Armenia Company Formation 

Business setup, banking, Taxes


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Armenia Company Formation Questionnaire 2018.05.03

I. Corporate Forms

To select the right corporate form you will have to consider a number of tax and non-tax factors, such as limited liability, setup and maintenance costs, privacy, number of shareholders, management structure and exit options. 

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    Private Entrepreneur (PE). A PE is an individual registered with the State Registry to whom a tax ID is assigned. A PE is not a company and his/her liability is not limited by the assets invested in the business. In other words, a PE's business and personal assets are not separated and he/she is personally responsible for any liabilities resulting from the business activities. On the positive side, this form of business is the easiest and cheapest to set up and maintain (taxes, accounting etc.). It suits better for smaller businesses that are owned and operated by a single individual. 
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    Limited Liability Company (LLC). An LLC is the most common corporate form in Armenia. As the name suggests, it offers limited liability to its shareholders who are not personally liable for the company's debts. An LLC is the preferred corporate form because of easy and inexpensive setup and maintenance, simple management structure and less corporate formalities. You may also create an Additional Liability Company, which is essentially the same as an LLC but is different in that the shareholders are personally liable for the debts of the company to the extent specified in the articles or organization.

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    Joint-Stock Company (JSC). A joint-stock company is a corporate form that suits better for medium and large businesses with several shareholders. This is a stronger entity offering better privacy to shareholders and with more options for structuring the share capital and the management of the company. In an open JSC (OJSC) shares can be transferred freely, and other shareholders do not have preemptive rights to purchase the shares. 

What are the main differences between an LLC and a JSC?

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    Partnership. A partnership may be registered as a separate legal entity or it can be formed as an agreement between the partners. Partnerships generally are less regulated and offer more flexibility. Unlike an LLC or a JSC where the company is managed by a single director (chief executive officer), a partnership may be actively managed by several partners. It is possible to create either a general partnership or a limited partnership. General partners are personally liable for the debts of the business, whereas the limited partners are passive investors who cannot lose more than their investment. A contractual partnership is not subject to registration, however the tax office must be notified of its creation. 

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    Cooperative. A cooperative is an association of workers where each member has one vote and profits are shared based on contribution of labor, not capital. This is a unique corporate form that better suits smaller employee-owned businesses which value labor more than capital.

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    Branch Office. A branch office is a territorial subdivision of a foreign company in Armenia. A foreign company (head office) can choose from several options to enter the Armenian market. It is possible to set up a subsidiary - a separate legal entity (e.g. LLC or JSC) that is wholly- or partly-owned by the foreign company. Or, the foreign company may decide to conduct business in Armenia through a branch office. The differences are detailed in the table below. If the foreign company's activities in Armenia are limited it can choose to set up a permanent establishment or a representative office

What are the main differences between a branch office and a subsidiary?

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    Non-Profit Organization. In Armenia non-profit organizations are normally established in the form of a foundation or a public association. A public association is a membership-based organization, which primarily caters to the needs of its members (e.g. professional associations, clubs etc.). Foundations do not have members and focus primarily on funding charitable projects that benefit certain classes of people or the society at large. Both foundations and public associations can directly engage in business activities. 

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    Private Equity Fund. A private equity fund is an entity used for making investments in real estate, securities and other assets. A private equity fund is registered by the Central Bank of Armenia and enjoys substantial tax benefits, such as annual tax equal to only 0.01% of its assets, tax-free distribution of profits etc. 

II. Tax Options

In Armenia medium and large businesses follow the general rules of taxation, while smaller businesses can take advantage of special tax regimes that reduce the tax burden and the paperwork. 

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    General Tax Regime. Unless a company opts for a special tax regime it will be subject to 20% corporate income tax (CIT) and 20% value-added tax (VAT).

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    Turnover Tax. Turnover tax is a form of a sales tax, with tax rates normally in the range of 1,5% to 5% , repalcing CIT and VAT. Only small businesses with annual sales of less than AMD58,53 million (approximately, US$121,000) can qualify for this tax regime. 

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    Patent Tax. Patent tax is a flat monthly fee that replaces CIT and VAT and is applicable to certain types of businesses, such as small restaurants, auto-shop and transportation services, beauty salons, game and entertainment facilities, dentist offices etc.   
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    Family Business. Family-owned and operated business are normally exempt from CIT and VAT if the annual sales do not exceed AMD18 million (approximately, US$37,000).

