Outsourcing Services in Azerbaijan 

 

 

The terminology mostly used in international practice such as outsourcing of employees, out-staffing, employee or labor dispatch are all defined as “provision of workforce” under the Tax Code of Azerbaijan. However, neither the Employment Code nor Civil Code provides further regulation regarding outsourcing in Azerbaijan. Therefore, outsourcing services and out-staffing services in Azerbaijan are among non-regulated areas.

 

As in international practice, many businesses in Azerbaijan use outsourcing (out-staffing) of employees due to its advantages. This shall not be considered as a temporary solution of employment issues; indeed, many foreign-owned companies operating in Azerbaijan have been obtaining outsourcing services for many years, not only at the initial stages of business, and even after it has grown and keeps operations.

 

Below we explain the primary advantages of outsourcing in Azerbaijan:

 

• To employ local citizens or foreigners, a business must have a legal entity in Azerbaijan (branch, representative office or a subsidiary company). Therefore, in the early stages of entering market, it may not be feasible to incorporate a company just to employ one employee with so many questions about the future success of business in Azerbaijan. If fails, company formation, its maintenance, and eventual liquidation would require resources (funds) and time. In case of outsourcing, the business would just need to pay for the employee salary and the fee charged by consulting companies for outsourcing (outstaffing) services in Azerbaijan;

• It provides flexibility about the business decisions and remove all concerns of employment regulations, paying taxes, paying salaries of the outsourced employees;

• Under the Tax Code of Azerbaijan, if the recipient of services (client) is foreigner (non-resident person or foreign company), then such outsourcing services would be exempt from VAT in Azerbaijan.

• Eliminates costs of hiring internal accountant and lawyers for providing legal and services, submitting tax returns, regulating contract and employment issues and other compliance matters;

• Any risk regarding breach of employment or tax regulations, and any other laws stemming from employment is transferred to the company providing outsourcing services;

• In case of employing foreign citizens, obtaining and renewal of work permits and compliance with immigration regulations are performed by the outsourcing companies in Azerbaijan.

 

 

It must be noted that such employment format based on outsourcing requires deep knowledge of local contract law and practice. The contract on outsourcing services requires lawyer review in order to regulate mutual matters and terms. Moreover, in practice, legal support would be needed in case of tax audit of the company providing outsourcing services as well the client – in order to explain the business model and the reason of not having employment agreement with the employee directly if the business has operations in Azerbaijan. This shall not create an impression of having employees worked for the company without employment agreement – which is prohibited and harshly punished by law.

 

With a team of professional lawyers, accountant and tax consultants we provide full outsourcing and out-staffing services in Azerbaijan at all stages of cooperation and business building. With tax optimized solutions we offer very competitive fees for outsourcing services in Azerbaijan. For details and questions, please contact us.