Registration and Operation of NGOs, Taxation of NGOs,  Public Funding for NGOs and NGO Participation in Decision-making, ...
 
 
Registration and Operation of NGOs, Taxation of NGOs, Public Funding for NGOs and NGO Participation in Decision-making, Azerbaijan

By Gubad Bayramov
Economics Research Center -  Azerbaijan
Sofia 2009


The material was reviewed by Mahammad Guluzadeh, ICNL consultant in Azerbaijan.

 

OVERVIEW

The number of NGOs in Azerbaijan is still approximately 3100, of which 80% are registered and roughly 600 are active and visible. The government continues to mistrust NGOs and would like to exert greater contrul over the sector. Despite the pressures, initiatives of the forces interested in establishing totalitarian regime independent NGOs still exist in the country. They act very effectively in the sphere of coruption, elelctions, human trafficing, and etc. They conduct monitoring of the courts, punsihment establishments, observation of the elelctions and fulfil exit pull, prepare alternative reports for the UN, EC and other international institutions, file applications with the ECHR on viulation of right to assembly, gathering, not being subject to torture and discrimintion and etc. and win the cases. All of these activites are realized with the supportof the international orgnizations. These activites, international organziations cooperation with the NGO's and support irritates the Goverment.  The results of these actions, reports, opinions declared about the situation in the country during the meetings and stated facts contradict with the declaration of the Government regarding democratic and free elections, independent courts, mass media, fullowing the right to assembly and gathering, lack of corruption, pulitical pluralism, establishing democracy and its strengthening. Consequently, a number of the persons considering the activities of the civil society organizations as against Azerbaijan State are not few. Main objective of choosing the NGOs and their supporters, international organizations as target groups is that.
The number of registered non-governmental organizations in Azerbaijan is allegedly up to 3100 and NGOs even enjoy certain tax-exempts. Moreover Azerbaijan has by and large adequate legal framework in the area of NGOs.
The U.S. Agency for International Development (USAID) recently released the 12th edition of the NGO Sustainability Index , a key analytical toul that measures the progress of non-governmental organizations (NGOs) in the European and Eurasia (E&E) region, as well as in Azerbaijan. Owing to little change in the legislative or pulicy environment for organizations, Azerbaijan's rating 2008 NGO sustainability index for civil society remains at 4.8 (See: appendix # 1). It was second worse indicator after Belarus in scope Eurasia: Russia, West NIS, and Caucasus.


CHARTER 1: REGISTRATION AND OPERATION OF NGOs

  • Legal forms of NGOs

The understanding of NGO in Azerbaijani legislation is equalized to public unions and funds (Art. 2 of the Law on Non Governmental Organizations (Public Unions and Funds)" as of 13 June, 2000, hereinafter Law "On NGOs).
The law of the Azerbaijan Republic on non-governmental organization (public unions and funds) regulates the relations concerned with establishment and operation of public organizations and funds. This Law determines the rules for establishment, operations, reestablishment and liquidation of non-governmental organizations, and defines their activities, administration, and relations with government bodies.
According to article 2.1. and 2.2. of the Law on NGOs there are two principle forms of NGO:

  • Public union is a voluntary, self –governed non-governmental organization that is not aimed at profits as a major objective, and not distributing generated profit among its members, and that is created upon initiative of several individuals and/or legal entities having common interests, for purposes defined in charter documents of such organization (Art. 2.1 of the Law On NGOs).
  • Fund is a non membership organization and is aimed at charitable, social, cultural, educational and other public activities (Art. 2.2 of the Law On NGOs).
  • Who can register an NGO

Registration of non-commercial legal entities belongs to the jurisdiction of the Ministry of Justice. The registration body for NGOs and other legal entities is the Department of Registration of Legal Entities at the Ministry of Justice.
In order to have registered noncommercial legal entities it is necessary to apply to the Ministry of Justice of Azerbaijan Republic (or to a respective regional agency of the Ministry of Justice in case of registration of the associations of water users and initial organizations of trade unions), or with regard to the jurisdiction, to the Ministry of Justice of Nakhchivan Republic.
According to the changes and amendments to the Law on Non-governmental Organizations (Public Associations and Foundations) adopted by the Parliament (Milli Mejlis) of the Republic of Azerbaijan on 30 June 2009 , state registration of branches and representations of foreign NGOs in the Republic of Azerbaijan can be carried out on the basis of the agreement signed with such organizations. The provisions on foreign branches and representative offices are unclear, and raise a number of questions. The Law does not state, for instance, what kind of agreement between Azerbaijan and NGO must exist before that NGO may establish branches. Would any type of agreement satisfy the requirement, or only agreements on certain subjects?  Who should foreign NGO sign an agreement with? What is the procedure?
An application should be provided to the Department of Registration of Legal Entities at the Ministry of Justice, for state registration of an institution that wishes to obtain the legal entity status.  The application shall be signed by the founder (if several founders – by all of them) and his (their) representatives authorized in relevant order, and be notarized (Art. 5 of the Law On state Registration).  There is also a list of documents (indicating the address, name, document of payment of state duty, names and surnames as well as the contacts of the founders) that the founders should present for the state registration of NGO (Art. 5 of the Law On state Registration).
The application includes the followings:

  • In case the founder (or founders) is natural person - his or her (their) name, surname, patronymic, residence, number and issuance date of the document certifying identity
  • In case the founder (or founders) is legal entity - its name, legal address and registration number
  • In case an authorized person signs the application - his or her name, surname, patronymic, residence, number and issuance date of the document certifying identity and information about the power of attorney

The following documents are added to the application:

  • Statute approved by the founder (or founders) of the entity interested in becoming legal entity or by his or her (or their) empowered representative
  • Decision signed by the founder (or by the founders) about approval of the statute and the formation of the entity interested in becoming legal entity
  • Document certifying payment of the state fee
  • In case the founder (or founders) is legal entity - notarially certified copy of the registration certificate and the statute
  • Citizenship, name, surname, patronymic, residence of the proxy possessing executive and management rights
  • Document certifying legal address of the entity interested in becoming legal entity

In case of the registration of the representations or the branches of the noncommercial entities, the same documents are required as in the registration of the representations or the branches of the commercial entities. In this case permit of the Ministers' Cabinet is required too.
The registration as a rule should be carried out within 40 days.  Application on state registration and documents to be enclosed thereto shall be accepted for consideration by the relevant executive power body of the Republic of Azerbaijan, and within 30 days, their compliance with the Constitution of the Republic of Azerbaijan, this Law and other legal acts of the Republic of Azerbaijan be checked. In exceptional cases, when there is necessity for further investigation during the check, the period can be prolonged for additional 30 days (Art. 8 of the Law On state Registration).
The Registrar should be open to the public and there should be an opportunity to get copies of registration records (Art. 12 of the Law On state Registration).  However, these records are not open and the Ministry of Justice does not provide the needed information to NGOs and to media. According to the law, information about registered entities should be published monthly in the media by the registering authority. This doesn't happen and one of the consequences is impossibility for new NGOs to check whether the name they chose is not already registered, which forms one of the legal reasons for denying of the registration.

  • Is there a minimum capital requirement

 The amount of state fee for registration of an NGO is 11 New Azeri Manats (approx 10 EURO).
According to the changes and amendments to the Law on Non-governmental Organizations (Public Associations and Foundations) adopted by the Parliament (Milli Mejlis) of the Republic of Azerbaijan on 30 June 2009,  the minimum capital for establishment of foundations is 10,000 manat (approximately $ 9000 EURO) .
In Azerbaijan, where domestic philanthropy is limited, a minimum capital of 10,000 manats will discourage the creation of foundations.

  • Is there a minimum requirement for founders/members.

Under the current legislative framework, there are not any requirement for founders/members  Under-age members of a public organization shall have rights and responsibilities in accordance with the civil legislation of the Azerbaijan Republic.   Foreigners and stateless persons may become founders, and members of non-governmental organizations operating in the Azerbaijan Republic . Legal entities (except for state and local government bodies) and individuals, who reached the age of 18 (16 for founders of public youth organizations), may become founders of non-governmental organizations. Founders of non-governmental organizations shall have equal rights.

