekly holiday? No Restrictions on overtime work? Yes Paid annual leave for a worker with 1 year of tenure (working days) 15.0 Paid annual leave for a worker with 5 years of tenure (working days) 17.0 Paid annual leave for a worker with 10 years of tenure (working days) 19.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 17.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party noti cation if one worker is dismissed? Yes Third-party approval if one worker is dismissed? No Third-party noti cation if nine workers are dismissed? Yes Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? No Page 64   Third-party Doing approval Business 2018 if nine workers are dismissed? Azerbaijan No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? Yes Priority rules for reemployment? No Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure 8.7 Notice period for redundancy dismissal for a worker with 5 years of tenure 8.7 Notice period for redundancy dismissal for a worker with 10 years of tenure 8.7 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 8.7 Severance pay for redundancy dismissal for a worker with 1 year of tenure 13.0 Severance pay for redundancy dismissal for a worker with 5 years of tenure 13.0 Severance pay for redundancy dismissal for a worker with 10 years of tenure 13.0 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 13.0 Job quality Equal remuneration for work of equal value? No Gender nondiscrimination in hiring? Yes Paid or unpaid maternity leave mandated by law? Yes Minimum length of maternity leave (calendar days)? 126.0 Receive 100% of wages on maternity leave? Yes Five fully paid days of sick leave a year? Yes Unemployment protection after one year of employment? Yes Minimum contribution period for unemployment protection (months)? 6.5 Business Reforms in Azerbaijan In the year ending June 1, 2017, 119 economies implemented 264 total reforms across the di erent areas measured by Doing Business. Doing Business has recorded more than 2,900 regulatory reforms making it easier to do business since 2004. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are the reforms for Azerbaijan implemented since Doing Business 2008. = Doing Business reform making it easier to do business. = Change making it more di cult to do business. DB2018 Getting Credit: Azerbaijan improved access to credit information by adopting a law allowing the establishment of credit bureaus. Protecting Minority Investors: Azerbaijan strengthened minority investor protections by increasing shareholder rights and role in major corporate decisions, clarifying ownership and control structures and requiring greater corporate transparency. Enforcing Contracts: Azerbaijan made enforcing contracts easier by introducing a system that allows users to pay court fees electronically. Resolving Insolvency: Azerbaijan made resolving insolvency easier by making insolvency proceedings more accessible for Page 65   creditors and granting them greater participation in the proceedings, improving provisions on the treatment of contracts during Minimum contribution period for unemployment protection (months)? 6.5 Doing Business 2018 Azerbaijan Business Reforms in Azerbaijan In the year ending June 1, 2017, 119 economies implemented 264 total reforms across the di erent areas measured by Doing Business. Doing Business has recorded more than 2,900 regulatory reforms making it easier to do business since 2004. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are the reforms for Azerbaijan implemented since Doing Business 2008. = Doing Business reform making it easier to do business. = Change making it more di cult to do business. DB2018 Getting Credit: Azerbaijan improved access to credit information by adopting a law allowing the establishment of credit bureaus. Protecting Minority Investors: Azerbaijan strengthened minority investor protections by increasing shareholder rights and role in major corporate decisions, clarifying ownership and control structures and requiring greater corporate transparency. Enforcing Contracts: Azerbaijan made enforcing contracts easier by introducing a system that allows users to pay court fees electronically. Resolving Insolvency: Azerbaijan made resolving insolvency easier by making insolvency proceedings more accessible for creditors and granting them greater participation in the proceedings, improving provisions on the treatment of contracts during insolvency and introducing the possibility to obtain post-commencement nancing. DB2017 Getting Electricity: Azerbaijan streamlined the process of obtaining a new electricity connection by introducing an electronic capacity/availability of connection map, which reduced the time needed to determine new customer connection points. Paying Taxes: Azerbaijan made paying taxes easier by abolishing vehicle tax for residents. Trading across Borders: Azerbaijan facilitated international trade processes by introducing an electronic system for submitting export and import declarations. DB2016 Starting a Business: Azerbaijan made starting a business easier by abolishing the requirement to use a corporate seal. Dealing with Construction Permits: Azerbaijan made dealing with construction permits easier by establishing a one-stop shop for issuing preapprovals for project documentation. Protecting Minority Investors: Azerbaijan strengthened minority investor protections by introducing requirements that related- party transactions undergo external review and be voted on by disinterested shareholders. DB2015 Starting a Business: Azerbaijan made starting a business easier by reducing the time to obtain an electronic signature for online tax registration. Registering Property: Azerbaijan made transferring property easier by introducing an online procedure for obtaining the nonencumbrance certi cate. Paying Taxes: Azerbaijan made paying taxes easier for companies by introducing an electronic system for ling and paying social insurance contributions. DB2014 Starting a Business: Azerbaijan made starting a business easier by introducing free online registration services and eliminating preregistration formalities. Dealing with Construction Permits: Azerbaijan adopted a new construction code that streamlined procedures relating to the issuance of building permits and established o cial time limits for some procedures. Trading across Borders: Azerbaijan made trading across borders easier by streamlining internal customs procedures. DB2011 Page 66   Getting Credit: Azerbaijan improved access to credit by establishing an online platform allowing nancial institutions to provide Trading across Borders: Azerbaijan made trading across borders easier by streamlining internal customs procedures. Doing Business 2018 Azerbaijan DB2011 Getting Credit: Azerbaijan improved access to credit by establishing an online platform allowing nancial institutions to provide information to, and retrieve it from, the public credit registry. Paying Taxes: A revision of Azerbaijan’s tax code lowered several tax rates, including the pro t tax rate, and simpli ed the process of paying corporate income tax and value added tax. DB2010 Getting Credit: Azerbaijan’s public credit registry improved the credit information system by providing banks with online access to its database, increasing the data available on borrowers and introducing penalties for banks that send information that is late or incorrect. Trading across Borders: Azerbaijan reduced the clearance and border crossing time for goods by streamlining and regrouping agencies behind a single customs service window. DB2009 Starting a Business: Azerbaijan reduced the time, cost and number of procedures to start a business by establishing a one-stop shop for completing registration requirements. Registering Property: Azerbaijan made registering property easier and less time consuming by introducing a uni ed property registry. Getting Credit: Azerbaijan improved access to credit information by eliminating the minimum threshold for loans reported to the public credit registry. Protecting Minority Investors: Azerbaijan strengthened investor protections by introducing requirements on the approval of related-party transactions and expanding remedies available against liable directors. Paying Taxes: Azerbaijan made paying taxes easier for companies by introducing an online ling and payment system with advanced accounting software and providing computer stations for users without computer facilities. Enforcing Contracts: Azerbaijan speeded up contract enforcement by creating a second commercial court in Baku, thereby increasing the number of specialized judges from 5 to 9. Labor Market Regulation: Azerbaijan allowed xed-term contracts to be concluded for permanent tasks, eliminated the requirements to notify third parties in cases of redundancy dismissals, and repealed a retraining or reassignment obligation before an employer can make a worker redundant. DB2008 Starting a Business: Azerbaijan made starting a business easier by abolishing the requirement to obtain approval from the Ministry of Justice for the company seal design. Paying Taxes: Azerbaijan made paying taxes easier and less costly for companies by introducing electronic ling and payment and by reducing the corporate income tax rate. Page 67   Paying Taxes: Azerbaijan made paying taxes easier and less costly for companies by introducing electronic ling and payment and by reducing Doing Business corporate the 2018 income tax rate. Azerbaijan Page 68