Proposal put forward to revise the duration of income tax incentives under the startup certificate
The duration of income tax incentives under the startup certificate in Azerbaijan should be reconsidered.
According to Startup.az, this recommendation is outlined in the “White Paper 2025” report published by the American Chamber of Commerce in Azerbaijan (AmCham).
The document notes that the current income tax exemption under the startup certificate applies only to enterprises classified as micro and small businesses. As a result, companies with annual turnover exceeding 3 million manats are automatically excluded from the incentive framework. The report argues that this policy fails to take into account modern innovative business models such as aggregators, platforms, and resellers.
Startups operating as aggregators, platforms, or intermediaries—for example, those reselling services from multiple suppliers—often report high gross turnover and are therefore effectively penalized for their non-traditional business models. In such cases, the high “gross sales” collected by the startup are largely passed directly to suppliers, while the company’s actual income consists only of commissions or service fees.
The report further emphasizes that despite high turnover, most startups built from scratch do not generate profits in their early years, as revenues are reinvested into growth, scaling, and human capital. From this perspective, income tax incentives provided under the startup certificate offer limited practical benefit to high-growth but loss-making startups. High-potential startups often intentionally operate without profit for 5–10 years while investing in technology and market expansion. Consequently, by the time the tax incentive period expires, the company may still not be profitable, rendering the incentive ineffective. As a result, the mechanism loses its impact, and startups and founders are effectively forced into a waiting position in order to benefit from tax relief.
AmCham proposes the following changes to the current startup certificate model:
a) Eligibility for a startup certificate should apply only to companies that apply within the first two years after state registration. This would ensure that the policy is specifically targeted at newly established startups.
b) The existing turnover-based model should be replaced with a model based on gross profit (total turnover minus the cost of goods or services) or net profit (earned commission or service fees). This would more accurately reflect the startup’s actual scale of operations rather than overall turnover.
In addition, the duration of the income tax incentive should be redefined. Instead of the current fixed three-year exemption period, it is proposed that the incentive apply to the first three financial years in which the company generates profit within a 10-year eligibility window.