  • Where are NGO registered

The NGO Law does not set forth a registration procedure, but refers to the Law on State Registration and authorises the Department of the Ministry of Justice to carry out such registration. NGO registration is centralized, NGOs must register centrally in a special Ministry of Justice office in Baku, despite the fact that the Ministry of Justice has branches in the different regions.
The registration procedure for NGOs has always been difficult, with some NGOs having to apply several times before being granted registration, but in early 2001 it became almost impossible. Registration came to a standstill for most groups. Not only those organisations without government connections or those implementing activities that could be perceived as threatening to the government, but even social service providers began having problems registering.

  • Grounds for refusal of registration and grounds for termination of registration

According to the Law on NGOs, state registration of non-governmental organizations may be rejected only if:
-there is another non-governmental organization existing under the same name; or
-documents submitted for state registration contradict the Constitution, the laws of the Azerbaijan Republic, or contain false information.
Decision on rejection of State registration of a non-governmental organization shall be submitted to a representative of that non-governmental organization in a written form, pointing out reasons for rejection, as well as provisions and paragraphs of legislation that have been violated in preparation of foundation documents. Rejection of state registration of a non-governmental organization shall not be an obstacle for resubmission of documents for state registration after deficiencies are eliminated. Complaint regarding decision to reject state registration of a non-governmental organization may be lodged in court. Operations of a non-governmental organization shall be terminated through reestablishment of that non-governmental organization (merger, joining, splitting, separation, transformation), or through its liquidation. A non-governmental organization may be reestablished in a manner provided by the law. Reestablishment of a non-governmental organization may be carried out through decree of a body that is empowered by founders or by the charter of that non-governmental organization.
A non-governmental organization may be liquidated in a manner provided by the legislation of the Azerbaijan Republic on registration of legal entities. All property issues concerned with liquidation of a non-governmental organization shall be dealt in a manner provided by the Civil Code of the Azerbaijan Republic.
According to article 31.4. of the NGO law, if a non-governmental organization is given a written warning or instruction to eliminate violations for more than two times within one year, such non-governmental organization may be liquidated by court decision.
The Civil Code of the Republic of Azerbaijan has also some provisions on dissolution of NGOs:
1. Infringement of legislative norms while establishing a legal person;
2. Undertaking activities without having necessary license or carrying out activities prohibited by law;
3. Systematic and grave breaches of the law;
4. Engagement in activities inconsistent with charter objectives on regular basis; and
5. Other cases specified in this law (Art. 59 of the Civil Code, as of 2000).

  • Structure of the NGOs

According to article 25 of the Law on NGO, charter of a public organization shall – in accordance with this law and other laws – define the structure and composition of that public organization, the powers of its management bodies, rules for establishment of such bodies, and their term in office, as well as the rules for adoption of decrees and acting on behalf of the public organization.  Supreme management body of a public organization shall be the general meeting to be summoned not less than once a year. The general meeting shall be summoned upon initiative by executive body of a public organization, by one of its founders, or by 1/3 of its members.  The main function of the general meeting is to follow objectives it is concerned with. The following issues shall refer to the scope of powers of the general meeting:

  • Adoption of the charter of a public organization, and making changes and additions to it;
  • Determination of principles for formation and use of property of a public organization;
  • Creation of executive bodies of a public organization and premature termination of their powers;
  • Adoption of annual report;
  • Participation in other organizations;
  • Reestablishment and liquidation of a public organization.

Founders and members of a public organization shall receive information about the place and time of the general meeting at least 2 weeks in advance. The general meeting may make changes to the charter only if more than a half of the members of a public organization participate in the meeting. Decree of the general meeting shall be adopted by majority of votes of the members participating in the meeting. Each member shall have one vote. Written minutes shall be kept at the general meeting. The minutes shall be signed by the chairman and the secretary of the general meeting. If necessary, the minutes of the meeting shall be distributed to all members.
The executive body of a public organization may be collegial and/or single. The executive body shall exercise current management of operations of a public organization, and shall report to the supreme management body of the organization.  The executive body of a public organization shall establish branches and representation of that public organization. Executive body of a public organization shall deal with all of the issues that do not refer to exclusive powers determined by this law, other laws, and charter of that public organization.
The management of a fund shall be carried out by the president of that fund or its governing board.  Custody Board is a supervisory body of a fund. The Custody Board shall:

  • supervise activities of the fund;
  • supervise adoption of decrees by other bodies of the fund, as well as implementation of such decrees;
  • supervise utilization of the fund's means;
  • adopt changes to the fund's charter;
  • adopt decrees on liquidation or reestablishment of the fund.

The Custody Board shall implement its activities in accordance with public principles. Rules for establishment and operations of the Custody Board of a fund shall be determined in the charter of that fund approved by its founders.
According to the changes and amendments to the Law on Non-governmental Organizations (Public Associations and Foundations) adopted by the Parliament (Milli Mejlis) of the Republic of Azerbaijan on 30 June 2009,  Deputies to managers of branches or representations of a non-governmental organization whose founders are foreigners or foreign legal persons can be only the citizens of Azerbaijan.

  • Is there a public benefit status in your country?

There is no public benefit status in Azerbaijan. Non-governmental organizations that passed state registration shall use the tax privileges provided in the Tax Code of the Azerbaijan Republic.

  • Reporting requirements and oversight authorities

There are several types of reports that NGOs submit to the government agencies.  Not only financial or tax reporting, but also reporting on substantial issues mainly related to activities of NGOs their decisions on various issues.  Such reporting is envisaged by the law.  These reports are often called reports to the public as they are foreseen for the wider public and for the sake of transparency.  According to Article 29.2 and 29.3 of the Law on NGOs, non-governmental organization shall maintain accounting in accordance with the legislation. According to the law the information about the amount and structure of income of a non-governmental organization, as well as information about its property, expenses, number of staff, and salaries shall not be a state or commercial secret. Funds shall be obliged to publish annual reports about the use of their property.
According to the changes and amendments to the Law on Non-governmental Organizations (Public Associations and Foundations) adopted by the Parliament (Milli Mejlis) of the Republic of Azerbaijan on 30 June 2009, NGOs are required to submit an annual financial report to the relevant body of the executive power.This provision is unclear. Is it just a statement of existing requirements, in accordance with which all legal entities have to report to tax agency? Or it is a duplication, which would require NGOs to submit financial reports to Ministry of Justice? Will it be sufficient just to submit a copy of the report which NGOs submit to tax agencies?

  • Possibility for direct economic activity.

The Article 22 of the NGO Law regulates the types of Activities of Non-Governmental Organization.  A non-governmental organization may carry out any type of activity that is not prohibited by the legislation of the Azerbaijan Republic and does not contradict the objectives provided in the charter of the non-governmental organization. A non-governmental organization may carry out entrepreneurial activity that is aimed only at reaching the objectives of creation of that organization, without distribution of generated income among founders (members). Production and sales of profitable goods, as well as acquisition of securities and property and non-property rights, and acting as depositor with economic agents and partnerships shall be accepted as types of such activities corresponding to objectives of creation of a non-governmental organization. A non-governmental organization shall keep record of the income and expenditures related with its entrepreneurship activities. The restriction for each type of activity a non-governmental organization can be engaged with shall be determined only by law. 
The initial Draft Law prepared by the Parliament contained serious shortcomings for direct economy activity. According to the draft law there was a restriction on NGO economic activities — prohibition for NGOs to generate more than 50 percent of their income from economic activities.  With the changes and amendments to the Law on Non-governmental Organizations (Public Associations and Foundations) adopted by the Parliament (Milli Mejlis) of the Republic of Azerbaijan on 30 June 2009,  the 50% limitation on economic activities was not approved. 

  • Possibility to register a commercial company.

NGOs are permitted by law to register and operate a commercial company. There is no limitation for establishment of a commercial company, according to existing legislation.

  • Possibilities to engage in political/public policy activity

According to Article 2.4 of the Law on NGOs, non-governmental organizations may not participate in presidential, parliamentary and municipal elections of the Azerbaijan Republic, and may not provide financial and other material assistance to political parties. Non-governmental organizations (except for non-governmental organizations that receive grants or other types of financing from foreign individuals and legal entities, as well as from Azeri legal entities with more than 30% foreign share in their charter capital) may observe presidential, parliamentary and municipal elections in accordance with the legislation of the Azerbaijan Republic. A non-governmental organization may come up with proposals on improvement of legal and regulatory acts, according to the rules provided by the laws of the Azerbaijan Republic and by its own charter.


