The importance of an effective and enforceable system of intellectual property laws and institutions has been acknowledged by the Armenian government and the society at large. A number of legal and institutional reforms have been initiated recently with a view to improving the system of intellectual property rights and enhancing the trade and investment environment in the country, including enforcing customs controls on imports and exports of pirated or counterfeit goods. This is also an important factor in facilitating the negotiation process for a Deep and Comprehensive Free Trade Agreement between Armenia and the EU and ensuring compliance with Armenia’s commitments under the WTO agreements.

The Armenian Law on Profit Tax (corporate tax) defines royalty as compensation for transferring a copyright to a work of literature, art or science; a patent; a trademark; a project or a model; a plan; a confidential formula or process; a software for computers or databases; a right to use industrial, commercial or scientific equipment; or information on industrial, technical, organizational, commercial or scientific experience.[1]Royalty is subject to taxation at the general corporate tax rate of 20%.[2] If royalty is paid to a non-resident entity a withholding tax of 10% is imposed on the resident company making the payment.[3]Individuals are subject to an income tax of 24.4% or 26%.[4] If royalty is paid to an individual not registered with tax authorities as an “individual entrepreneur” a withholding tax of 10% is applicable.[5]

Small and medium enterprises with an annual turnover of less than AMD 58.35 million (approx. USD 142,000) are exempted from corporate tax but subject to turnover tax.[6] Under the turnover tax regime royalties are taxable at 10%.[7]

Licensing and technology transfer are considered provision of services and as such are subject to a VAT[8] of 20%[9].  Small and medium enterprises with an annual turnoverof less than AMD 58.35 million (approx. USD 142,000) are exempted from VAT.[10]Zero rate VAT applies to provision of services outside the territory of Armenia.[11]Services for transfer of patents, licenses, copyright, trademarks and similar rights and provision of software are considered to be provided in Armenia if the recipient of such services (the transferee) is a company or an individual entrepreneur registered in Armenia.[12]If the transferee is an Armenian company and the transferor is a foreign company the Armenian company must withhold the tax unless it is exempted from VAT.[13]

The customs value of goods imported to Armenia shall include the amounts payable to the supplier by the purchaser against royalties and license fees that are required conditions for the sale of the imported goods.[14]The rate of the import duty is either 10% or 0% of the customs value.[15]

Money Transfer

No restriction is imposed on current operations between resident and non-resident entities or persons, i.e. payments for sale of goods, provision of services, performance of work, use of property, granting of short-term loans, payment of interest, dividends, remittances etc.[16]Other transactions , which do not fall within this category of “current operations,” are treated as capital flow and financing operations and theoretically can be restricted by the Central Bank in order to achieve financial system stability, combat money laundering and terrorism financing, prevent economic risks and collect statistical information.[17] In practice, however, such restrictions have not been imposed.

Foreign currency exchange transactions cannot be restricted but shall be executed through licensed entities, i.e. banks, exchange offices, currency dealers etc.[18] Export of cash is limited to AMD 5 million (approx. USD 12,000) or its equivalent in foreign currency, whereas the import is limited to 15,000 euro or its equivalent in another currency.[19]The law requires that monetary equity investments in Armenian companies be made in local currency.[20]

Joint Research and Retention of Rights

Copyright to a work made by the joint creative labor of two or more citizens belongs to the coauthors jointly, regardless of whether such a work forms one indivisible whole or consists of parts each of which also has independent significance.[21]Each of the coauthors shall have the right to use a part of the work created by him that has independent significance at his discretion unless otherwise provided by contract.[22]Copyright to a work shall be exercised by all the authors jointly and remuneration shall be distributed among them equally, unless otherwise provided by contract.[23]If the work of coauthors forms one indivisible whole, then no one of the authors can, without sufficient grounds, prevent others from using the work.[24]

If an invention is made by several persons jointly the right to apply for and obtain a patent belongs to them jointly.[25] Mutual relations of patent holders, i.e.cocreators of an invention, utility model, or industrial design shall be determined by agreement among them.[26]Noncreative support in the creating of an invention, utility model or industrial design (technical or organizational assistance, assistance in formalizing rights, etc.) does not entail cocreatorship.[27]

The Law on Trademarks does not restrict the ownership of a trademark by two or more persons[28] and contains a number of provisions on collective marks[29].

Preferential Treatment

Scientific research and development works are exempted from VAT.[30]For corporate tax purposes expenses on scientific, experimental and designing works are deductible in the year where expenses were incurred.[31] Resident entities implementing business plans approved by the Government of Armenia are entitled to a tax credit equal to the amount of wages paid for work performed within the business plan for the first year of operations and the following two years, provided that such amount does not exceed 30% of the corporate profit tax and that the activities in question are not commercial or financial in nature.[32]

• Name of the authority: Intellectual Property Agency of the Ministry of Economy
• Address: Central Avenue, Government Building 3, Yerevan 0010
• Phone Number: (374 10) 543-467
• Email Address: armpat@aipa.am
• Website: www.aipa.am
• Jurisdiction of the Authority: examining applications and registering inventions, utility models, industrial designs, trademarks and service marks, geographical indications, topographies of integrated circuits; granting patents; registering license agreements, hearing appeals and oppositions; publishing official information and operating search engines; registering patent attorneys; ensuring international cooperation; providing advice to the Minister of Economy for improvement of intellectual property legislation.