Companies can opt for turnover tax or family business regimes within 20 calendar days following the registration of the company. 

Payroll Taxes

Employers are required to withhold personal income tax (PIT) and social security payments from income paid to their employees or individual contractors (salary, benefits, bonuses, temporary disability compensation, maternity leave compensation etc).

Monthly income of up to AMD150,000 (US$310)

Monthly income between AMD150,000 and AMD 2M (US$310 and 4,120)

Monthly income above AMD 2M (US$4,120)

Personal Income Tax

23%

28%

36%

Monthly income of up to AMD500,000 (US$1,030)

Monthly income above AMD 500,000 (US$1,030)

Social Security Payments

5%

10%

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The maximum amount of social security payments is capped at AMD 25,000 per month until July 1, 2020. Moreover, starting from July 2018, only 50% of that amount is contributed by the employee while the remaining 50% shall be paid by the government. 

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For example, an employee with a monthly salary of AMD 600,000 (US$1,237) will pay 23% on income of 150,000 (34,500 in taxes) and 28% on income in excess of 150,000, that is, on 450,000 (126,000 in taxes),  which results in income tax of 160,500. The employee will also pay 12,500 in social security payments because of the 12,500 cap. The after-tax income will be 427,000 (600,000-160,500-12,500).

Import Taxes

Imported goods are generally subject to 20% VAT, although a number of goods are exempt from this tax. Moreover, VAT payments can be deferred by up to three years for goods imported under government-approved projects. 


Armenia is a member of the Eurasian Economic Union (EAEU) together with Russia, Belarus, Kazakhstan and Kyrgyzstan. Goods imported from these countries are exempt from import duties, while goods imported from third countries are subject to import duties established by the EAEU Commission.

Other Taxes

Depending on the nature of its activities, an Armenian company may also be subject to excise tax, environmental tax, road tax, real estate and vehicle property taxes.

III. Procedure, Timeline & Cost

Procedure

Company formation and corporate amendments are registered with the State Registry of Legal Entities of the Armenian Ministry of Justice. You do not have to personally appear before the Registry as lawyers can complete the formalities with a power of attorney. Typically company registration is followed by ordering a corporate rubber stamp and filing documents with the tax office.

Timeline

Remote registration can take as little as one business day if fast-track service fees are paid or three business days if no such fee are paid. Certain registrations related to branch offices and non-profits can take longer. 

Documents

Documents required may vary form case to case but, in general, individual shareholders/directors are required to provide original or legalized copies (i.e. Apostille or consular legalization) of their passports. Corporate shareholders/directors are required to provide legalized copies of their corporate documents - certificate of registration and articles of incorporation or equivalent documents. Originals or legalized copies are necessary in order to have them translated into Armenian language and notarized. 

Cost

Incorporation costs consist of government fees, legal fees and other expenses, such as fees for translation, corporate stamps, mailing etc.

What government fees are applicable to company registration and amendments?

IV. Business Name

A company registered in Armenia must have a business name (firm name) to which it has exclusive rights. The business name shall consist of a distinguishing word or expression (common or proper name, fictitious name or sequence of letters) and the corporate form of the company (e.g. ACME LLC). A business name can be changed but it cannot be assigned to another person unless the company reorganizes. 


The use of words "Armenia," "Armenian," "Arm," the names of Armenian regions, cities, villages can only be used with the approval of the national or local authorities. The annual government fee for using the words "Armenia" or "Armenian" is AMD 600,000 (US$1,233). Moreover, a business name cannot contain names the use of which requires a special license or permit (e.g. "bank," "insurance," "notary" etc). 


A business name cannot be identical or confusingly similar to a business name or trademark previously registered in Armenia. Name searches can be conducted in advance of registration at the websites of the State Registry and the Intellectual Property Agency. While a firm name grants its holder exclusive rights to use it, you should also consider registering a trademark as it generally offers a better protection. 

V. Shareholders & Managers

Shareholders

There are generally no restrictions on shareholding in Armenia. Foreign individuals and legal entities are allowed to be 100% owners of Armenian companies without having to involve local partners, directors, employees etc. 

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A limited liability company (LLC) cannot be 100% owned by another company (local or foreign) that consists of only one member (shareholder).  

