Incentives for Foreign Investment in Azerbaijan 5 November 2013 TEAS Azerbaijan Business Forum London James E Hogan Managing Partner Salans FMC SNR Denton Baku Office

Azerbaijan Investment Policy 5 November Very open to foreign investment 1992 to date Overall an excellent track record for respecting the stability and sanctity of contracts Avoiding disputes, distractions, costly delays Recent trends include the implementation of special economic zones Focus is on diversifying the economy away from oil and gas exploration and production, while exploiting the competitive advantages inherent in the Azerbaijani economy

Law on Special Economic Zones, 14 April November Provides a legal basis and framework for the establishment and operation of territorial zones To accelerate development of entrepreneurial activity in connection with the production of highly competitive goods and the rendering of highly competitive services using modern technology Simplified customs regime Customs duties exemptions Simplified income tax Exemption from most other taxes Ineligible Activities: Extraction, production, processing of oil, petroleum production, natural gas, precious metals and mineral resources Television-radio broadcasting activity Production of alcoholic beverages and tobacco products Production, storage and sale of goods prohibited or restricted for civil turnover

Special Economic Zones - Benefits 5 November Customs Simplified customs regime Indefinite exemption from import duties upon import into and export from zone (unless imported into the customs territory of Azerbaijan) Exception: excised goods Possibility of duty free temporary import for finishing, repair, display for goods produced with within the zone No time limits for re-export from SEZ Tax A simplified tax regime applies Profits Tax assessed on basis of 0.5% of gross turnover, payable quarterly No reductions in personal income tax, social contributions Employment Law/Currency Regulation No special benefits

Recent Presidential Decrees 5 November Industrial Parks Presidential Decree No. 548 of 21 December 2011 On the Establishment of the Sumgait Chemical Industrial Park Presidential Decree of 28 December 2011 On the Establishment of the Balakhani Industrial Park in Baku Exemption from import VAT for technical equipment for 7 years Exemption from property tax for 7 years Exemption from a land tax for 7 years Exemption from income tax for 7 years Not yet known whether OGPC will have a similar tax and customs regime established

Information and Communication Technologies 5 November was declared the Year of Information and Communication Technologies in Azerbaijan (Presidential Order No of 2013) The State Fund for the Development of Information Technologies (Presidential Decree No of 2012) invests in the charter capital of companies involved in ICT (both local and foreign owned); provides subsidised loans via local banks; providing grants for startups A High Technology Park was established in Sumgait by Presidential Decree No. 736 (2013)

High Technology Park - Benefits 5 November For a period of 7 years following registration as a resident of a technological park, legal entities and entrepreneurs benefit from: no income tax on any income (other than income from employment) generated from activities in the technological park (Article , Tax Code) no profits tax on any income generated from activities in the technology park (Article , Tax Code) no import VAT upon importation of machinery, technological equipment and plants for the construction of production facilities within such parks or for research and development work (Article , Tax Code) no property tax in respect of property located in the technology park (Article 199.7, Tax Code) no land tax in respect of on land in the technology park (Article 207.2, Tax Code).

Thank you James E. Hogan Managing Partner Salans FMC SNR Denton Hyatt International Center Hyatt Tower 2, 8 Izmir Street Baku AZ1065, Azerbaijan T F dentons.com © 2013 Dentons Dentons is an international legal practice providing client services worldwide through its member firms and affiliates. This publication is not designed to provide legal or other advice and you should not take, or refrain from taking, action based on its content. Please see dentons.com for Legal Notices.