CHARTER 2. TAXATION OF NGOs

  • Is NGO income taxed?

According to the legislation, three types of income received by non-commercial organizations are exempt from taxation under the Tax Code: charitable monetary transfers, membership fees, and donations. These types of income are not defined within the framework of the Tax Code. In addition, Azerbaijan's Civil Code does not define "donations."
A fourth type of income -- grants -- is, in practice, exempted from profits taxation, although the Tax Code does not specifically exempt grants. Under the Law on Grants, a "grant" is described as purpose-oriented, gratuitous, non-repayable assistance provided under the procedure in the Law on Grants for preparation and implementation of projects beneficial to state and society. To qualify as a recipient of a grant, a domestic legal entity must have as its primary statutory purpose either of the following: (1) charitable activity; or (2) the implementation of projects and programs – eligible for a grant – that do not pursue the direct derivation of profit from the grant.
A prior version of the Law on Grants exempted grants from profits taxation, but the current law notes that "issues of taxation, connected with the obtaining … of a grant, or of other monetary or material assistance are regulated by the Tax Code of the Republic of  Azerbaijan." Since the tax code does not specifically exempt grants, (and precludes inclusion of issues concerned with taxation and tax control into other legislative acts) , we may conclude that the practice of exempting grants is based on an understanding that "donations," as used in the Tax Code, includes grants.
All income received by charitable organizations, except for income from entrepreneurial activities, is exempt. A charitable organization should thus enjoy exemptions for gratuitously obtained income (membership fees, donations, charitable money transfers) both by virtue of the overall exemption and as an NCO. "Non-commercial activity" is defined in the Tax Code as:
"any activity not prohibited by law that is not aimed at the generation of profits, and, in the event profits are earned, they are used solely for non-commercial purposes, including for its statutory purposes. Otherwise the activity is deemed commercial."
A "charitable organization" is defined in the Tax Code as a "non-commercial organization conducting charitable activities."
"Charitable activity," in turn, is defined as:
"activity, conducted by an individual and (or) charitable organization, consisting of direct and disinterested aid (support), including the gratuitous transfer of money to individuals in need of such material or other aid (support) or to organizations directly providing such aid (support), including charitable organizations, or, unless other circumstances are provided for by this Tax Code, scientific, educational or other activities in the public interest.
Charitable organizations are exempt from profits tax, except with respect to income received from entrepreneurial activities.
No other laws in Azerbaijan address charitable organizations in any further detail. No objective criteria or procedures exist in the Tax Code or elsewhere for identifying an organization as "charitable" on the basis of its intended and/or actual activities. Note that under the Tax Code's definition, it is unclear whether an NCO must conduct only charitable activities to be treated as charitable, or, on the other hand, whether any NCO conducting charitable activities (in addition to any other activities) should qualify.
Finally, profit tax reduction of 50 percent applies to enterprises owned by public organizations at which no less than 50 percent of the employees are disabled persons.

  • Is there a tax on the NGOs economic activity income?

Under the tax code, income from entrepreneurial activities by NCOs  is taxed. No distinction is made between income arising from activities related to and those unrelated to the statutory purposes of the NCO. Nor does the Tax Code condition any exemptions for other types of income (donations, fees, etc.) on non-conduct of entrepreneurial activities or unrelated activities.
Under the status legislation, however, NCOs are permitted to engage in entrepreneurial activities only if they are indicated in their charters as related to their statutory purpose. The Law on NGOs requires NCOs to conduct separate accounting for revenues and costs of entrepreneurial activity.
Profits of "enterprises" are taxed under the Tax Code (Tax Code) of the Republic of Azerbaijan. The term "enterprise" is used to refer, inter alia, to legal entities established under the laws of Azerbaijan that conduct entrepreneurial activities and are established for such activities. While this may suggest that non-entrepreneurial organizations (i.e., non-commercial organizations created for non-commercial purposes) are not taxpayers, in practice, non-commercial organizations engaging in entrepreneurial activities are subject to profits tax.
"Profit" is defined as the difference between non-exempt income of a taxpayer and the deductions allowed by the Tax Code .
The tax rate is 22 percent . Certain types of passive income addressed further below are taxed at different rates.
Under the Tax Code legal entities and natural persons not registered for the VAT purposes,  engaged in entrepreneur  activities, which have the volume of taxable operations for the previous three month period at less than  22500 manats, are eligible for simplified taxation.
Tax rates for the simplified tax are :
• In Baku city – 4 (four) percent;
• In other cities including Naxchivan Autonomic Republic- 2 (two) percent;
If a taxpayer is registered in other regions but functions in Baku city then four percent simplified tax will be applied.
Any person who is eligible as simplified taxpayer is exempt from profits tax, property tax, excise tax, road tax and certain other taxes irrespective of an organization's status as commercial or non-commercial.
Natural persons are subject to income tax regardless of whether their employer is under simplified taxation or is VAT tax payer. The taxable base with respect to the personal income tax of residents shall be the taxable income determined as the difference between their gross income for the tax year and expenses (or deductions) for the respective period.
If tax is withheld at payment source the taxable base shall be the taxable income. Income of a resident shall consist of income generated in and outside the Republic of Azerbaijan. Income of a non-resident shall consist of income generated from the sources in the Republic of Azerbaijan.  Income shall cover:

  • income received as the result of employment;
  • income from activity which is not (connected with) employment;
  • all other kinds of income except for tax-exempt income.

Table 1.  The monthly income shall be taxed at following rates:

 

Amount of monthly taxable income Amount of tax

Up to 2000 manats

14 percent

Over 2000 manats

280 Manats + 35% of the amount exceeding 2000 manats

 

Income tax from the incomes of natural persons, working under contracts in two or more places, shall be calculated separately from the amount paid by each employer, and paid to the state budget.

  • Is there a tax on donations?

According to Tax Code, there is no tax on donations from the NCOs side.

  • Are there exemptions for donors of NGOs (both physical or legal)?

Neither legal entities nor individuals are entitled to any deductions for their contributions to charitable organizations or NCOs.

  • Is there a tax on income from passive investments (interest on deposits, dividends, etc)?

The Tax Code does not contain any explicit exemptions for passive income of NCOs. However, the broad exemption for charitable organizations, which applies to all income except that from entrepreneurial activity, may operate to exempt them from profits tax on passive income. This conclusion is based on the facts that (a) the definition of "entrepreneurial activity" under the Tax Code, does not seem to include passive income; and (b) according to Section 99 (3), which refers to income of individuals, "income from non-entrepreneurial activities" includes, inter alia, interest payments, dividends, income from renting out property, royalties, and gains from the sales of assets not used for entrepreneurial activities. As a result, passive income received by charitable organizations should be tax exempt.
Regardless of whether or not passive income is exempt for the recipient of such income, dividends  and interest are subject to a 10 (ten) percent tax withheld at the source. Dividends of a resident legal entity taxed at the source are not subject to any further taxation when received by the legal entities and individuals.
When a resident legal entity receives interest payment that has been taxed at the source at a rate of ten percent, the amount of interest is included into the taxable income. In this case, the amount of tax withheld at the source can be deducted from the aggregate income tax obligation of the legal entity for the reporting period, provided withholding of interest tax is confirmed by appropriate documents.
Neither framework legislation nor tax legislation contains any requirements regarding expenditure of funds or limitations on administrative expenses.

  • Are there taxes on the property owned by NGOs?

There is a property tax and a land tax in the Republic of Azerbaijan. For the purposes of property tax, taxpayers are enterprises and individuals that own taxable objects. The tax base for assessing property tax is, in the case of physical persons, the value of buildings and motor vehicles owned by them; and in case of enterprises, the annual average balance sheet value of fixed assets and balance sheet value of motor vehicles. Property tax on fixed assets of enterprises is 1 (one)  percent.
For the purposes of land tax, taxpayers are enterprises and individuals who own or use land plots on the territory of the Republic of Azerbaijan. Land tax is paid on an annual basis at various rates (ranging from 0.005 to 0.3 percent of non-taxable monthly income per square meter of land) based on the size of the land plot owned or used by the taxpayer.
Entities exempt from property tax include, inter alia, public organizations of the handicapped and budget-financed institutions. Property tax is not levied on buildings used as artists' workshops. The tax base for assessing the amount of property tax is reduced by the value of buildings (objects) used by institutions of education, health care, culture and sports, if used according to their primary purpose.
No benefits with respect to land tax are applicable to NCOs

  • Is there an inheritance tax on property inherited by an NGO?