• Name of the authority: State Commission for Protection of Economic Competition
• Address: 5b, MherMkrtchyan St., Yerevan 0010
• Phone Number:  (374 10) 543-986
• Email Address: webaster@competition.am
• Website: www.competition.am
• Jurisdiction of the Authority: enforcingcompetition laws; prosecuting unfair trade practices; designing and implementing competition policy; international cooperation.

• Name of the authority: Police, First Unit of the Anti-Organized Crime Department
• Address: 130, Nalbandyan St., Yerevan 0025
• Phone number: (374 10) 520-310
• Email Address: N/A
• Website: www.police.am
• Jurisdiction of the Authority: registering claims, conducting operational and intelligence activities, expert examinations, detecting and investigating intellectual property crimes.

• Name: Ministry of Agriculture
• Address: Central Avenue, Government Building 3, Yerevan 0010
• Contact Details: (374 10) 524-641
• Email Address: N/A
• Website: www.minagro.am
• Jurisdiction of the Authority: examining applications and registering plant variety rights; granting patents; registering license agreements.

• Name: Customs Service of the State Revenue Committee
• Address: 3, MovsesKhorenatsi St., Yerevan 0015
• Contact Details: (374 10) 544-311
• Email Address: N/A
• Website: www.customs.am
• Jurisdiction of the Authority: prevention of illegal import and export of goods containing intellectual property objects.

• Name of the Business Association: Armauthor Association
• Address: 19a, Koryun St., Yerevan 0009
• Phone Number: (374 10) 529-492
• Email Address: info@armauthor.am
• Website : www.armauthor.am
• Membership size: Armauthor is a non-governmental collective management organization of authors’ rights and related rights.
• Types of Members: authors, performers and phonogram producers.

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Armenia enacted investor friendly laws on company registration and has regularly amended them in recent years. The central piece of legislation is the Law on Corporations dating from 2001 but the very process of incorporation is governed by a 2012 Law on State Registration of Legal Entities. On the whole, Armenian laws provide for a fast incorporation, low maintenance fees and use of corporate form to engage in any legitimate business, such as investing, trading, and property holding. Unlike foreign individuals, corporations are allowed to own interest in land.

Formation

A corporation is formed by filing articles of incorporation with the State Registry. Engaging in business activities without state registration can result in administrative or criminal liability. Since the “one-stop shop” was launched in 2011 businesses have been able to complete state registration, tax registration and trade name reservation at a single location and at the same time. It is possible to submit all necessary documents online, and incorporators do not need to submit the documents in person. The articles of incorporation must be written in Armenian but use of a parallel languages is not restricted. A single shareholder is sufficient to create a corporation. The law requires the registration to be completed within two working days if founders use a standard package of founding documents. The corporation’s life can be specified in the articles of incorporation. Armenia is party to the Apostille convention and incorporation documents are eligible for an apostille. Armenian law does not recognize migration of domicile. Corporate seals are not required by law but in practice seals can be asked for when dealing with some public and private entities (e.g. State Revenue Committee, financial institutions). Thus, businesses prefer to pay an additional fee and obtain a seal on the registration day.

Limited Liability

Corporations registered in Armenia enjoy limited liability and are not liable for debts of their shareholders. Shareholders, in their turn, are not responsible for debts of the corporation, and the doctrine of corporate veil piercing is not applicable in Armenia.

Trade Name

Trade names are registered in Armenian language but it is lawful to use their translations into other languages. Corporations are required by law to use name endings stating the limited liability. Trade names shall not contain words like “bank” or “insurance,” unless the corporation possesses a proper license. Words “Armenia” or “Armenian” can be used only upon a formal permit issued by the Government . It is possible to check the availability of trade names online.

Share Capital

Corporations may issue shares of various classes: preferential or common, voting or non-voting. Bearer shares and no par value shares are not authorized. There are no minimum or maximum limits on the amount of share capital. Share capital can be paid in Armenian currency or by transferring other non-cash assets. Share register must be kept and maintained by a licensed registry (not applicable to LLCs).

Confidentiality

Nominal shareholders are allowed, and particulars of beneficial or nominal shareholders and directors are not part of public record. However, articles of incorporation, information on executive officer, local address and share capital are available to public.

Maintenance and Administration

A corporation must at least have an executive officer. The corporation must maintain a registered office (legal address) in Armenia but no company staff, local directors and secretaries are required. The executive officer and directors can be corporate entities. Officers, directors and employees can be foreign citizens and residents of any country. Books and records must be maintained but there are no requirements for filing them with the Registry, except for amendments to articles of incorporation and changes of executive officers. There are no requirements for annual audits. Annual meetings can be anywhere in the world, and shareholder can be represented by proxies.

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Citizens of states for which no visa entrance regime is provided, are allowed to enter the territory of Armenia and stay there for up to 180 days, according to article 7 of the Armenian Law ”On Foreigners”.

