Azerbaijan’s tax incentives encourage Israeli technology companies to move

Globes exclusively announced that among the incentives offered to Israeli startups that choose to move to Azerbaijan are full exemptions from corporate tax, purchase tax, real estate tax and dividends for a period of ten years.

The decision to take such a step during the current war, despite a wave of anti-Israel sentiment in a Shia Muslim-majority country, is exceptional and surprising. The move follows the launch of a technology park currently under construction in Baku, although concessions offered by the Azeri government are available to Israeli technology companies setting up anywhere in the country. According to the information provided by the sources to “Globes”, several Israeli technology companies are already negotiating about relocation to Azerbaijan.

Above and beyond the incentives listed above, company employees will pay 0% personal income tax on monthly wages up to $4,700. To qualify for these incentives, companies must have been in business for at least one year or have ten or more full-time employees, or have an annual revenue of at least 200,000 manats (430,000 AZN).

The program provides immigration support to the country, which includes work permit exemptions, residence permit assistance, and logistical arrangements such as finding an office and residence.

Azerbaijan is trying to become a technological hub of the Eurasian region, a gateway to Turkic countries. Baku’s relations with Ankara are based on the idea of ​​”one nation, two countries”. Therefore, at a time when relations between Israel and Turkey are at an unprecedented low, companies looking for extensive operations in Turkey will be able to benefit from the depth of relations between Turkey and Azerbaijan.

It’s time to get rid of the fat

The program is led by the Innovation and Digital Development Agency of Azerbaijan (IDDA) and its main goal is to diversify the economy. In 2022, 47.8% of Azerbaijan’s GDP, 52.7% of its budget resources, and 92.5% of its exports fell to the oil and gas sector. gold.

Azerbaijan has been inspired by the Gulf countries, which in recent years have worked harder to diversify their economies and “wean” off fossil fuels. For example, the UAE launched a program last year that required private companies to hire 6% local workers in 2024 and 10% by 2026. On the other hand, Azerbaijan does not force the moving companies to hire at a certain percentage. of local workers.

However, IDDA is already working on training relevant personnel and funding scholarships for over 3,000 students for IT courses. The goal is to train as many young people as possible to join foreign companies. Next year, the number of scholarships for local residents is expected to reach 5,000.

Pasha Aliyev, the IDDA regional vice-president responsible for the relocation of startups in Azerbaijan, is fluent in Hebrew. He tells Globus that the initiative to attract Israeli companies is part of a broader effort to build a strong technological ecosystem in Azerbaijan. He says: “Our young and multilingual population combines with diverse cultures to create a dynamic and innovative workforce. In addition, our advanced infrastructure allows companies moving to the country to settle and integrate quickly in their new home. Azerbaijan is an ideal location for technology companies looking for growth and innovation in the Asian market. “.

Development of relations with Israel

Israel-Azerbaijan relations have been developing since 1992 on the basis of the sale of Azerbaijani oil to Israel and advanced technology Israeli weapon systems to Azerbaijan. In the first half of 2024, according to the Baku Customs Bureau, there was a 55% increase in oil imports from Azerbaijan to Israel, which amounted to 989 million dollars. As Globes revealed, despite Turkish President Recep Tayyip Erdogan’s trade embargo on Israel, Azerbaijani oil continues to flow through the BTC (Baku-Tbilisi-Ceyhan) pipeline – from where it is loaded onto tankers in the Turkish port city of Ceyhan. For Haifa. The main reason for the oil supply not being damaged is the close relationship between President of Azerbaijan Ilham Aliyev and Erdogan.

On the other hand, Azerbaijan is the main customer of Israel’s defense industry. Among other things, it bought Spike anti-tank missiles from Rafael, Hermes anti-aircraft missiles from Elbit and Harop munitions from Israel Aerospace Industries (IAI). Last October, Azarkosmos signed a contract with IAI for two OptSat500 satellites, which will replace the Azarsky satellite manufactured by Airbus, which was discontinued in April 2023.

Thus, the development of the technology sector in Azerbaijan will diversify both its economy and trade relations with Israel. “We are focusing on companies that will come to Azerbaijan, attract local people and create a critical mass,” Aliyev explains. “We are in regular contact with institutions such as the Export Institute in Israel, and we are also in regular contact with similar institutions in other countries.”

Globes, Israel business news – en.globes.co.il – published on September 5, 2024.

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