According to existing legislation, there is no inheritance tax on property inherited by an NGO.

  • Is there tax on grants?

According to the Law on Social Insurance, local NGOs pay 22 percent of their consolidated payroll to the State  Social Security Fund. NGOs that receive grants for social service projects enjoy a moratorium on the tax until 2007, though they must still pay 14% income tax and 3% from individual salaries into the Social Insurance Fund. Some international donors such as USAID enjoy tax exemptions as the result of bilateral agreements between governments.
Any person who is registered or to be registered as VAT payer shall pay property tax, excise tax, road tax and certain other taxes apply irrespective of an organization's status as commercial or non-commercial.

  • Is there any limitation on foreign funding (e.g. there needs to be a preliminary approval of the state, it can be only a certain percentage of your total income, etc.)

There is not any limitation for foreign funding. According to the Concept of the State Support to Non-Governmental Organizations of the Republic of Azerbaijan,  carrying out state support to non-governmental organizations by the Council does not limit the possibilities of rendering assistance to non-governmental organizations by the state authorities and international organizations.

  • Are there any exemptions from VAT for NGOs?

Any person engaged in entrepreneurial activity and whose taxable operations during the period the of preceding three months exceed a volume equal to 22500 manats  (with exception of those specified in Article 218.1.1.1 of this Code ) within 10 days shall be obliged to submit the application on VAT registration to tax authority.
The Tax Code of Azerbaijan establishes a uniform VAT rate of 18 percent.
A zero rating is applicable to transactions listed in Section 165 of the Tax Code, which includes, inter alia:
"purchases of goods, performances of works, and provision of services [funded by] gratuitous financial assistance (grants) received from abroad, as well as importation of such."
Zero rating is applicable only to foreign grants. Therefore, zero rating applies to the purchase of goods (works, services) by recipients of foreign grants if the purchase is paid for out of grant funds. It should be noted that zero rate is in fact available to the supplier of such goods (works and services) and not to the grantee itself (if registered as a taxable person) if the latter provides goods (works, services) out of the grant funds.
In order to ensure the proper administering of such zero-rated transactions, the VAT Instruction envisages a burdensome procedure, according to which a number of documents have to be submitted first by the grant recipient to the supplier, and then by both of them to the tax authorities. A grant recipient must submit to the local tax authorities a report on goods (works, services) purchased at the expense of foreign grants.
It is not unreasonable to suggest that in view of a burdensome procedure applicable to the sale of goods (works, services) at a zero rate, suppliers may be reluctant to sell goods at a zero rate. In this case, the grant recipient may purchase goods with the VAT included in the price and claim reimbursement from tax authorities later.
The main rule applicable to reimbursement by the government for the excess of the input VAT over the output VAT (hereinafter, the "excess") is as follows:
If at least 50 percent of the taxable turnover of the taxpayer during the reporting period is zero-rated, the excess is to be reimbursed within 45 days of submission of the application for reimbursement. According to the VAT Instruction, the amount of VAT reimbursement due to the taxpayer is first applied by tax authorities towards payment of any other taxes, interest, and financial sanctions due from the taxpayer; any remaining amount must be reimbursed within 45 days. For other taxpayers (i.e., who have less than 50 percent of zero-rated taxable turnover), the excess VAT is applied towards future VAT obligations over the period of the subsequent 3 months, after which any remaining excess shall be reimbursed within 45 days of submission of the taxpayer's application.
A special procedure has been established for persons acquiring or importing goods (works, services) funded by "gratuitous monetary transfers" from an international organization or foreign legal entity or individuals pursuant to an international agreement to which Azerbaijan is a part. The recipients must claim from the tax authorities any VAT they paid within the calendar month following the month in which the taxable operation or taxable import occurred. Reimbursement is due within 45 days of receipt of the application.
The Tax Code in its Section 164 establishes a list of supplies and imports that are exempt from VAT, regardless of whether they are performed by commercial or non-commercial entities. Those exemptions are linked to the nature of services, which, inter alia, include the following:
• turnover related to sales and purchase of mass media products, editorial, publishing and printing activities, connected with production of printed mass media products (except for advertisement services);
• editorial, publishing, and printing activities, connected with production of schoolbooks for middle-schools, children's literature and publications of national importance, subsidized from the budget;
• ritual services by funeral bureaus and cemeteries .
Under Section 164.2 of the Tax Code, appropriate executive bodies of executive authorities may provide exemptions for other types of import (in addition to those listed in Section 164 of the Tax Code).


 

III. CHARTER 3. PUBLIC FUNDING FOR NGOs

  • Is there a special government program providing grants to NGOs?

In line with the Law "On Non-governmental Organizations (public associations and foundations)" of the Republic of Azerbaijan, the state may provide financial and other support to non-governmental organizations. The state support to NGOs may be provided through information, consultations, methodology, logistics, grants, etc.
There is a special government program providing grants to NGOs established under the Council of State Support to Non-Governmental Organizations under the president of the Republic of Azerbaijan.  The Council was established upon the Decree of the President dated 13 December 2007 and the Regulations of the Council were approved. The decree incorporated recommendations prepared by international organizations. Among the council's primary responsibilities is the creation of an enabling legal environment for NGOs. The establishment of the special Fund for Support to Non-Governmental Organizations under the President of the Republic of Azerbaijan aims to allocate budget money through competition among local NGOs.  The fund is managed by the Council.
The Council established competitive rules for soliciting grant applications and awarding funds, and the first call for applications was launched in early 2008 . In August 2008, the Council awarded grants worth more than 1,2 million manats (approximately 1,5 million in dollars), to local NGOs working in areas including human rights protection, capacity building, public health, social services delivery, and refugees' rights. Three hundred and sixty-one projects were submitted, 290 out of these projects were submitted by Baku and the other 71 were submitted by regional NGOs. 24 organizations were rejected as they did not comply with the rules established by Council. 337 NGO projects were submitted for evaluation. Each project separately was evaluated by 3 independent experts. Finally the decision was made on financing of 191 projects. The grant maximum was approximately $25,000. Awards could be used to cover program costs, including expenditures that support institutional capacity (such as staff training, participation in conferences, etc.). Many of the grantees are either newly established or have limited experience managing grant funds. To build NGOs' financial viability, the Council on State Support to NGOs is undergoing an effort with the support of the USAID Civil Society Project to institutionalize international best practices for grantmaking, financial management, and project  management. The Council on State Support to NGOs is funded from monetary reserves; NGOs specializing in public financing believe that these funds are secure through 2010. The council is seeking partnerships with bilateral and multilateral donors to continue long-term public financing.
Over 2 million AZN (equivalent to $2.45 million) have been budgeted for NGO financing in 2009 . During the 2009 financial competition, the Council received projects from 569 NGOs. Of them, 212 participated in 2008 competition, and 357 NGOs presented their projects for the first time. According to the results of competition, 226 projects were approved, and 1.848 million manat will be provided for them. They are currently going through the selection process.

  • Are there organizations that receive direct state subsidies because they are important or represent the interests of certain groups (e.g. the Red Cross or Union of Blind)?

For purposes of this paper, a "subsidy" is general support from a government to an NGO. Unlike procurement contracts, subsidies are not typically tied to any particular deliverable or program purpose. Rather, funding can be used to cover general operating support of an organization. Often, the recipients and amounts are written directly into the national or municipal budget. Like other countries in the region, Azerbaijan provides subsidies to selected organizations. Beneficiaries include organizations supporting creative unions (Union of Writers, Union of Composers,  etc ), youth, sports, veterans, and people with disabilities (Union of Blind, etc). On the other hand, an organization representing the physically disabled continues to receive a subsidy even though many other organizations with similar missions have since been formed.
According to the State  Budget Law for 2009, from the budget were  allocated  373190 manat ( approximately 450.000 in dollars) to the Union of Writers,  186094 manat (200.000 in dollars) to the Union of Composers, 150480 manat (180.000 in dollars) to the  Union of Painters,  601920  manat  (750.000 in dollars) to the Gulden Crescent .
In some cases, these groups are successors to social support or trade organizations that in Soviet times were considered part of the government or were run by the Communist party and which successfully lobbied for continued support after transition.
Subsidies are also given to local chapters of recognized humanitarian organizations such as the Red Cross. On 8 May 2007, after four years of intense work by the National Society, the president of Azerbaijan signed the Law on Red Crescent to be adopted at the parliament which will increase governmental support for the Azerbaijan Red Crescent. Thus the National Society has managed to cover staff salaries and administrative costs with the support of the government since January 2007.
Local government units that do not have the capacity to conduct open competitions for grants may provide noncompetitive subsidies instead. Typically, subsidies are given by various Ministries and often the name of the recipient NGO and the amount provided are written directly into the budget.

