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Outsourcing to Armenia

Numerous prominent American and European enterprises, including influential technology giants like Intel, Microsoft, Google, IBM, and Cisco, have strategically established their operations within Armenia because of its highly skilled workforce, communications infrastructure, business friendly environment, and favorable cost-efficiency.

Armenia boasts robust outsourcing capabilities, particularly in software development and services, programming services, consultancy and integration, computer graphics, animation and multimedia production, mobile application development, web programming and design, microcircuit design, engineering, as well as research and experimental services. Notably, the nation's technology sector has exhibited a remarkable annual growth rate ranging between 20-25%. This burgeoning trajectory underscores Armenia's appeal as a burgeoning technology hub.

Legal Guide to Outsourcing to Armenia

#1. Benefits of Outsourcing to Armenia

1. Skilled Local Workforce

Armenia has been a software development, electronics, and semiconductor hub, dating back to the Soviet era. Armenian developers are known by the quality of their solutions and their ability to deliver on time and on budget. The majority of IT specialists in Armenia hold technical degrees in fields including science, technology, mathematics, and engineering, alongside proficiency in English. It is expected that Armenia will have 30,000 software developers by 2025.

2. Friendly Immigration Rules and Foreign Talent

Marked by a low cost of living, minimal crime rates, and a rich cultural heritage, Armenia attracts professionals from diverse nations, including Iran, India, and Russia. Liberal immigration rules make it easy to obtain work permits and acquire residence status.

3. Low Cost of Doing Business

Armenian enterprises capitalize on economical workforce, affordable rental rates, utilities, registration expenses, and other startup costs. Minimum capital prerequisites are absent, with a company's paid-up capital potentially as modest as $1. Government fees are non-existent for company registration and renewal processes. Enterprises can maintain good standing without recurring report filing charges. Dormant companies are exempt from taxes and tax return submissions. No obligatory office space rental or local employee hiring mandates exist. Regulatory demands are streamlined for optimal efficiency.

4. Tax Holidays

Freshly established IT companies can generally capitalize on available tax holidays. Moreover, micro-businesses, entities situated in free economic zones, industrial zones, specific border towns, and villages can achieve zero-tax status. Small businesses with annual sales below $298,000 are subject to a nominal sales (turnover) tax of merely

5%. Dividends typically attract a 5% tax, although this rate could be lower due to Armenia's extensive network of double-tax treaties. The country generally refrains from taxing capital gains stemming from securities, real estate, or other asset sales.

5. Business-Friendly Environment

Company registration can be executed within a single day if physically present in Armenia and opting for standardized registration documents. Only minimum documents are required, such as the passports of the shareholders and directors. You will get a registration certificate with a taxpayer ID number, ready to start operating immediately. Foreign ownership of Armenian companies is permissible up to 100%, without a local partner or agent requirements. No restrictions apply to shareholders' citizenship or residency. Foreign individuals can comprise the entirety of an Armenian company's directors and employees, without residency or local address requirement. A foreigner can be the only director and the 100% owner of a company.

6. Government Assistance

In addition to various tax holidays and incentives, Armenia's government extends support to important investment projects through real property privatization, public-private partnership funding, loans, guarantees, subsidies, export insurance, and more.

7. Effective IP and Data Protection Laws

Armenia aligns with international best practices by implementing and enforcing intellectual property (including copyright, trade secrets, know-how, confidential information, trademarks) and data protection laws.

8. Residency & Citizenship

Armenia offers temporary, permanent, and specialized residency statuses to foreign business individuals, along with citizenship-by-exception opportunities for significant investors.

#2. Outsourcing business structure

When considering outsourcing your business to Armenia, several structural options are available for your consideration:

1. Contract for Services with a Third Party (Direct Outsourcing)

This approach involves the client company engaging directly with an Armenian service provider—an independent contractor equipped with its own infrastructure and workforce—to execute the required services. To ensure the success of this arrangement, comprehensive due diligence is recommended on the Armenian service provider. This scrutiny should include an assessment of its financial stability, employee mobility, intellectual property safeguards, infrastructure adequacy, and performance track record on similar projects.

2. Indirect Outsourcing

Indirect outsourcing entails the client company enter into an outsourcing arrangement with an Armenian or alternative enterprise. This primary entity then subcontracts the tasks to an Armenian service provider. Often, this subcontractor maintains some affiliation with the intermediary. In such cases, it's recommended for the client company to incorporate additional safeguards within the vendor contract, aimed at protecting against potential issues arising from the subcontractor's involvement.