If dividends are formally declared and distributed to shareholders they may be subject to taxation. Individual shareholders pay income tax of 10% (foreigners) or 5% (Armenian citizens). Dividends paid to non-resident legal entities are subject to 10% withholding tax, while dividends received by Armenian companies are exempt from taxation. The rate of 10% applicable to non-resident shareholders can be reduced by a double tax treaty.

Shareholders generally enjoy limited liability, which means that they cannot lose more than the amount invested and they are not personally responsible for the debts of the company. However, shareholders may be held liable if they knowingly (intentionally) caused the bankruptcy of the company.

Managers

In Armenia companies are normally managed by a single director (chief executive officer) who acts on behalf of the company by virtue of law and can issue powers of attorney to other managers. It is possible, but uncommon, to have an upper-level board of directors. Creation of a board is legally required for companies with more than 49 shareholders. Directors can be individuals or legal entities. 


Directors and other managers may be held liable for damages caused to the company if they act unreasonably or in bad faith. Directors may also be held liable for administrative and criminal offenses resulting from mismanagement (including tax evasion, money laundering, currency control, immigration offenses etc). Managers may also be held liable for intentional bankruptcy of the company.


Having an internal auditor (audit committee) is required for all JSCs and for LLCs with more than 20 shareholders.

VI. Legal Address & Phone Number

To be registered in Armenia the company must have a legal address to which official letters and notifications will be sent. You are not required to own or lease business offices in Armenia and you can use your residential address for company registration purposes. If you do not have an address in Armenia it can be provided to you by your lawyer.  

The legal address is used for official correspondence and it may be different from the actual place of business. The legal address must be shown in the articles of organization of the company. If the address is changed the articles have to be amended accordingly.

Having a local phone number is also important as the tax office and other government agencies will primarily use the phone for urgent communication with the company.

VII. Bank Account

Opening a corporate bank account in Armenia may take 1-10 days, depending on the length of background checks conducted by the bank. As of 2018, there are 17 banks in Armenia, all of which are privately owned. 

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Because of AML requirements it may be difficult or even impossible to open corporate bank accounts for companies that do not have an actual place of business in Armenia. 

Armenian banks offer a wide range of modern banking services, including opening accounts in major foreign currencies, online and mobile banking, debit and credit cards, international bank transfers, money remittance services, safety deposit boxes etc.

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Not all banks work with clients from Iran and Syria. If the company is owned or managed by a national of one of these countries it is recommended to check the possibility of opening a bank account in advance.  

VIII. Business Licenses & Permits

Business licenses and permits are generally not required in Armenia. However, certain classes of business activities may be subject to licensing or notification requirements.

List of Businesses that Require a License or Notification in Armenia

Certain businesses require a permit from the local municipality (city, town, village). Issuance of such permits is conditioned upon payment of a local tax.

List of Businesses that Require a Permit and Payment of a Local Tax

IX. Accounting & Tax Compliance

Companies operating in Armenia are required by law to keep accounting records and prepare financial statements in accordance with international financial reporting standards (IFRS). However, an Armenian company is not required to publish its financial statements, unless it is considered a "large company," i.e. a company with annual income or assets with book value in excess of 1 billion drams (approximately, US$2,080,000). Financial statements published by large companies do not have to be audited. Accounting records shall be kept using a government-approved software if the company's income exceeds 500 million drams (approximately, US$1,040,000).

Armenian companies are also required to file reports with the tax office and the statistics office, unless the company is inactive (dormant).  

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    Personal Income Tax (PIT) Returns. PIT returns shall be filed on a monthly basis, before the 20th day following the reporting month. They cover payments made to individuals, including contractors and salaried employees and show the amounts of income tax withheld by the company.

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    Turnover Tax Returns. If the company pays turnover tax it has to file turnover tax returns on a quarterly basis, before the 20th day following the reporting quarter. 

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    VAT Returns. Unless the company pays turnover tax, it normally must file VAT returns on a monthly basis, before the 20th day following the reporting month.   
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    Corporate Income Tax (CIT) Return. Unless the company pays turnover tax, it normally must file an annual CIT return, before April 20th of the following year.   
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    Statistical Reports. Statistical reports are generally submitted to the statistics office separately on a monthly basis. Companies are required to submit 12 monthly reports and 3 annual reports.    