Obtaining an Entrance Visa

According to the  Law ”On Foreigners” citizens of states for which no visa entrance regime is not provided may enter the territory of Armenia only after obtaining an entrance visa. The entrance visa can be issued in two ways:
1. When the foreigner arrives to Armenia (at the Armenian state border)
2. Before the foreigner’s arrival to Armenia (at the Armenian embassy or consular service).

Citizens of some countries also have to obtain a prior invitation from Armenia before applying for an entrance visa. Governmental Decree No. 329-N of 04.04.2008 approved a list of countries citizens of which need to receive a visa before their arrival to Armenia and a list of countries citizens of which need to obtain a prior invitation from Armenia before applying for an entrance visa. According to the Law ”On State Duty” duties payable for an entrance visa are set as follows:

1) 15,000 AMD (about $36) for a visa valid for up to 120 days

2) 3,000 AMD (about $7) for a visa valid for up to21 days

Obtaining a Residence Card

A foreigner must obtain a residence card, if he/she wants to extend the stay in Armenia beyond the period specified in the entrance visa or by law where an entrance visa is not required. According to the Law  ”On Foreigners,”  there are 3 types of residence cards:

1. Temporary

2. Permanent

3. Special

Initially a  foreigner who is not of Armenian descent can apply for a temporary residence card, which  is granted for a one-year period. The issuing body is the Police. The procedure for issuing residence cards is established by Governmental Decree No. 1134-Nof 07.02.2008. In order to receive a temporary residence card the applicant must submit the following documents:

1.  Application-questionnaire

2.  Three color photos (35 x 45mm)

3. Passport, copy of the passport and a notarized translation into Armenian of the passport.

4. Medical certificate on health condition (general examination can be carried out in Armenian hospitals).

5. Documents justifying the residence in Armenia (usually a certificate from employer or from an educational institution or other document showing the reason of residence).

6. A proof of payment of state duties in the amount of  105,000 AMD (about $255). The payment is made only after the Police notifies of its positive decision, which is  usually made within a month from the application date.

 Obtaining a Labor Permission

The Law ”On Foreigners” requires foreigners to obtain a labor permission before they can be employed in Armenia. Exceptions to this rule are provided in article 23 of the Law, including cases when the foreigner is a founder or an executive officer or a representative of a company with foreign investment. According to the Armenian Law ”On Foreign Investments” the company is considered to be with foreign investment if it is created and its capital is paid by a foreign person or entity.

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Government plans to reduce tax exemptions and increase tax revenue


Government approved a schedule of tax legislation amendments for the period of 2012-14. The schedule provides for the following amendments:

• Reviewing current VAT regime for financial services
• Restricting tax incentive periods to a maximum of five years and requiring cost and benefit analysis for future tax incentives
• Eliminating minimum taxes and improving the advance payments system
• Introducing declining-balance depreciation with pooling of assets
• Considering elimination of tax breaks for the Pan Armenian Bank
• Introducing automatized systems for real property assessment
• Eliminating discretionary tax exemptions by municipal authorities
• Introducing mechanisms to ensure refund of VAT debit balances to taxpayers
• Implementing the accrual principle in VAT taxation
• Disallowing educational expenses deduction
• Taxing capital gains
• Improving the excise and VAT taxation of gasoline and diesel fuel
• Bringing cadastral values of real property in line with market prices to increase the collection of property taxes
• Eliminating VAT exemptions for the sale of tobacco products, books and periodicals, precious and semi-precious stones, jewellery, carpets, and provision of touristic services to foreigners.

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The following important amendments were made to the Law on Foreigners:

• Foreigners enjoying a visa free regime can stay in Armenia for up to 180 days in a year instead of 90 days under former law.
• Foreigners without a valid passport or visa can exit Armenia upon submission of proof of payment of a fine (50,000 to 100,000 drams) imposed on them under article 201 of the Administrative Code.
• Children and parents or temporary residents are eligible for temporary residency. Under old law only spouses were eligible.
• All ethnic Armenians can obtain a visa at the border without invitation. Under old law citizens of a number of countries could obtain a visa only at Armenian consulates abroad and only upon invitation. The list of proofs of Armenian ethnicity is to be established by the Government.
• Travel tickets or entry visas to third countries shall be submitted to obtain a transit visa only if transit involves crossing air border. Under old law these documents had to be presented for crossing land borders as well.
• Entrepreneurs doing business in Armenia are entitled to permanent residency. Under old law such entrepreneurs could be granted permanent residency.

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Armenian Government passed a resolution on electronic government procurement. The procurement system will allow registered suppliers to electronically receive notifications, place bids and sign contracts. The resolution requires all executive agencies to place orders through the electronic procurement system starting from January 1, 2012. Suppliers are invited to register at the official website of the procurement system, www. armeps.am. However, several documents still need to be filed in paper to complete the registration. In 2010 government procurements amounted to 450 billion drams.

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In order to improve the affordability of digital signature certificates the Government will provide a $27,000 subsidy, which is expected to reduce the price of a digital signature certificate from $34 to $9.

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