1. Benefits of Registering a Company in Armenia
Swift and Effortless Registration: Armenia offers ultra-fast, one-day registration for businesses with sample documents, making starting a business in Armenia incredibly efficient. For those wondering how to start a business in Armenia, customized or remote registrations take just one to three business days. A registration certificate with a taxpayer ID number is swiftly provided, enabling immediate operations and simplifying the process of doing business in Armenia.
Affordable Setup and Maintenance: With no minimum capital requirements and an option for a nominal paid-up capital of $1 in local currency, starting a business in Armenia is cost-effective. For those looking into how to start a business in Armenia, it’s important to note that there are no government fees for company registration or renewal, eliminating recurring reporting costs. Doing business in Armenia is further simplified as inactive (dormant) entities are exempt from taxes and tax filings, and there are no obligations for office rental, local hires, or compulsory bank accounts.
Foreign Ownership Freedom: Armenia welcomes foreign ownership without constraints. Starting a business in Armenia allows for full ownership by foreigners, exempt from the need for local partnerships or agents. For those exploring how to start a business in Armenia, it's reassuring to know that the citizenship or residency of shareholders poses no limitations. Non-resident directors and employees, including sole foreign directors, can manage and wholly own companies without local presence mandates.
Residence and Citizenship Avenues: Operating or owning an Armenian company can open paths to various residency statuses for you and your family. Starting a business in Armenia or engaging in doing business in Armenia can facilitate these opportunities. Under general naturalization rules, three years of residency can lead to eligibility for Armenian citizenship.
Advantageous Tax Regime: Micro-businesses, entities in economic or industrial zones, and more qualify for zero-tax status. IT startups can benefit from a reduced personal income tax rate for employees, paying 10% instead of the standard 20%. Companies with annual sales of less than 115 million drams (approx. $299,000) incur sales (turnover) tax of 1.5-10%. Dividend taxation at 5% is flexible due to numerous double-tax treaties, while capital gains on asset sales remain untaxed for individuals. Additionally, gifts, inheritance, net worth, and insurance/pension payments incur no taxes.
Privacy and Credibility: Selecting the right corporate structures or using nominee services is possible for ownership privacy. Armenian bank secrecy is law-protected and disclosing it is a crime. The country 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.
Skilled Workforce and Low Labor Costs: Armenia offers a highly educated, skilled workforce with a 99.7% adult literacy rate. Multilingual universities contribute to a qualified labor pool. The minimum monthly wage stands at $195, while the national average is approximately $690.
Economic Growth, Integration, and Diaspora: In 2023, Armenia's GDP grew by 8.7%. Membership in the Eurasian Economic Union (EAEU), WTO, and free-trade agreements with CIS countries, Canada, Japan, Norway, and Switzerland position Armenia favorably. The global Armenian diaspora, numbering 7 million, enriches the country's resources.
Investment-Friendly Environment: Armenia ensures free repatriation of capital and profits, allows foreign land ownership, and encourages investments through tax incentives and government aid programs. Extensive double taxation and foreign investment protection agreements strengthen Armenia's investment appeal.
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Choosing the appropriate business structure entails a comprehensive assessment of both tax and non-tax considerations. These encompass factors like limited liability, establishment and maintenance costs, confidentiality, number of shareholders, managerial framework, and exit strategies.
Private Entrepreneur (PE)
A Private Entrepreneur is an individual registered within the State Registry, assigned a tax ID. Operating as a PE does not constitute a distinct legal entity; thus, personal liability extends beyond the invested business assets. In essence, business and personal assets remain undivided, potentially leading to personal accountability for business-related liabilities. However, the advantages include its uncomplicated and economical setup and maintenance, absence of dividend taxes, and streamlined accounting procedures. This structure best caters to smaller businesses owned and managed by a sole proprietor.