The Armenian tax office also requires the companies to use an e-invoicing system to issue invoices electronically. Because the tax returns and invoices must be signed and filed electronically and in Armenian language it generally becomes necessary to hire local professionals (accountants) to ensure proper tax reporting and record keeping, including through the use of cash books, cash machines etc.

X. Employment & Payroll

As of 2018 the minimum monthly salary in Armenia is AMD 55,000 (US$115). Minimum hourly wages are AMD 330 (US$0.69), AMD 367 (US$0.77) and AMD 550 (US$1.15) for 40-hour, 36-hour and 24-hour work weeks respectively. These are net (after-tax) amounts and employers must gross them up to account for taxes. Thus, the minimum gross (before-tax) salary for full-time employment will be AMD 75,168 (US$157), including the net salary of AMD 55,000, the 23% income tax (AMD 17,289), the 2,5% social payment (AMD 1,879) and the flat military tax of AMD 1,000. 


The normal work week is 40 hours long. Employees are entitled to an annual leave of 20 working days.


Maternity leave normally lasts 140 days (70 days before and 70 days after the delivery). A woman can take unpaid maternity leave up to three years after the birth of her child, keeping her position in the workplace. 


Non-competition and other restrictive covenants may not be enforceable in Armenia. 


The employment agreement must be made in writing and contain information on the start date, place of work, working hours, duties, basic salary and bonuses (if any), term of the agreement, probation period (not exceeding three months). The employer must register the newly hired employee electronically with the tax office not later than on the first day of work. 


Employment agreements can be for a specific term or for an indefinite term. Employment for an indefinite term can be terminated at the initiative of the employer if at least one of the legal grounds for such termination exists (see table below).

Legal Basis for Termination

Advance Notice

Severance Pay

Dissolution of the company (employer)

2 months

1 month's wages

Layoffs caused by production necessity (i.e. urgent and unpredictable circumstances) or changes in 1) volumes of production, 2) economic conditions, 3) technological conditions, 4) conditions of labor organization

Employee does not meet the requirements for the position to be held or the work to be performed

14 days if employment lasted less than 1 year;

35 days if employment lasted 1-5 years;

42 days if employment lasted 5-10 years;

49 days if employment lasted 10-15 years;

60 days if employment lasted more than 15 years.

10 times daily wages if employment lasted less than 1 year;

25 times daily wages if employment lasted 1-5 years;

30 times daily wages if employment lasted less 5-10 years;

35 times daily wages if employment lasted 10-15 years;

44 times daily wages if employment lasted more than 15 years.

Long-term disability of the employee

Employee's attaining the age of retirement (63 or 65 years), if provided by employment agreement

Regular failure by the employee to perform his duties without a valid reason

N/A

N/A

Loss of confidence in the employee

Employee's reporting to work under the influence of alcohol or drugs

Employee's absence from work during the whole working day (shift), without a valid reason

Employee's refusal to undergo compulsory medical examination

XI. Corporate Formalities

At least one general meeting of shareholders must be held annually to approve the financial statements and the balance sheet of the company not earlier than two months and not later than six months after the end of the financial year. Proxies are normally allowed and a meeting can also be held remotely by postal voting. 


In addition to the regular annual meeting of shareholders extraordinary meetings may be convened to approve removal and appointment of the executive officers, transfer of shares (in closely-held companies), changes in the statutory capital, reorganization, dissolution of the company etc.

XII. Changes & Dissolution

Amendments in the articles of the company must be registered with the State Registry.  In particular, changes in the name of the company, its statutory capital, address, executive directorship require making amendments to the articles. In case of a limited liability company (LLC) changes in shareholding also must be registered. Documents submitted are checked and registered within two business days, unless the applicant pays the fast-track service fees for urgent registration (see the table below).


Reorganization of the company can take the form of a merger, spin-off, split-off, or change in the corporate structure (e.g. LLC turns into a JSC or vice versa). 


The dissolution of the company requires posting an announcement on the official website www.azdarar.am to notify the creditors of the company. The creditors have two months to file their claims. The tax office has 20 days to submit its claims for unpaid taxes. Normally this is preceded by a tax audit in the company. The dissolution of the company also involves working with the National Archive and the Police in order to archive the corporate documents and to destroy the company's stamp, respectively. 


The alternative to dissolution can be filing a declaration with the tax office stating that the company is inactive. The inactive (dormant) company will remain on the register but will not be required to file tax returns or pay taxes. 


