Taxes in Armenia

Foreign entrepreneurs and investors value the rapidity of economic reforms, the safety, freedom, and openness that Armenia offers. Many prefer to visit Armenia in person and register a business as a first step to enter the market.

Micro-businesses, companies operating within free economic zones, industrial zones, select border towns, and villages can benefit from a zero-tax status. Similarly, smaller businesses with annual sales under approximately $280,000 are subject to a nominal sales (turnover) tax, ranging from 1.5% to 5%. Remarkably, Armenia follows a lenient tax policy regarding individual capital gains from the sale of securities, real estate, and various assets. Additionally, insurance and pension payments are exempt from taxation, as are gifts, inheritances, and net worth.

Navigating Armenia's business landscape can be greatly simplified with the assistance of a knowledgeable local lawyer. These experts play a pivotal role in minimizing potential risks through meticulous compliance with tax, labor, and immigration regulations. By harnessing their expertise, businesses can adeptly sidestep potential pitfalls while capitalizing on tax benefits and government assistance programs.

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      Overview of Taxes in Armenia

1

Business Tax Options

Examine the various tax regimes for businesses in Armenia.

2

Payroll Taxes

Investigate the payroll taxes withheld by the employers.


3

Import Taxes

Explore the taxes for import-export business activities. 


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Business Tax Options

In Armenia, taxation varies based on the size of the business. Medium and large businesses adhere to standard tax rates, whereas smaller enterprises can benefit from special tax regimes designed to alleviate both the tax burden and paperwork.


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

General tax regime

By default, businesses are subject to the general tax regime, which includes an 18% corporate income tax (CIT) and a 20% value-added tax (VAT). VAT is reduced to 0% for goods or services that are exported. Under this regime, CIT returns are filed annually, while VAT returns must be submitted on a monthly basis.

Turnover tax

Turnover tax is a form of a sales tax, with rates typically ranging from 1.5% to 5%. It serves as a replacement for both CIT and VAT. However, this tax regime is only available to small businesses with annual sales totaling less than AMD 115 million (approximately $280,000). Turnover tax returns are filed quarterly.

Micro-businesses

Micro-businesses, defined as those with annual sales below AMD 24 million (about $62,000), enjoy exemptions from both CIT and VAT. It's important to note that certain businesses, such as those located in the capital city of Yerevan and various service sectors, are excluded from this tax system and cannot take advantage of these exemptions.

TAXATION OF IT COMPANIES

Newly registered businesses in the IT sector, including both companies and private entrepreneurs, have had the opportunity to apply for an IT Start-Up certificate. This certificate holds the potential to offer significant tax advantages, including a substantial reduction in payroll tax, lowering the rate of personal income tax withheld by the employer from the standard 20% to just 10% until December 31, 2024. Currently, the deadline for applications is November 1, 2024.

To benefit from this program, it's crucial to note that businesses must apply for the IT Start-Up certificate within 90 days following their registration. These tax incentives are not accessible to larger companies with 30 or more employees, or to subsidiaries and branch offices of foreign companies (these restrictions may potentially be revised following the passage of new legislation). The issuance of IT Start-Up certificates is overseen by the Ministry of High-Tech Industry.

The following businesses can take advantage of these tax benefits:

  • Software development, including the creation, modification of software, testing and support services; creation of applications for clients; development of the structure and contents for systems software, applications, databases, websites, or the creation of machine commands necessary for such development or operation; transformation and adaptation of applications to the information environment of the customers;
  • Consulting activities in the area of computer technology, including the development and design of computer technical means, software, and integrated computer systems in communication technologies; services in connection with educating the users;
  • Computer system management activities, including network management and creation of computer systems for customers or maintenance of technical means for data processing, and other support services;
  • Data processing, distribution of information in the network and related activities, including provision of infrastructures for website placement; data processing (complete processing of data provided by users or through application of original software; automated data processing; input services, including database management services) and related services; specialized services for placement of websites (hosting service), i.e. placement of websites in the Web (Web hosting), current transfer of data (undivided, according to plans) or placement of applications; operation (launching) of software and hardware resources; servicing users through a central (global) computer functioning in total time-sharing mode;
  • Activities related to web-portals, including activities related to websites (use of search engines to create and maintain large-scale databases of information located on the Internet with the purpose of facilitating easy and accessible searches by addresses or content); activities related to other websites that operate as web-portals, such as, for example, news websites providing regularly updated information;
  • Implementation of educational and research programs in the field of information technologies;
  • Design, testing and production of electronic systems;
  • Computer animation and modeling;
  • Design and testing of integrated circuits.

