Azerbaijan permits individuals to operate businesses under the “Fərdi sahibkar” (Individual Entrepreneur) status, a practical form of sole proprietorship. This article covers registration requirements, available tax regimes, and essential compliance considerations for sole proprietors in Azerbaijan in 2025.
Availability of Sole Proprietorship Status in Azerbaijan
The sole proprietorship status in Azerbaijan is formally known as “Fərdi sahibkar” (Individual Entrepreneur). Azerbaijani citizens can register directly with the State Tax Service and benefit from a straightforward process, including online registration. This business structure is commonly used, allowing individuals to invoice clients and run most business activities without the requirement to form a separate legal entity.
Main Features of the “Fərdi sahibkar” (Individual Entrepreneur) Status
| Criteria | Details |
|---|---|
| Availability | Yes; open to Azerbaijani citizens |
| Status Name | Fərdi sahibkar (Individual Entrepreneur) |
| Registration Authority | State Tax Service |
| Online Registration | Available |
| Separate Legal Entity Required | No; individual status |
Taxation Regimes for Individual Entrepreneurs
Once registered, an individual entrepreneur must choose between the general taxation regime and the simplified tax regime. Below is a summary of the tax treatment for individual entrepreneurs as of 2025:
| Regime | Applicable Activities | Tax Rate (Percentage %) | Location |
|---|---|---|---|
| Simplified Tax Regime | Most business activities | 2% | Baku |
| Simplified Tax Regime | Most business activities | 4% | Other regions |
| Simplified Tax Regime (special rates) | Retail trade, public catering | Varies | All regions |
| General Tax Regime | All activities | Subject to full tax rates | All regions |
In the simplified tax regime, the tax is calculated on gross revenue. For example, an individual entrepreneur in Baku with annual revenues of 50,000 AZN would pay 1,000 AZN (2%) in simplified tax, while the same turnover in other regions would result in a 2,000 AZN (4%) tax liability. (For USD conversion, if 1 AZN ≈ 0.59 USD: 1,000 AZN ≈ $590 USD; 2,000 AZN ≈ $1,180 USD).
Social Insurance Contributions
Regardless of the chosen tax regime, individual entrepreneurs are required to pay mandatory social insurance contributions. The exact amounts may vary according to changes in law and should be verified directly with the State Tax Service. Social insurance ensures coverage for healthcare and retirement.
Registration process for Individual Entrepreneurs
The registration of individual entrepreneurs is managed by the State Tax Service of Azerbaijan. The process can be completed online, making it accessible and efficient. After registration, the individual receives a taxpayer identification number and can legally conduct business and issue invoices.
For official guidance on the registration process and up-to-date documentation, visit the relevant section of the Azerbaijani State Tax Service site: taxes.gov.az.
Key Advantages of the “Fərdi sahibkar” Status
- Simple Registration: Online application and no need to establish a complex company structure.
- Flexible Tax Options: Choose between simplified and general taxation, matching your business needs.
- Direct Invoicing: Operate under your name and invoice both domestic and international clients.
Pro Tips for Operating as a Sole Proprietor in Azerbaijan
- Take full advantage of the online registration process via the State Tax Service website to save time and reduce paperwork.
- If operating in Baku, opt for the simplified tax regime to benefit from the 2% tax on gross revenue—significantly lower than other available regimes for many businesses.
- Keep detailed records even under simplified taxation; this makes annual reporting and social insurance calculations much easier.
- Check whether your business activity qualifies for alternative (often higher) simplified tax rates, especially in sectors like retail or public catering.
- Regularly review updates from the State Tax Service to ensure compliance, as requirements and rates may change annually.
Official Sources
For further official information on sole proprietorship registration and tax regulations in Azerbaijan, refer to these authoritative resources:
To sum up, Azerbaijan’s sole proprietorship system under “Fərdi sahibkar” offers straightforward registration, with a choice between general and simplified taxation. The 2% simplified rate in Baku is among the most competitive regionally, and mandatory social contributions provide essential coverage. Staying compliant requires regular attention to updates from the State Tax Service, but the benefits in simplicity and taxation make this a preferred structure for many Azerbaijani business operators in 2025.