  • Are there examples of local authorities providing funds to NGOs for certain activities?

Cooperation between local authorities and NGOs in the regions outside the capital is still poor. In some cases, local officials attempt to control the activities of NGOs and create obstacles if NGOs fail to inform authorities in advance about their activities. NGOs based in the regions demonstrated more activity in 2008 as a result of support from international donors and the central government. NGOs cooperated successfully with municipalities to increase budget transparency and civic engagement.

  • Are there cases when the state/local authorities hire an NGO to provide certain services or perform a certain task e.g. prepare a legislative analysis or provide food to old people.

International donors such as the World Bank have begun granting the State funding on the condition that it provides contracts to NGOs. As a result, the Ministry of Culture and Tourism, the Ministry of Youth and Sports, the Ministry of Communication and Information Technology, the Ministry of Economic Development, The State Committee for Refugee and Iinternally Displaced Persons issues of the Republic of Azerbaijan and others (Azerbaijan Republic 's Commission on Combating Corruption) have begun turning to NGOs

  • Can NGOs take part in public procurement procedures and get contracts?

NGOs are permitted by law to apply and compete for government contracts. NGOs rarely apply, however, due to the absence of appropriate regulations and transparency, the lack of financing, and a general distrust of government structures.

  • Are state funds provided in a decentralized way (e.g. each ministry gives grants in its own area or there is one institution giving grants in different areas).

In Azerbaijan, the process is not clearly centralized or decentralized because both the NGO Council and Ministries can provide funding to NGOs.

IV. CHARTER 4 . NGO PARTICIPATION IN DECISIOB MAKING

  • Is there a state strategy for NGO-government relations?

In order to establish a stable and efficient system of partnership relations between the state and non-governmental organizations, to involve non-governmental organizations in solution of problems which are crucial for the development of the state and society and to speed up the civil society development, was developed the Concept of the State Support to Non-Governmental Organizations of the Republic of Azerbaijan approved by the Decree signed by the President of the Republic of Azerbaijan on 27 July 2007. The concept has defined the basic principles for the beginning of a state strategy for NGO-government relations.
The Concept has defined the basic means of providing state support to non-governmental organizations:
1. Improving the legislative framework:
Upgrading the legal-normative acts focusing on improvement of NGO activities through involvement of civil society institutions and on deepening the relationship between the state and non-governmental organizations.
2. Improving cooperation mechanisms between the state and non-governmental organizations:
- to conduct regular civil forums that is an effective tool to meet mutual activity challenges between the state and civil society;
- to establish an agency for the state and NGO issues focused on deepening social democratization;
- to create the assistance fund for the non-governmental organizations that will provide financial support to the implementation of projects important for the state and society;
- to develop the national information-analytical network with a view to effectively supervising the civil society development processes, monitoring the implementation of cooperation-oriented programs;
- to draw up recommendations for the state agencies on creation of civil society institutions database, including setting up the forms and methods of mutual cooperation, formation of effective activity mechanisms;
3. Terms of state-financing for programs, projects and actions focusing on the problems which constitute importance both for the state and society:
- to establish the financial-contractual relations between the state and non-governmental organizations;
- to evaluate the outcomes of state-funded programs and projects;
- to learn and apply the international practice on cooperation between the state and non-governmental organizations in developing and implementing national activity programs in various fields.

  • Is there a ministry or agency responsible for relations with NGOs?

In December 2007, Azerbaijan established a new Council on State Support to NGOs ("Council"). According to regulations on the Council of State Support to Non-Governmental Organizations under the President of the Republic of Azerbaijan, the Council is functioning as a specialized agency promoting cooperation between the state and non-governmental organizations and providing state support to non-governmental organizations.   The Council possesses autonomy in its activity and acts on a mutual partnership basis with the state agencies and local self-governing bodies, local, foreign and international non-governmental organizations. Provision of State Support to Non-Governmental Organizations through the Council does not limit the possibility of providing assistance to NGOs by the public institutions and international organizations.
The regulations of the Council define the basic goals and objectives, rights and functions of the Council. Main objectives of the Council are as follows:

  •  to participate in preparation and implementation of state policy for development of the civil society;
  • to attract NGOs into settlement of problems which are of public and social importance;
  • to make proposals on improvement of activities of NGOs and legislative frameworks regulating relations between public institutions and NGOs;
  • to support establishment of stable and efficient partnership system in order to form a model of modern relations between public institutions and NGOs;
  • to supervise, analyze and promote the development processes of Non-governmental Organizations;
  • to develop and implement programs and projects on state support to NGOs under the guidance of the priority directions envisaged in the "Concept of State Support to Non-Governmental Organizations of the Republic of Azerbaijan";
  • to carry out other duties prescribed by the legislation.

The Council has the following rights to implement its duties:

  • to develop proposals on improvement of the state policy in regard of NGOs and submit them to the President of the Republic of Azerbaijan;
  • to organize public debates for discussing NGO activities and draft legislative acts on improvement of mutual relations between public institutions and NGOs;
  • to develop programs and projects to settle problems of public and social importance, to attract experts from relevant fields for their implementation, to organize expert groups consisting of representatives of the relevant public institutions and NGOs;
  • to organize conferences, symposia, forums and other events dedicated to activities of NGOs and participate in them;
  • to provide consultative, methodical, organizational-technical, financial and other type of assistance to NGOs;
  • to stimulate large debates on cooperation of state agencies and civil society institutions in settlement of problems of state and social importance, activities and development of Non-governmental Organizations;
  • to submit information and proposals for development of mutual cooperation between the state agencies and Non-Governmental Organizations to the public, relevant state agencies and other organizations;
  • to make requests to state agencies and local self-governing bodies, physical persons and legal entities for collection of the necessary data and documentation concerning the issues within its powers and acquire this data and documents;
  • to investigate the cases of violation and abuse of contractual commitments by Non-governmental Organizations under projects, to apply to relevant state agencies for taking relevant measures;
  • to deprive the Non-Governmental Organizations, which violate the contractual commitments under the projects, of the right to participate in those programs for a 2-year period;
  • to establish legal entities, found media outlets, issue special bulletins and other publications, create and utilize a web-site in the order prescribed by the legislation;
  • to fulfill other rights prescribed by the legislation.
  • Is there a special government program providing grants to NGOs?

In line with the Law "On Non-governmental Organizations (public associations and foundations)" of the Republic of Azerbaijan, the state may provide financial and other support to non-governmental organizations. The state support to NGOs may be provided through information, consultations, methodology, logistics, grants, etc.
There is a special government program providing grants to NGOs established under the Council of State Support to Non-Governmental Organizations under the president of the Republic of Azerbaijan.  The Council was established upon the Decree of the President dated 13 December 2007 and the Regulations of the Council were approved. The decree incorporated recommendations prepared by international organizations. Among the council's primary responsibilities is the creation of an enabling legal environment for NGOs. The establishment of the special Fund for Support to Non-Governmental Organizations under the President of the Republic of Azerbaijan aims to allocate budget money through competition among local NGOs.  The fund is managed by the Council.
The Council established competitive rules for soliciting grant applications and awarding funds, and the first call for applications was launched in early 2008 . In August 2008, the Council awarded grants worth more than 1,2 million manats (approximately 1,5 million in dollars), to local NGOs working in areas including human rights protection, capacity building, public health, social services delivery, and refugees' rights. Three hundred and sixty-one projects were submitted, 290 out of these projects were submitted by Baku and the other 71 were submitted by regional NGOs. 24 organizations were rejected as they did not comply with the rules established by Council. 337 NGO projects were submitted for evaluation. Each project separately was evaluated by 3 independent experts. Finally the decision was made on financing of 191 projects. The grant maximum was approximately $25,000. Awards could be used to cover program costs, including expenditures that support institutional capacity (such as staff training, participation in conferences, etc.). Many of the grantees are either newly established or have limited experience managing grant funds. To build NGOs' financial viability, the Council on State Support to NGOs is undergoing an effort with the support of the USAID Civil Society Project to institutionalize international best practices for grantmaking, financial management, and project  management. The Council on State Support to NGOs is funded from monetary reserves; NGOs specializing in public financing believe that these funds are secure through 2010. The council is seeking partnerships with bilateral and multilateral donors to continue long-term public financing.
Over 2 million AZN (equivalent to $2.45 million) have been budgeted for NGO financing in 2009 . During the 2009 financial competition, the Council received projects from 569 NGOs. Of them, 212 participated in 2008 competition, and 357 NGOs presented their projects for the first time. According to the results of competition, 226 projects were approved, and 1.848 million manat will be provided for them. They are currently going through the selection process.