Limited Liability Company (LLC)
The Limited Liability Company (LLC) is the predominant corporate form in Armenia. As the name suggests, shareholders in an LLC benefit from limited liability, safeguarding them from company debts. This form's popularity stems from its straightforward and cost-effective establishment, uncomplicated managerial hierarchy, and reduced corporate formalities. Membership is capped at 49 shareholders. Alternatively, an Additional Liability Company mirrors the LLC but varies in that shareholders bear responsibility for company debts, as outlined in the organization's articles.
Header | Limited Liability Company (LLC) | Joint-Stock Company (JSC) |
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| The register of shareholders is maintained by a governmental agency (State Registry) and is annexed to the articles of organization. The register is public. Articles of organization have to be amended every time share ownership changes. | The register of shareholders is maintained by a bank or an investment company for a fee. The register is not public. |
| Shareholders have preemptive rights to purchase shares before they are offered to third parties. A shareholder may exit the company any time and claim a refund equal to the value of his share. | In a close joint-stock company (CJSC) shareholders have preemptive rights to purchase shares. In an open joint-stock company (OJSC) no such rights exits and shares can be freely transferable. |
| Capital may be divided in registered shares. | Share capital can consist of certain classes of common/preferred, voting/non-voting shares. |
Annual Meeting of Shareholders | Annual meetings can be held remotely with shareholders casting their votes by means of distant communication. | Annual meetings can be held anywhere in the world, and shareholders can be represented by proxies. |
| Shareholders appoint one executive manager (director). Creation of an upper-tier board of directors is optional. | Shareholders appoint one executive manager or a management board. Creation of an upper-tier board of directors is required only for companies with more than 50 shareholders. |
| An internal auditor or audit committee is optional for companies with less than 21 shareholders. | An internal auditor or audit committee is mandatory. |
In-Kind (Non-Cash) Contributions | A report by an external appraiser is required if the nominal value of the shares issued in exchange for in-kind contributions exceeds AMD 500,000. | A report by an external appraiser is required for all in-kind contributions. |
Joint-Stock Company (JSC)
The Joint-Stock Company proves suitable for medium to large enterprises with multiple shareholders. This strong structure offers enhanced shareholder privacy and increased flexibility in share capital structure and company management. An Open Joint-Stock Company (OJSC) enables unrestricted share transfers, devoid of shareholders' preemptive acquisition rights.
Partnerships can take the form of a distinct legal entity or a contractual agreement among partners. Partnerships offer more flexibility and are less regulated. Unlike an LLC or JSC with a single director, a partnership can be actively managed by multiple partners. You have the option to create a general partnership, where partners bear debt liability, or a limited partnership, with passive investors who risk only their initial investment. A contractual partnership doesn't require registration, but notifying the tax office is necessary.
Cooperatives are worker associations, where each member holds an equal vote, and profits reflect labor contributions, not capital. This unique structure suits smaller employee-owned businesses valuing labor over capital. Specific rules apply to agricultural cooperatives.
A private equity fund is used for investing in real estate, securities, and other assets. Registered by the Central Bank of Armenia, it enjoys significant tax benefits, including a mere 0.01% annual tax on net asset value and tax-free profit distribution.
Non-Corporate Forms of Doing Business
Business partners can also engage in non-corporate collaborations via contractual agreements like joint ventures, franchising, trust management, agency, commission, and delegation.
Non-profit entities in Armenia are typically founded as either foundations or public associations.
Public Association: A public association operates as a membership-driven entity, primarily catering to its members' needs (e.g. professional associations, clubs, etc.). Oversight of a public association falls to an executive manager (management board) appointed by the members' general assembly.
Foundation: Foundations lack members and are primarily established to fund charitable initiatives benefiting specific groups or society as a whole. Governance of foundations rests with a board of trustees, initially designated by the founders, and an executive manager appointed by the board.
Both foundations and public associations have the capacity to engage in business and revenue-generating activities. Income generated from such activities is subject to regular taxation rates applicable to for-profit establishments. However, fees from memberships, charitable contributions, and other voluntary transfers (monetary and in-kind) directed toward non-profit organizations remain non-taxable. Non-profit entities may choose to create for-profit businesses (LLC, JSC, etc.) to segregate commercial operations from their core pursuits.
