Registration takes two days. The bank account and the first tax registrations are where a branch becomes real, and where the parent's profile is looked at properly. This guide is what to expect and what to bring.
The Head opens the account in person after the registration extract and the seal are issued. Kapital Bank, ABB and PASHA Bank are the usual choices for foreign-owned branches; all three have English-speaking corporate desks in Baku. Bring the registration extract, the registered statute, the Head's power of attorney and passport, the seal, the tax identification number (VÖEN), the legalised and translated parent pack, and the first client service agreement. Accounts in AZN, USD and EUR are opened together. Expect one to three weeks from the meeting to an active account, longer if compliance asks for more.
Compliance will look at the parent's country, age, ownership and activity. A parent with a short history or no declared turnover gets questions, not a refusal: what the branch will do, who its clients are, where the money comes from. The honest answer for a service office is simple: the branch invoices named clients under service agreements, the parent transfers a starting amount, and the Head draws a salary. Bring the agreements and the shareholding record to the meeting and the questions are answered on the spot.
Keep the money story clean. The starting amount comes from the parent's own account by bank transfer referenced to the resolution. Client fees arrive by transfer against invoices. Cash deposits and transfers from personal accounts invite questions you do not need.
A branch is a permanent establishment of the foreign parent under Art. 19 of the Tax Code. It pays profit tax at 20% on the profit attributable to its activity in Azerbaijan, with salaries, rent and other business expenses deductible. Profit remitted to the parent carries an additional branch remittance tax of 5%. The 2% simplified regime available to small local companies is, in practice, not available to a permanent establishment, which is the main tax cost of choosing a branch over an LLC. For a service office with modest fees and deductible salaries the difference is small; for a high-margin operation it is worth modelling.
A permanent establishment registers for VAT, at 18%. Services supplied to clients outside Azerbaijan are generally outside the scope of Azerbaijani VAT under the place-of-supply rules, so a branch whose clients are all abroad files nil or small VAT returns. Services to Azerbaijani customers are taxable in the normal way. Your accountant confirms the treatment of each contract before the first invoice.
If the Head and Deputy Head draw salaries locally, the branch registers the employment contracts electronically, withholds income tax and pays social insurance contributions. Employer social charges run at roughly 15 to 22% depending on the salary band, plus small unemployment and medical insurance contributions. Salaries may instead be paid by the parent abroad, in which case Azerbaijani payroll does not arise but the residency file should still show the appointment and the source of income. Decide before the first payroll, because switching later means re-registering contracts.
A permanent establishment files profit-tax, VAT and payroll returns electronically through the tax portal, which requires an ASAN İmza electronic signature obtained in Baku after registration. A local accountant costs 300 to 500 AZN a month for a small branch and is worth engaging before the first return: late or missing returns attract fixed penalties, and the accountant also handles the information-system registration that applies when client data is processed.
Monthly running cost of a small branch, excluding salaries: registered address 100 to 900 AZN, accountant 300 to 500 AZN, bank charges 20 to 50 AZN. That is the whole fixed overhead.
Both are part of our company-setup package.
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