  • Are there organizations that receive direct state subsidies because they are important or represent the interests of certain groups (e.g. the Red Cross or Union of Blind)?

For purposes of this paper, a "subsidy" is general support from a government to an NGO. Unlike procurement contracts, subsidies are not typically tied to any particular deliverable or program purpose. Rather, funding can be used to cover general operating support of an organization. Often, the recipients and amounts are written directly into the national or municipal budget. Like other countries in the region, Azerbaijan provides subsidies to selected organizations. Beneficiaries include organizations supporting creative unions (Union of Writers, Union of Composers,  etc ), youth, sports, veterans, and people with disabilities (Union of Blind, etc). On the other hand, an organization representing the physically disabled continues to receive a subsidy even though many other organizations with similar missions have since been formed.
According to the State  Budget Law for 2009, from the budget were  allocated  373190 manat ( approximately 450.000 in dollars) to the Union of Writers,  186094 manat (200.000 in dollars) to the Union of Composers, 150480 manat (180.000 in dollars) to the  Union of Painters,  601920  manat  (750.000 in dollars) to the Gulden Crescent .
In some cases, these groups are successors to social support or trade organizations that in Soviet times were considered part of the government or were run by the Communist party and which successfully lobbied for continued support after transition.
Subsidies are also given to local chapters of recognized humanitarian organizations such as the Red Cross. On 8 May 2007, after four years of intense work by the National Society, the president of Azerbaijan signed the Law on Red Crescent to be adopted at the parliament which will increase governmental support for the Azerbaijan Red Crescent. Thus the National Society has managed to cover staff salaries and administrative costs with the support of the government since January 2007.
Local government units that do not have the capacity to conduct open competitions for grants may provide noncompetitive subsidies instead. Typically, subsidies are given by various Ministries and often the name of the recipient NGO and the amount provided are written directly into the budget.

  • Are there examples of local authorities providing funds to NGOs for certain activities?

Cooperation between local authorities and NGOs in the regions outside the capital is still poor. In some cases, local officials attempt to control the activities of NGOs and create obstacles if NGOs fail to inform authorities in advance about their activities. NGOs based in the regions demonstrated more activity in 2008 as a result of support from international donors and the central government. NGOs cooperated successfully with municipalities to increase budget transparency and civic engagement.

  • Are there cases when the state/local authorities hire an NGO to provide certain services or perform a certain task e.g. prepare a legislative analysis or provide food to old people.

International donors such as the World Bank have begun granting the State funding on the condition that it provides contracts to NGOs. As a result, the Ministry of Culture and Tourism, the Ministry of Youth and Sports, the Ministry of Communication and Information Technology, the Ministry of Economic Development, The State Committee for Refugee and Iinternally Displaced Persons issues of the Republic of Azerbaijan and others (Azerbaijan Republic 's Commission on Combating Corruption) have begun turning to NGOs

  • Can NGOs take part in public procurement procedures and get contracts?

NGOs are permitted by law to apply and compete for government contracts. NGOs rarely apply, however, due to the absence of appropriate regulations and transparency, the lack of financing, and a general distrust of government structures.

  • Are state funds provided in a decentralized way (e.g. each ministry gives grants in its own area or there is one institution giving grants in different areas).

In Azerbaijan, the process is not clearly centralized or decentralized because both the NGO Council and Ministries can provide funding to NGOs.

IV. CHARTER 4 . NGO PARTICIPATION IN DECISIOB MAKING

  • Is there a state strategy for NGO-government relations?

In order to establish a stable and efficient system of partnership relations between the state and non-governmental organizations, to involve non-governmental organizations in solution of problems which are crucial for the development of the state and society and to speed up the civil society development, was developed the Concept of the State Support to Non-Governmental Organizations of the Republic of Azerbaijan approved by the Decree signed by the President of the Republic of Azerbaijan on 27 July 2007. The concept has defined the basic principles for the beginning of a state strategy for NGO-government relations.
The Concept has defined the basic means of providing state support to non-governmental organizations:
1. Improving the legislative framework:
Upgrading the legal-normative acts focusing on improvement of NGO activities through involvement of civil society institutions and on deepening the relationship between the state and non-governmental organizations.
2. Improving cooperation mechanisms between the state and non-governmental organizations:
- to conduct regular civil forums that is an effective tool to meet mutual activity challenges between the state and civil society;
- to establish an agency for the state and NGO issues focused on deepening social democratization;
- to create the assistance fund for the non-governmental organizations that will provide financial support to the implementation of projects important for the state and society;
- to develop the national information-analytical network with a view to effectively supervising the civil society development processes, monitoring the implementation of cooperation-oriented programs;
- to draw up recommendations for the state agencies on creation of civil society institutions database, including setting up the forms and methods of mutual cooperation, formation of effective activity mechanisms;
3. Terms of state-financing for programs, projects and actions focusing on the problems which constitute importance both for the state and society:
- to establish the financial-contractual relations between the state and non-governmental organizations;
- to evaluate the outcomes of state-funded programs and projects;
- to learn and apply the international practice on cooperation between the state and non-governmental organizations in developing and implementing national activity programs in various fields.

  • Is there a ministry or agency responsible for relations with NGOs?

In December 2007, Azerbaijan established a new Council on State Support to NGOs ("Council"). According to regulations on the Council of State Support to Non-Governmental Organizations under the President of the Republic of Azerbaijan, the Council is functioning as a specialized agency promoting cooperation between the state and non-governmental organizations and providing state support to non-governmental organizations.   The Council possesses autonomy in its activity and acts on a mutual partnership basis with the state agencies and local self-governing bodies, local, foreign and international non-governmental organizations. Provision of State Support to Non-Governmental Organizations through the Council does not limit the possibility of providing assistance to NGOs by the public institutions and international organizations.
The regulations of the Council define the basic goals and objectives, rights and functions of the Council. Main objectives of the Council are as follows:

  •  to participate in preparation and implementation of state policy for development of the civil society;
  • to attract NGOs into settlement of problems which are of public and social importance;
  • to make proposals on improvement of activities of NGOs and legislative frameworks regulating relations between public institutions and NGOs;
  • to support establishment of stable and efficient partnership system in order to form a model of modern relations between public institutions and NGOs;
  • to supervise, analyze and promote the development processes of Non-governmental Organizations;
  • to develop and implement programs and projects on state support to NGOs under the guidance of the priority directions envisaged in the "Concept of State Support to Non-Governmental Organizations of the Republic of Azerbaijan";
  • to carry out other duties prescribed by the legislation.

The Council has the following rights to implement its duties:

  • to develop proposals on improvement of the state policy in regard of NGOs and submit them to the President of the Republic of Azerbaijan;
  • to organize public debates for discussing NGO activities and draft legislative acts on improvement of mutual relations between public institutions and NGOs;
  • to develop programs and projects to settle problems of public and social importance, to attract experts from relevant fields for their implementation, to organize expert groups consisting of representatives of the relevant public institutions and NGOs;
  • to organize conferences, symposia, forums and other events dedicated to activities of NGOs and participate in them;
  • to provide consultative, methodical, organizational-technical, financial and other type of assistance to NGOs;
  • to stimulate large debates on cooperation of state agencies and civil society institutions in settlement of problems of state and social importance, activities and development of Non-governmental Organizations;
  • to submit information and proposals for development of mutual cooperation between the state agencies and Non-Governmental Organizations to the public, relevant state agencies and other organizations;
  • to make requests to state agencies and local self-governing bodies, physical persons and legal entities for collection of the necessary data and documentation concerning the issues within its powers and acquire this data and documents;
  • to investigate the cases of violation and abuse of contractual commitments by Non-governmental Organizations under projects, to apply to relevant state agencies for taking relevant measures;
  • to deprive the Non-Governmental Organizations, which violate the contractual commitments under the projects, of the right to participate in those programs for a 2-year period;
  • to establish legal entities, found media outlets, issue special bulletins and other publications, create and utilize a web-site in the order prescribed by the legislation;
  • to fulfill other rights prescribed by the legislation.
  • Is there a Parliamentary commission responsible for NGO issues?

