Azerbaijan is set to introduce a new package of legislative measures aimed at strengthening its digital economy, supporting technological entrepreneurship, and attracting investment and international talent. Approved on October 22, 2026, the changes will introduce new incentives for technology park residents, investors, and businesses developing innovative solutions, with implementation scheduled to begin on January 1, 2027.

A key part of the new framework is the expansion of tax incentives for technology park residents and those investing in them. The measures cover exemptions related to income and dividend taxes, property and land taxes, customs duties, import VAT, and social insurance contributions, alongside provisions concerning foreign work permits and employee income tax. Additional benefits will apply to certain share transactions, employee stock options, and investments made by accredited investors, crowdfunding participants, and venture capital funds. Payments for cloud-based infrastructure, software, and platform services will also qualify for withholding tax and VAT exemptions under the applicable conditions.

The changes also aim to encourage businesses to invest in research and development. Qualifying expenses for scientific research, design and survey work, and experimental industrial activities may be recognized as deductible expenses using a 2.5 multiplier. This is intended to support the development and testing of new technologies and innovative products.

Public procurement is another area targeted by the reforms, opening additional opportunities for businesses offering innovative products and services. The new rules provide for simplified procedures for qualifying innovative products valued at up to AZN 100,000, a 20% procurement preference in tenders with an estimated value of up to AZN 250,000, and exemption from procurement security requirements for qualifying proposals in procurements of up to AZN 1 million. Requirements to demonstrate experience in previous activities will also be waived in relevant procurements involving innovative products or services, subject to the applicable conditions.

Taking effect on January 1, 2027, the measures are intended to create more favorable conditions for innovation, investment, and the commercialization of new technologies in Azerbaijan, while providing startups and technology businesses with additional opportunities to participate in the country’s digital economy.