The Central Bank of the Republic of Azerbaijan (the CBA) has issued the new Rules on Foreign Currency Operations of Residents and Non-Residents in the Republic of Azerbaijan (the Currency Rules). The Currency Rules enter into force today, on 8 December 2016, and supersede the previous rules dated 13 June 2002.
The Currency Rules set the rules for foreign currency operations carried out through banks by residents and non-residents. Under Azerbaijani law, the definition of "resident" includes individuals having a permanent place of residence in Azerbaijan and legal entities established in accordance with Azerbaijani law. The branches and representative offices of foreign entities established in Azerbaijan do not fall within the definition of resident - they are deemed non-residents for the purposes of the currency regulations.
Currency Operations without Opening a Bank Account
Currency operations without opening a bank account are now subject to a new legal regime:
- they can only be carried out by resident and non-resident individuals;
- outbound money transfers by resident and non-resident individuals are limited to the equivalent of USD 1,000 per day, but no more than USD 10,000 per month; and
- inbound money transfers are accepted without any limitation.
Currency Operations through Bank Accounts
The CBA abolished the individual permit for offshore payments not listed in the law, and allowed only the following bank transfers:
- payments (including advance payments) for imported goods or services by residents and non-residents. In case of advance payments, documents confirming import of goods or services must be provided to the bank within 180 days;
- payments by residents and non-residents under re-export contracts;
- refunds of advance payments received by residents and non-residents under export contracts which have been terminated;
- payments by resident entities to their foreign representative offices, branches, and affiliates for a specified and declared purpose;
- repayments by residents and non-residents of principal, interest, fees, and penalties on foreign loans and other debt obligations;
- payments of dividends by residents to non-residents;
- repatriation of foreign investments, including transfers of revenues and other amounts, by non-residents;
- payments under labor agreements by residents and non-residents to non-resident employees;
- payments by residents and non-residents for litigation, arbitration, notary and other mandatory fees, scholarships, pensions, alimony and related costs, as well as inheritance payments by non-residents;
- payments by residents and non-residents for participation in international organisations, conferences and other events; education and medical treatment; copyright, patents and franchising; and fees to foreign publishers, libraries, databases;
- payments for personal purposes, such as transfers by resident individuals of up to USD 10,000 per month to close relatives; transfers by resident and non-resident individuals of any amounts earlier transferred to Azerbaijan or brought in cash and declared to customs authorities; and transfers for other purposes by resident and non-resident individuals of up to USD 1,000 per day, but no more than USD 10,000 per month; and
- transfers by residents and non-residents for exporting capital, provided that such transfers are made for equity investments, acquisition of securities, and acquisition of ownership rights on land, subsoil, buildings, as well as other rights to immovable property. This means that the Currency Rules effectively abolished the previous entitlement for resident entities to transfer foreign currency funds to their overseas bank accounts for saving purposes, while resident and non-resident individuals' ability to transfer money to their overseas bank accounts is subject to the limitations specified in sub-paragraph (11) above, although the previous rules did not contain any limitations.
The banks may only process the above-listed payments upon submission of supporting documentation by residents and non-residents. It is now questionable how transfers not listed above may be processed because, as mentioned above, the CBA abolished the individual permit procedures for non-listed transactions. This will, most likely, effectively mean that such non-listed transactions would be totally prohibited.