In the Milli Mejlis (Parliament of Azerbaijan Republic), the Human Rights Committee is responsible for NGO issues indirectly. According to the Law on Standing Commissions of the Milli Majlis of the Republic of Azerbaijan, standing Commission on Human Rights is a leading commission for draft laws and resolutions on the formulation and implementation of the state policy on ensuring and protection of human rights and freedoms. Standing Commission on Human Rights:

  • develops draft laws on ensuring the protection of human rights and freedoms, identification of the status of national minorities and protection of their rights, identification of the status of refugees and IDPs, and protection of their rights,  provides opinion on all draft laws recommended to the consideration of the Milli Majlis and touching on  human rights and freedoms;
  • provides opinion on draft laws and resolutions with regard to ensuring human rights and freedoms based on the instructions by the Milli Majlis of the Republic of Azerbaijan or chairman of the Milli Majlis of the Republic of Azerbaijan.
  • Can NGO easily take part in debates in parliamentary committees?

According to the Law on the Internal Regulations of the Milli Majlis of the Republic of Azerbaijan , meetings of the Milli Majlis are held in accordance with the legislative action plan adopted at the beginning of a regular session of the Milli Majlis. The legislative action plan of the Milli Majlis shall be approved by a decision. According to the Law, draft laws and resolutions submitted to the Milli Majlis are referred to the appropriate standing commissions of the Milli Majlis by the chairman of the Milli Majlis. While draft law is referred to several standing commissions, Milli Majlis chairman designates only one of them as a leading commission. Procedures for the development and consideration of draft laws and resolutions in standing commissions of the Milli Majlis are identified by a leading commission of the Milli Majlis in accordance with the Constitution of the Republic of Azerbaijan and this Internal Regulations. The standing commission may establish a working group to carry out the work on draft laws and resolutions If draft laws and resolutions are developed by several standing commissions, they may establish joint working groups. If there are two or more draft laws and resolutions related to one issue, they are considered together.  Administration of the Milli Majlis makes the expertise (expert review) of draft laws and resolutions from legal and language-style point of view with the assignment of the standing commission, as well as draws up the list of laws and other normative legal acts to be adopted, to be changed or to be annulled in connection with the adoption of the draft law. Comments and proposals of members of the Milli Majlis and other legal subjects with the right of legislative initiative related to draft laws and resolutions are considered in meetings of the leading standing commission. If different opinions arise among standing commissions of the Milli Majlis on the drafts considered, the decision of the leading standing commission is given preference. The opinion of standing commission disagreeing with this decision is submitted in writing to members in the meeting of the Milli Majlis dedicated to this issue. To be included in the agenda of the Milli Majlis, the developed or considered draft shall be submitted to the Milli Majlis chairman together with the list of the persons to be invited to the meeting.
The NGO representative only can take part in debates in parliamentary committees in the participation a working group, which are established by a leading commission of the Milli Majlis  and in the discussion in Standing Meeting through official and individual  invitation.

  • Is there a legal requirement for ministries/parliament to publish draft laws on their websites and ask for comments from the public?

According to Article 14 of the Law "On Budget System" of Azerbaijan Republic , the draft budget for the next year along with other documents are published in media in the course of ten days after their submission to Azerbaijan Republic Milli Mejlis. Other documents indicated in Articles 12.1.1 – 12.1.10 of this Law, which is including, draft law on the State Budget for the next budget year and the explanation note on the draft law;  conceptual and forecast indicators of the economic and social development of Azerbaijan Republic for the next budget year and the following three years,  main directions of the fiscal policy,  special purpose programs to be financed by the State Budget, draft budget revenue classification, draft revenues and expenditure with breakdown by functional, economic and organizational items, information on the state debts, state guaranteed and other liabilities,  Draft consolidated budget of next year at paragraph level by functional and economic classification; according to drafts of the next year State Budget and consolidated budget, as well as the following three years consolidated budget draft state investment programs draft which reflect the important investment projects,  consolidated financial balance sheet for the whole territory of Azerbaijan Republic;  draft laws on budgets of extra-budgetary state funds for the next budget year if they are to be approved by the Azerbaijan Republic Milli Mejlis prepared in accordance with the legislation.
There is no other legal requirement for ministries to publish draft laws. But parliament should put the draft Laws on its web-site and organize forum for the discussion of draft laws, through sending comment via electronically way. There is some technical possibility in the web-site parliament, it is not working at present.

  • Are there joint bodies between the administration and NGOs for consultations on different issues?

Yes. There are three examples, two of them positive and one negative. First of all, I present positive examples:
1. According to the Regulations on the Council of State Support to Non-Governmental Organizations under the President of the Republic of Azerbaijan , the Council functions with a staff consisting of 11 members. The members of the Council are appointed by the President of the Republic of Azerbaijan. 8 members of the Council are nominated by the Non-governmental Organizations, while other 3 members from the state authorities. The term of office for the Council's members is 4 years. The same persons may not hold membership of the Council for more than two terms consequently. The members of the Council are functioning on public grounds (as voluntary employees). The members of the Council must be individuals with higher education (university degree) and possess positive public reputation and high moral values.  Individuals, who have dual citizenship or no citizenship of the Republic of Azerbaijan, who have commitment to other foreign states, who were charged with crime, persons, whose incapacity has been approved by a court decisions and religious figures cannot be members of the Council. Announcement on nomination of candidates for the Council's membership by Non-governmental Organizations is published in official newspapers. Each NGO group specialized in the following areas nominates 3 candidates for the Council's membership:

  • human rights and democracy;
  • family, women and children issues;
  • the issues of refugees, IDPs, the disabled and veterans;
  • economic and social issues;
  • education, science and culture;
  • the youth and patriotic education;
  • public health, health and ecology;
  • combating drug abuse, corruption, human trafficking and terrorism.

2. On March 2, 2006 with the participation of Azerbaijan Republic's Commission on Combating Corruption was established the Information and cooperation Network of NGOs acting in the field of combating corruption. A Cooperation Memorandum was signed, the Network's statute was approved and broad information on objectives and future activities of the Network was provided. The Cooperation Memorandum was signed by Transparency International Azerbaijan, Fund of Struggle against Corruption, Eurasia Lawyers Association, National Confederation of Entrepreneurs' Organizations, Constitution Researches Fund, Association of Traders and Producers, Fund for Assistance to Market Economy and Entrepreneurship, Coalition for Improving Transparency in Extractive Industry, Azerbaijan Young Lawyers Union, Association of Young Azerbaijani Friends of Europe, Citizens  Labor Rights Protection Center, Law and Development Public Union and Center for Effective Initiatives. Azerbaijan Republic 's Commission on Combating Corruption as well joined the Network and signed the Cooperation Memorandum.
3.  In accordance with Article 5.4 of the SOFAZ (State Oil Fund of Azerbaijan) Regulations , which were approved by the Presidential Decree #434 of December 29th, 2000, a representative(s) of civil society institutions must have a seat(s) on the Supervisory Board of the Fund . In accordance with the Presidential Decree No. 73 dated November 27, 2008 ,  7 members of the Supervisory Board were appointed.  So the board must be composed a  member from Milli Maclis (parliament or legislative power), four  members from the Government (executive power), a member from the Milli Bank (central bank), and a member from the National Academy of Sciences.
The coalition of civil society institutions Increasing Transparency in Extractive Industries on June 8th issued a statement on the newly arranged composition of the Supervisory Board of the State Oil Fund of the Azerbaijan Republic (SOFAZ). The announcement refers to the corresponding Presidential Decree of May 18th on the approval of the new composition of the SOFAZ Supervisory Board.  The Coalition, as a party to the implementation of the Extractive Industries Transparency Initiative in the field of petroleum and mining development in Azerbaijan, on February 7th 2007 applied in written to the President of the Azerbaijan for the purpose of representation in the Supervisory Board of the State Oil Fund, considering it wrong to introduce representatives from Milli Maclis and the National Academy of Sciences on behalf of civil society institutions. The alliance claims dubious representation of civil society by parliament and Academy of Sciences. Unfortunately, there wasn't any response.

