A proposal to extend tax incentives available to qualifying businesses in Karabakh and East Zangezur across Azerbaijan has emerged during a discussion on widening access to credit for small companies.
The proposal was presented as one part of a broader support package for entrepreneurs who struggle to meet banks’ lending requirements because they lack collateral, have short credit histories or are not sufficiently prepared to manage borrowed funds.
Credit Growth Remains Uneven
Figures cited during the broadcast discussion put total lending to Azerbaijan’s economy at about 34.9 billion manats ($20.5 billion). Household loans accounted for roughly 60% of the total, while industry received 7.8% and agriculture 1.5%, according to the discussion.
The speakers also said lending to industry had increased by just 0.4% over the year, compared with an 84% rise in lending to the transport sector. They cited the contrast as evidence that overall credit growth does not necessarily make financing more accessible to small manufacturers or rural entrepreneurs.
Commercial banks have an incentive to lend, but they also evaluate borrowers’ risk and ability to repay. Startups and microbusinesses frequently lack the stable revenue, credit record and assets that banks require. In rural areas, difficulties documenting property ownership can create another obstacle to using property as collateral.
The discussion also highlighted shortcomings within some small businesses, including weak accounting, cash-flow management and organizational structures. Those problems increase risk for lenders and can leave entrepreneurs unable to obtain the financing needed to expand.
Existing Incentives in Liberated Territories
Under Azerbaijan’s current tax rules, qualifying residents of the liberated territories are exempt from profit or entrepreneurial income tax, property tax, land tax and simplified tax for 10 years beginning Jan. 1, 2023.
The State Tax Service also says registered value-added tax payers in those territories may import approved machinery, technological equipment, raw materials and supplies free of VAT for 10 years, subject to the applicable conditions.
The proposal discussed in the broadcast calls for a similar approach to be considered more broadly across Azerbaijan to stimulate entrepreneurship. It is a policy recommendation, not an announced government decision.
Financing and Advice Also Needed
The participant argued that tax relief alone would not solve the collateral problem or guarantee access to funding. The proposed package would also include small startup-financing programs that allow new businesses to establish operations before seeking larger commercial loans.
Business advice should form another part of the support system, including assistance with business plans, market research and financial management, the discussion said. Programs run by the European Bank for Reconstruction and Development for small and medium-sized enterprises were cited as one possible model.
The central recommendation was to combine tax incentives, financing and practical preparation for entrepreneurs rather than rely on any single measure.
Sources: Vesti Baku; Azerbaijan State Tax Service; broadcast discussion.