Dissolution or corporate amendments can be registered remotely by your lawyer or other representative having the necessary power of attorney. 

What government fees are applicable to company registration and amendments?

Benefits of Company Registration in Armenia


1. Ultra-Fast Registration

Company registration normally takes as little as one business day. A tax identification number is immediately issued to the newly registered company, hence there is no need for a separate tax registration. You will get a registration certificate (extract from register) with a tax ID, articles of association, and your company will be ready to start operating immediately.


2. Low Cost of Registration and Maintenance

The government generally does not charge any fees for company registration or only minimal fees are required for certain government services. There are no renewal fees: once registered, your company will be in good standing indefinitely, without having to pay any recurring fees to the government. Inactive (dormant) companies do not have to pay any taxes, file tax returns or undergo audits. Active companies may incur expenses associated with tax compliance, payroll services and taxes. 


3. 100% Foreign Ownership Allowed

As a foreigner you can own 100% of the company. No local partners or agents are required, irrespective of the area of your business. There are no restrictions on the number of shareholders, the countries of their citizenship/residence etc.


4. Foreign Directorship Allowed. No Local Partners Needed.

A director of an Armenian company can be a foreign citizen. The director is not required to reside in Armenia or have a local address. A foreigner can simultaneously be the 100% shareholder and the director of the company.


5. Remote Registration 

If you cannot or do not wish to spend time and money on traveling to Armenia you may choose to register your company remotely. Remote company registration is possible with a power of attorney. Once the registration is done we will collect the company documents and send them to you by express mail or will safely keep them in our office until your further instructions.


7. Minimum Documents

Having a valid passport is generally sufficient to start a company in Armenia. There is no need to provide additional documentation such as proof of address, bank statements etc. 


8. No Capital Requirements

There are no minimum capital requirements to set up a company in Armenia. You do not have to set up a bank account and block funds on it. A company may have a statutory capital of only $1. 


9. No Requirements to Have Local Staff, Office etc.

Registering a company in Armenia does not require you to incur expenses such as renting office space, hiring local staff (directors, officers, secretaries, agents, accountants etc.) or opening an account with a local bank. 


10. Armenian Residence and Citizenship

Doing business in Armenia will qualify you as well as your family members for residency status in Armenia. Business people can apply for single or multiple-entry visas, temporary (1-year), permanent (5-year) or special (10-year) residence permits. After maintaining the residence permit for 3 years a business person may be eligible for Armenian citizenship.


11. Low Taxes

Armenia is a low-tax jurisdiction with special tax benefits for certain categories of taxpayers, including IT companies, small and medium companies, farmers etc.


12. Privacy

If you are concerned about privacy you can either choose one of the corporate forms which do not require the shareholders to be registered (e.g. joint-stock company, cooperative etc.) or you can use nominee director/shareholder services. Bank secrecy is strictly protected by law and it is a crime to disclose it.


13. Reputation

Armenia is not a remote island but a real country with diverse economy. It has an up to date anti-money laundering legislation, and the Central Bank has ensured the safety, stability and good reputation of the banking system. Armenia does not appear on any list of offshore countries (IMF, FSI, OECD), lending to its positive image and credibility.. 


14. No Permits/Licenses & Unlimited Scope of Business

Generally no business permits or licenses are required to start business operations in Armenia. Companies operating in certain areas may be required to obtain local permits (e.g. sale of alcohol or tobacco products) or to notify relevant government offices of their activities (e.g. restaurants, import/export companies). Licensing applies to limited activities in areas of financial services, education, medicine, gambling etc.


Unlike many other countries Armenia does not require companies to list the activities they are allowed to engage in. By default a company registered in Armenia can engage in any type of lawful activity, unless it is subject to licensing.


About Us


Nerses Isajanyan

Attorney

We are a team of licensed lawyers based in Armenia. We can provide you with all necessary support and guidance throughout the process. For more information on creating and operating companies in Armenia  please email us at help@vardanyanlaw.com. 

What We Provide

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    Company formation & maintenance
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    Payroll services
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    Virtual office
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    Visa, residence & passports

Why Choose Us

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    10+ years of experience
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    Effective and quick communication 
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    Fees based on results
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37 Mashtots Ave., Suite 4, Yerevan 0028, Armenia

phone

+374.99.00.11.67

help@vardanyanlaw.com

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