  • Is there a legal act or other state document requiring the administration to consult with NGOs?

In Azerbaijan there is no law or regulation of the Government requiring that state agencies consult with interested parties, including NGOs when preparing legal documents. But Azerbaijan has obligations under international treaties. The administration is obliged to consult with NGOs in Azerbaijan based on international obligations, for examples, the Minister of Justice signed an Order On Approval of Regulations on Public Participation in Correction of Prisoners and Public Supervision over the Penitentiary on 25th April 2006 .  The Order underlines that the Code of Execution of Punishments of the Republic of Azerbaijan provides for public participation in the correction of prisoners and public supervision over the penitentiary facilities. Analogous provisions are also set forth in the Statute of the Ministry of Justice as well as in the European Penitentiary Rules and other international documents.
Hence, the conference was held in order to discuss organization of mutual collaboration on 8th August 2005. "Memorandum on Mutual Understanding" was signed between NGOs and the Ministry of Justice thereat. Moreover, a working group was set up in order to draft a relevant legal act providing for public supervision over the penitentiary.  Thus, draft "Regulations on public participation in correction of prisoners and public supervision over the penitentiary" was developed absorbing proposals of human rights defenders, NGO's dealing with penitentiary issues and ombudsman. It was discussed and hold acceptable by the MoJ Plenary Board at its meeting on 27th January 2006. Then, the draft was forwarded to the relevant institutions seeking their feedback. Consequently, the draft was highly evaluated as a progressive and transparent document while some proposals were formulated thereto. The re-viewed draft was considered and subsequently approved by the Plenary Board.  The Regulations on Public Participation in Correction of Prisoners and Public Supervision over the Penitentiary,approved by Ministry of Justice  on May 12, 2006. The present Regulations are developed in accordance with the Code of the Republic of Azerbaijan on Execution of Punishments, Statute of the Ministry of Justice, while taking into account the European Penitentiary Rules and other international instruments in this field. The Regulations provide for legal basis of the public participation (NGO, religious organizations, human rights activists and public figures) in ensuring legally provided rights and freedoms of prisoners who are detained in the institutions for serving sentences and in specialized institutions  The purpose of public participation in correction of prisoners and public supervision over the penitentiary facilities is to achieve goals of the imposed punishment and to provide assistance to the activity of these facilities. Public participation in correction of prisoners and public supervision over the penitentiary facilities shall be based on the principles of legality, objectivity, transparency, impartiality, promotion of law abiding among prisoners and strengthening the correctional effect of the punishment.  According to the Regulations, in order to ensure participation of non-governmental organizations and general public in correction of prisoners and public supervision over the penitentiary facilities the Public Committee shall be generally consisted of representatives of NGOs and their associations, which deal with human rights, legal awareness, education, health care, as well as of members of religious organizations and their associations; prominent scholars, cultural and other public figures.  Coordinator of the Public Committee on Penitentiary System under the Ministry of Justice is a Chairman of the Executive Committee of the Citizen's Labor Rights Protection League, as non-governmental organization.

 

SUMMARY
The legal framework governing NGO activities includes the NGO Law of June 2000, the Grants Law of 1998, the Tax Code of 2000, the Civil Code of 1999, the Law on State Registration of Legal Entities, the State Register of 2004, and the Regulations on NGO Registration. Laws governing NGOs are often adopted under pressure from the Council of Europe, the European Commission on Human Rights, and other international organizations. NGOs report that these laws are seldom enforced or honored. The MoJ, for example, is required by law to respond to an application for registration within 30 days of receiving it. The MoJ has yet to create the appropriate mechanisms, however, and regularly exceeds the 30 day limit. The inability to register prevents NGOs from opening bank accounts and registering with the Bureau of Internal Revenue Statistics Committee and Social Security Fund, which they are required to do within 10 days of registering with the MoJ. NGOs in the regions have even greater difficulty registering. The ten regional departments of the MoJ have the authority to process registration applications but do not do so. The most that an NGO can do is register as a limited liability company. Many NGOs require intervention from "influential forces" or have to pay bribes to register, though once they register they face other legal obstacles to their operations.
There are various reasons why NGO registration in Azerbaijan is a problem. According to NGO legal activists, the main reasons are deficiencies within the current law, poor implementation of that law, the lack of qualified legal assistance to NGOs and poor advocacy of NGOs' rights. In addition to these technical and capacity explanations, there is a suspicion on the part of many NGOs that there is an order from the political leadership of the country to suspend NGO registration altogether. 


Problems with the Law
As mentioned earlier, the law is written in a very general way leading to opportunistic interpretations. In addition, regulations on the establishment, operation and dissolution of NGOs are contradictory. There are also many gaps in the legislation. Among them is the lack of clarity regarding consequences for officials who violate the law or deviate from registration regulations and procedures. Still another problem with the law is the requirement that all NGOs must register centrally in a special Ministry of Justice office in Baku. This makes registration even more difficult for NGOs based outside of Baku. 


Poor Implementation of Law
The law states that written notification of the decision whether to register the NGO or not must be issued within 30 days of the application. The Ministry of Justice has the right to reject NGO registrations, but according to the NGO Law, the MoJ has to justify its decision indicating the provisions and clauses of the NGO Law not followed in the organisation's statutory documents. In some cases, the MoJ rejects registration several times, each time stating a different problem with the organization's documentation. Most written rejections cite that a part of the organization's charter or documentation does not correspond with the law without specifying which law or how it does not correspond.
In many cases, the Ministry of Justice does not issue written rejections, it simply never informs the NGO whether it is registered or not. This is a violation of the ten- day notification rule, but also denies NGOs the ability to appeal the decision in court since they do not have written notification to prove rejection. In other cases, the MoJ refuses to accept registration applications altogether. Finally, there is no requirement for MoJ officials to issue written receipts for registration applications, so it is difficult for NGOs to prove that the ten-day deadline for notification has passed. 


Lack of Qualified Legal Assistance and Poor Advocacy of NGOs Rights
Although there are local and international organisations providing legal training and consultation, there is still not enough support for NGOs to prepare their statutory documents. There is also a lack of qualified legal assistance to represent NGOs in court. Perhaps just as important is that most NGOs are not willing to defend their interests in the courts or to use other legal means to defend their rights. Often both NGOs and government officials view NGOs who publicly represent their interests and protect their organization's rights as interfering in politics. NGOs fear repression if they speak out against government policies and the officials who violate NGOs' rights. Public expressions are usually confined to petitions or discussions in seminars and conferences organized by international organizations.


NGO Registration as a Political Issue
There is a suspicion on the part of many NGOs that the accumulated impact of the poor implementation of the current law and the lack of political will to improve it add up to a de facto government policy to suspend NGO registration. Ministerial officials privately say that NGO registration is suspended by an order from higher levels. These officials give two reasons: first, that political opposition parties created NGOs and are using them to channel external financial support to their causes; and second, that religious NGOs are backed by certain forces unfriendly toward Azerbaijan.
The government continues to mistrust NGOs and would like to exert greater control over the sector. Though minor amendments to the legal framework were meant to simplify NGO registration, government officials are inconsistent in the time they take to process applications. Many organizations continue to experience difficulties when registering and require intervention by "influential forces" to be registered. Many of the NGOs created under the umbrella of government ministries are used to misappropriate public funds and grants.

Appendix 1.
Azerbaijan's rating 2008 NGO sustainability index for civil society
(1999-2008 yy)

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

4.75

4.50

4.50

4.25

4.50

4.75

5.00

5.25

5.25

4.80

 

Appendix 2
The number of registration NGOs in Azerbaijan

 

 

2001

2002

2003

2004

2005

2006

2007

2008

Total

Number of registration NGOs

23

50

100

164

379

548

229

276

Apr. 3100

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