Religious Organization: Registering a religious organization mandates obtaining certification from the Council of Religious Affairs, verifying the religion's "traditional" status (based on historical canonized scripture and integration into contemporary religious and ecclesiastical communities), and confirming a membership of at least 200 individuals (excluding minors).
Institution: An institution is a structural or territorial unit established within a legal entity to engage in non-profit endeavors related to education, sports, culture, governance, etc. While an institution has its articles of organization, it doesn't hold legal entity status. Debts incurred by the institution fall under the responsibility of the founding organization.
Engaging in unregistered business operations, known as illegal entrepreneurship, carries significant tax and criminal implications in Armenia. If you're unsure about whether your business activities necessitate registration in Armenia, it's advisable to consult with professionals who can provide expert guidance.
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3. Subsidiary, Branch Office, Representative Office
Choosing the appropriate business structure entails a comprehensive assessment of both tax and non-tax considerations. These encompass factors like limited liability, establishment and maintenance costs, confidentiality, number of shareholders, managerial framework, and exit strategies.
1. Branch Office (BO): A branch office is a territorial division of a foreign enterprise operating within Armenia. It doesn't exist as a separate legal entity but rather serves as an extension of the foreign company. For proper functioning, branch offices established in Armenia need to undergo registration with the State Registry and obtain a taxpayer identification number.
2. Subsidiary: A subsidiary involves the establishment of a locally registered company (LLC or JSC) that is either fully or partially owned by a foreign corporation. All aspects of corporate operation are governed by Armenian law. Importantly, the limited liability structure ensures that creditors of the subsidiary cannot lay claim to the assets of foreign shareholders.
Branch vs. Subsidiary Comparison
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Taxation of Worldwide Income | Only income from Armenian sources is taxed. | Worldwide income is taxed. |
Repatriation of Profits (Dividends & Interest) | Transfers of funds between the branch office and the head office are non-taxable intra-company transfers. | Dividends and interest income paid to a foreign parent company are taxed at 5% or a lower rate if a DTT applies. |
Transfer of Assets from/ to Head Office (Parent Company) | Intra-company transfers of assets are generally not taxable. | Transfers may result in income taxes or VAT. |
Double-Tax Treaties (DTT) | Branch offices are non-residents and Armenia's DTTs do not apply to them. | A subsidiary is an Armenian company that can benefit from Armenia's DTTs. |
Taxation of Dividend Income | Dividend income is taxable. | Dividend income is not taxable. |
Tax Benefits for Residents | Special rates and exemptions are generally not applicable to branch offices. | Subsidiaries are resident companies and can take advantage of certain tax benefits (reduced rates or exemptions). |
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| Head office is liable for all debts of the branch office. | Parent company enjoys limited liability and generally is not responsible for the subsidiary's debts. |
| A branch office is not an Armenian entity and is governed by the laws of the jurisdiction where the head office is located. | A subsidiary is an Armenian company and must comply with the Armenian company laws. |
| Branch office must use the name of the foreign company (head office). | Subsidiary's business name can be different from that of the parent company. |
| Branch office is considered a non-resident and can use foreign currency in its dealings with Armenian residents. | A subsidiary is an Armenian resident company and must comply with foreign currency control requirements. |
3. Representative Office: A representative office, akin to a branch office, functions with the key distinction that it cannot conduct business activities. Rather, its purpose is confined to representing the interests of the foreign entity within Armenia. Starting a business in Armenia may involve setting up a representative office, which mandates registration with the State Registry and acquisition of a taxpayer identification number.
4. Permanent Establishment: The concept of a permanent establishment revolves primarily around taxation. It materializes when a foreign company maintains a significant business presence within Armenia. Starting a business in Armenia and deciding to establish a permanent presence is predominantly driven by tax considerations. The Tax Office oversees the registration of permanent establishments and issues corresponding taxpayer identification numbers, ensuring compliance for those doing business in Armenia.