  • Fast implementation
  • Flexibility in expanding and downsizing


  • More expensive option
  • Less control over employee performance
  • Less control over IP matters
  • Less control over data protection
  • Provider stability and business risks

3. Establishing a Subsidiary or a Branch Office

In this strategic framework, the client company initiates the establishment or acquisition of a subsidiary or a branch office within Armenia. This entity is either fully owned by or under the control of the client company. While a subsidiary constitutes a distinct legal entity, a branch office functions as an extension of the client company. This arrangement gives the client company with heightened authority over the employees tasked with service provision, alongside the implementation of protocols for managing intellectual property and confidential information. Integrating the subsidiary into the client company's global systems, processes, and culture becomes feasible. Notably, the greater degree of control may be a valuation element in an acquisition of the client company. However, this structure may demand additional time and resources to oversee the subsidiary's operations. In this setup, due diligence primarily centers on the subsidiary's management team. Typically, a local manager oversees day-to-day operations, requiring a selection process. The chosen individual holds considerable significance, as the managing director's actions can bind the subsidiary with third parties through the legal theory of apparent authority, irrespective of restrictions imposed by the subsidiary's board of directors and/or employment agreement terms.


  • Control over subsidiary operations
  • Own procedures for IP and sensitive data
  • Fast registration and setup


  • Startup and recurring costs
  • Less flexibility expanding or downsizing
  • Resources spent on oversight
  • Importance of local managing director

4. Dedicated Center or "Build, Operate and Transfer"

This structure presents a fusion of the previously described approaches. The Armenian service provider, functioning as an independent contractor, initiates the establishment of a dedicated center (team) tailored to cater to the client company's service requirements. This specialized team could operate within a distinct section of the service provider's premises or in a separate facility altogether. While certain managerial, accounting, and administrative personnel might not be exclusively assigned to the dedicated team to streamline overhead costs, the core team remains isolated.

In this setup, the client company wields greater authority over the vendor's employee selection, their training, and the nature of their tasks. In return, the client company assumes increased risks and potential cost increases associated with these employees.

Within the "Build, Operate and Transfer" (BOT) model, the agreement often incorporates an option empowering the client company to potentially acquire the business unit represented by the dedicated team. Alternatively, the client company may be granted the right to solicit and hire certain employees from the dedicated center.


  • Flexibility in expanding and downsizing
  • Fast implementation


  • More expensive option
  • Less control
  • Provider stability and business risks
  • Transition risks (BOT)

#3. outsourcing contracts

1. Contract for Services with a Third Party

A master agreement can be established between the client company and the Armenian service provider when a multi-project relationship is contemplated. Each project is performed through an exhibit attached to the master agreement. The contents of the agreement will depend on the specific nature of the services provided. Key components include a detailed description of the services to be performed, including detailed specifications of the deliverables, projected delivery schedule, work milestones, schedules for project reviews and reports, as well as pricing.

Acceptance: A defined acceptance period following work product delivery is recommended to assess quality. This facilitates potential modifications by the service provider if the work product fails to conform to the specifications.
Warranties: The client company typically seeks performance warranties ensuring defect-free work products post-acceptance. Additionally, the service provider's warranty should include non-infringement of third-party intellectual property rights. The service provider, however, may seek to limit liability under these warranties and limit performance warranties within a specific timeframe.
Service Level Agreement: There will be service level performance requirements tailored to the type of service where no work product will be delivered, such as tax return preparation or financial services.
Payment Terms: Pricing structures can be fixed, time and materials-based, or founded on production units (e.g., per tax return). Payment schedules often align with performance milestones, especially in software or developmental contexts.
Ownership of Work Product: All work product ownership rights must be assigned to the client company or a designated entity. This includes intellectual property generated or developed by the service provider. The provider may aim to retain ownership of pre-existing "base software" or core intellectual property (IP), necessitating the client company to secure a perpetual, fully-paid, worldwide license for the requisite IP to facilitate its business operations.
Employee Invention Assignment and Confidentiality: A prerequisite for each employee and contractor of the service provider is the assignment of intellectual property rights and adherence to confidentiality commitments consistent with the agreement between the client and service provider. Third parties should refrain from subcontracting or involving non-employee service providers without written client consent. The assignment of intellectual property rights should address "moral rights" ownership as dictated by Armenian law.
Liability for Third-Party Intellectual Property Infringement: The service provider assumes the responsibility of indemnifying the client in the event of third-party intellectual property right breaches. The client company might strive for an unlimited indemnity for copyright and trade secret claims, while the service provider may seek capped liability.
Confidentiality: The service provider must maintain the confidentiality of the client's proprietary information and limit its use exclusively to service provision. The period for confidentiality obligations following engagement's conclusion could be debated, but a minimum term of three years is recommended.
Non-Competition/Non-Solicitation: The service provider should agree that it will not seek to take away or interfere with any customers of the client company, or solicit or hire the employees or contractors of the client company during the agreement, and for at least one year post-termination.
No Assignment by Service Provider: The service provider should be prohibited from assigning obligations under the agreement without prior written client consent.
Taxes: The agreement should affirm the service provider's responsibility for applicable taxes on payments received. Local withholding taxes are typically absent in services transactions devoid of licensing.
Governing Law/Jurisdiction: The client company will want the parties to agree to settle any dispute in its own jurisdiction based on the governing law of that jurisdiction, with conflicts of law principles excluded.
Compliance with Law: Both parties should commit to compliance with applicable laws and regulations.

