How to Set Up a Sole Proprietorship in Azerbaijan: A Step-by-Step Guide for Foreigners

Azerbaijan is gaining popularity among international freelancers and entrepreneurs as a convenient destination for launching and growing a business. With a straightforward registration process, low taxation, and access to a dynamic market, one of the most practical ways to operate a small business here is through registering as a sole proprietor (individual entrepreneur). This guide outlines what foreigners need to know about opening a sole proprietorship in Azerbaijan — requirements, benefits, and process.

Who Is Eligible to Register as a Sole Proprietor in Azerbaijan?

Both Azerbaijani nationals and foreign residents can register as individual entrepreneurs. However, for foreign nationals, there is one crucial requirement: a valid residence permit. Without this permit, setting up a sole proprietorship is not allowed.

What Does a Foreigner Need to Register?

To open a sole proprietorship in Azerbaijan, a foreign individual must prepare the following:

• A valid residence permit
• International passport
• Personal FIN code (identification number)
• Residential address within Azerbaijan (e.g., rented accommodation)
• Contact information, including phone number and email

All other procedures — paperwork, submission, and official registration — are managed by our specialists. There’s no need for you to visit the tax authority or submit the application yourself.

Registration Process: How It Works

1. Verification of documents and residence status — registration is not possible without a valid residence permit.
2. Official registration with the tax authority — we handle this entirely on your behalf.

Processing time: typically between 1 and 3 business days after all required documents are submitted.

Taxation System for Sole Proprietors in Azerbaijan

Azerbaijan provides a favorable tax environment for small business owners and freelancers under its simplified tax regime:

• 2% flat tax on gross revenue for most services and activities
• 4% tax for businesses involved in trading or public catering

If your annual turnover exceeds 200,000 AZN, VAT registration becomes mandatory, with a current VAT rate of 18%.

Additional Benefit: Entrepreneurs earning under 8,000 AZN per year (excluding oil and gas sectors) are exempt from personal income tax, further enhancing the appeal of the simplified system.

Advantages of Registering a Sole Proprietorship in Azerbaijan as a Foreigner

• Quick registration — complete setup in just a few days if you hold a residence permit
• Digital convenience — file reports and pay taxes online
• Minimal tax burden — only 2% under the simplified tax system
• Ideal for freelancers, consultants, and small business owners
• Business-friendly environment — Azerbaijan is actively investing in entrepreneurship support
• Strategic location — excellent access to markets in Europe, Central Asia, and the Middle East

Frequently Asked Questions

Can I register as a sole proprietor without a residence permit?
No. Only those with a valid Azerbaijani residence permit can register as sole proprietors.

Do I need to rent an office?
No office is required — you can use your residential rental address for registration.

Can I open a business bank account under my sole proprietorship?
Yes. Once your IE is registered, you can open a business account. Banks may request proof of residency and address.