Payroll Taxes

Employers are required to withhold both personal income tax (PIT) and social security contributions. This encompasses various forms of income such as salaries, benefits, bonuses, temporary disability compensation, and maternity leave compensation. As of 2023, a uniform personal income tax rate of 20% applies to all forms of compensation, regardless of the amount involved.

Apart from PIT, employers are also responsible for deducting social security payments. The rate for these payments stands at 5% for income up to 500,000 AMD (approximately $1,309) and 10% deducted 25,000 AMD for income exceeding this threshold. It's important to be aware that there's a maximum salary limit for social security payments, currently capped at 1,125,000 AMD per month (equivalent to 15 times the minimum monthly wage of 75,000 AMD).

Military taxes (contributions to the insurance foundation of servicemen) are withheld in the following manner:

  • 1,500 AMD ($4) for salaries of up to 100,000 AMD ($261)
  • 3,000 AMD ($8) for salaries of 100,000-200,000 AMD ($523)
  • 5,500 AMD ($14) for salaries of 200,000-500,000 AMD ($1,309)
  • 8,500 AMD ($22) for salaries of 500,000-1,000,000 AMD ($2,619)
  • 15,000 AMD ($39) for salaries in excess of 1,000,000 AMD ($2,619)

It's important to note that social security payments and military taxes are obligations that exclusively apply to Armenian citizens and residents (i.e. individuals holding residence permits). Generally, those born before 1974 enjoy an exemption from social security payments.

For instance, in the tax year 2023, consider an employee earning a monthly salary of AMD 600,000 (equivalent to $1,571). This individual will be subject to a flat income tax rate of 20% on their entire income, amounting to income tax of AMD 120,000 (approximately $314). Furthermore, the employee will be liable for social security payments totaling 35,000 AMD (around $91) and an additional military tax of 8,500 AMD (approximately $22). Consequently, the after-tax income for this individual will be AMD 436,500 (calculated as 600,000 - 120,000 - 35,000 - 8,500), which is equivalent to $1143. This results in an overall tax burden of approximately 27%.

Import Taxes

In Armenia, typically, there's a 20% Value Added Tax (VAT) applied to imported goods, although some goods enjoy exemptions from this tax. Notably, for goods imported under government-approved projects, there's an option to defer VAT payments for a period of up to three years.

Moreover, Armenia is part of the Eurasian Economic Union (EAEU), which includes countries such as Russia, Belarus, Kazakhstan, and Kyrgyzstan. Importantly, goods imported from these EAEU member countries are exempt from import duties. However, when importing goods from countries outside the EAEU, import duties are imposed based on rates set by the EAEU Commission.

Other taxes

Armenian companies may be subject to various taxes based on their specific business activities. These taxes can include excise tax, environmental tax, road tax, as well as real estate and vehicle property taxes.

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Nerses Isajanyan

Managing Attorney

LL.M., Georgetown University

Licensed Attorney, Armenia: License no. 903

Licensed Attorney, New York: License no. 5148945

Our firm's reputation rests on more than just legal expertise. We pride ourselves on the values of honesty, transparency, and an unwavering commitment to client care. We recognize the unique opportunities and challenges Armenia presents, and we are here to guide you through them.

For inquiries or to schedule a consultation, you may contact us at [email protected] or +374.99.00.11.67. I look forward to collaborating with you on your journey in Armenia.

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Address

4/3 Pirumyanner, 4th Floor, Suite 12 , Yerevan, 0054, Armenia

Phone

+37499001167

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