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How to obtain an Import and Export Exemption Certificate?

 Fuad Gashamov is an attorney and partner at EKVITA.

Imamverdi Novruzlu is a legal assistant at EKVITA

General information

Recently, most of the services provided by the state authorities has become electronic and the communication between the officer and citizen has been minimized for the transparency purposes. To this end, the State Customs Committee also provides electronic services, as well as the service related to issue of import and export exemption certificate (the “Certificate”).

Production sharing agreements (PSAs) and their respective protocols concerning import-export duties and taxes (the “Protocols”) are the main regulatory instruments with regard to the process of obtaining the Certificate.

In accordance with the Protocols, each contractor party, its affiliates, operating company or a sub-contractor or their agent (“Registered Company”) have the right to import into, and re-export from Azerbaijan free of any taxes and restrictions in their own name the following:

all equipment, materials, machinery and tools, vehicles, spare parts, goods and other supplies necessary according to the Contractor's reasonable opinion for the proper conduct and achievement of hydrocarbon activities.
foodstuff (subject to compliance with applicable regulations pertaining to the import of foodstuff).

In accordance with the Protocol, Contractor should give preference to Azerbaijani suppliers if it is able to compete with foreign suppliers in all important aspects in terms of price, quality and availability of goods.

Each Registered Company and all of its employees and family members have the right to import into and re-export from Azerbaijan all furniture, clothing, household appliances, vehicles, spare parts and all personal effects (including foodstuff, alcohol and tobacco products as permitted to import free of customs duties under Azerbaijan customs legislation) for personal use by employees and their families assigned to work in or travel to Azerbaijan free of taxes and restrictions at any time.

Obtaining the Certificate

Each Protocol specifies the procedure for obtaining of the Certificate. Therefore, first of all, the company should determine which PSA applies to its operations.

The Certificate may be obtained by either the contractor, its partner company, the operating company or the subcontractor or their agents. The contractor or subcontractor applies in written form to the State Customs Committee in order to obtain the Certificate.

As noted, companies now can apply electronically for obtaining the Certificate, and this e-service is free.

Under the Protocols, the following documents are required to obtain the Certificate:

Application to the Customs Committee;
A copy of the State Registration Certificate issued by the Ministry of Taxes;
A copy of the Charter / Regulation;
A copy of the Extract from the State Registry;
A copy of the contract that relates to the respective PSA;
List of goods to be imported under the contract during the relevant years;
A copy of the previous expired Certificate (if you do not apply for the first time);
A copy of the VAT exemption (zero-rating) certificate;
Annex 3 to the Protocol (application for the certificate of exemption from import and export taxes);
Appendix 4 to the Protocol (appendix to the application for obtaining the certificate of exemption from import and export taxes by subcontractors).

 

Within 30 calendar days after receiving of the written application, the State Customs Committee issues the numbered Certificate to the applicant, valid from the date of receipt of the respective application.

If the State Customs Committee refuses to issue the Certificate, it has to explain in writing to the applicant the reason for the refusal. In this case, the applicant may challenge the decision to refuse by filing an administrative and (or) judicial complaint.

If the Certificate is obtained by a contractor or operating company, this Certificate will be valid for 5 years. If it is obtained by subcontractor, the Certificate will be valid for 1 year or during the term of the contract concluded with the subcontractor for less than 1 year.

It should be noted that, the validity of the Certificate will be renewed by re-submitting the application in the manner prescribed above. When renewing the Certificate, the previous one must be handed over regardless of whether it has expired or not. The Certificate cannot be transferred or issued to another person and all current Certificates must be submitted to the State Customs Committee directly after the completion of the business activities regarding hydrocarbon operations.

After the expiration of the Certificate, the Certificate holder may face certain issues until obtaining the new one. Therefore, the company must apply for the new Certificate before the expiration of the previous one. Obtaining the certificate does not exclude the requirements arising from the customs legislation during the import and export of goods. Thus, in any case, when importing, goods shall be declared and cleared in accordance with the customs legislation.

Recommendation

In practice, there are certain difficulties in obtaining the Certificate. This issue is mainly related to the requirement of indication of the commodity nomenclature (commodity codes) of foreign economic activity in the list of goods to be imported.

Commodity codes are reflected in the Resolution of the Cabinet of Ministers No. 500 dated 17 November 2017 on Approval of the “Commodity nomenclature of foreign economic activity of the Republic of Azerbaijan, rates of import customs duties and rates of export customs duties”.

We recommend to companies applying for the Certificate to make sure that the codes of the goods to be written in the list of imported goods are correct. For this purpose, it is advisable to consult experienced professionals regarding the codes. Otherwise, the State Customs Committee would refuse to issue the Certificate due to incorrect codes of goods. Re- applying for the Certificate may result in extra time loss.

EKVITA is a full-service legal, tax and management consulting company with circa 50 full time professionals. Its active clients include several Fortune 500 companies operating globally. The company have also been engaged in government projects as well as worked for international donor organizations such as World Bank.

EKVITA company delivers integrated professional services combining general business advisory support with very strong legal, finance and tax practice.

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04 May, 2020