2. Contract for Services with a Subsidiary

The parent-subsidiary relationship, crucial for tax purposes, necessitates "arms-length" agreement provisions—similar to those between unaffiliated entities. However, several distinct clauses pertain to subsidiary agreements:

Payment: Due to potential transfer pricing scrutiny (Armenian transfer pricing rules apply if annual turnover between affiliates exceeds approximately $400,000), the agreement usually incorporates a cost-plus clause. This mandates the client company to pay service fees equivalent to the subsidiary's costs plus profit, often around 10%. Detailed expense reports are typically expected on a regular basis.
Work Direction and Quality: The subsidiary agrees to follow the client company's directives. Unlike the project-focused nature of third-party arrangements, agreements with subsidiaries are typically more generalized service agreements.
Confidentiality: As a separate entity, the subsidiary must maintain client-provided information's confidentiality, including intellectual property and business data. The subsidiary's employees should also adhere to this obligation.
Intellectual Property Ownership: The subsidiary's ownership of developed intellectual property doesn't automatically transfer to the parent company due to their corporate linkage. The subsidiary usually assigns ownership of generated intellectual property to the parent company or its designee. Exceptions may apply for tax considerations.

#4. Intellectual property assignment

In Armenia, the prerequisites for securing ownership of the outcomes derived from outsourcing services differ for independent contractors and employees. Particularly, a subsidiary is categorized as an autonomous provider of contractor services, distinct from an "employee." It is crucial to meet these requirements, as failure to do so may result in the client enterprise being unable to claim ownership over the delivered outcomes, even in the event of remuneration.




Agreement after Completion of Work

Geographical Scope

Obligation to Exercise the Rights Assigned

Duration of Assignment



Not Required


Not required



No unless assigned in writing

Not Required


Not required


Armenia maintains membership in a range of international intellectual property agreements, including the Berne Convention, TRIPS (WTO), WIPO Copyright Treaty, the Paris Convention, and the Patent Cooperation Treaty ("PCT"). The Berne Convention provides for national treatment of an author of a member state. Armenian copyright law provides moral rights to an author of a work that are non-waivable and cannot be transferred.

#5. Taxation

Taxation of the Armenian Service Provider

Value Added Tax (VAT): When an Armenian IT service provider serves a foreign clientele, these services are classified as being provided beyond Armenia's borders, resulting in a VAT zero-rated export status. Thus, the Armenian company apply for a refund of input VAT, provided timely submission of the VAT refund application and appropriate documentation.

Corporate Income Tax: Standard taxation for the Armenian service provider involves an 18% tax on its annual profits.

Tax Exemptions and Advantages: IT startups, including recently registered software development or other IT companies, typically enjoy tax holidays (currently extended until 2024). This effectively relieves the company of profit tax obligations during this period. Subsequent to the conclusion of these tax holidays, smaller companies can take advantage of tax benefits, including tax exemption if annual sales remain below approximately $62,000 or a flat tax rate of 5% on gross sales if the annual sales are under $298,000.

Additional tax exemptions and incentives are accessible for companies operating within free economic zones (FEZ), entities importing capital assets for government-approved investment projects, enterprises engaged in space-related activities, and more.

No local taxes are applicable to Armenian service providers, with the exception of real property taxes if the provider is a property owner. For more information please check the page on property.

Taxation of the Customer

No stamp duties or analogous taxes are imposed on the outsourcing contract itself.

Withholding Taxes and Double Tax Treaties: Payments directed towards the service provider may attract withholding taxes, depending on the policies within the customer's jurisdiction. These withholding taxes might be minimized or nullified in cases where a bilateral double tax treaty is in place between the two nations. Strategic tax planning might be necessary when configuring the corporate group and selecting the jurisdiction for the holding company, aiming to reduce source income taxes and avoid double taxation.

Transfer Pricing: Transactions between a parent and subsidiary should ideally adhere to "arms-length" principles for tax purposes. Regulatory bodies often scrutinize transfer pricing within corporate entities. In Armenia, transfer pricing regulations come into play if annual turnover amid affiliated entities exceeds approximately $400,000.

Permanent Establishment: Within a cross-border contract, the Armenian service provider may form a permanent establishment, signifying a taxable presence, on behalf of the customer in Armenia. This occurs, for instance, when an Armenian subsidiary exercises authority to finalize contracts, secure orders, or deliver goods on behalf of the parent entity.

#6. Hiring & firing, HR matters

Employees v. Independent Contractors: In Armenia, there is a distinct advantage for clients to engage individuals as independent contractors rather than formal employees. This is primarily due to favorable considerations in taxation, with a nominal 5% tax on services paid by contractors, as opposed to the more substantial 25.5% income tax and accompanying social payments typically withheld from an employee's salary. Moreover, independent contractor agreements offer greater contractual customization, without numerous restrictions imposed by the Labor Code. Employment agreements may be used either because services cannot be provided by an independent contractor such as employment clearly exists because of the requirement to work on specific premises under customer's close control, in the order or sequence set by the customer or because of other considerations, such as putting important professionals on the payroll to increase the value of the company.

Employment Agreements: Written employment agreements must be executed, taking the form of a single document produced in duplicate—one copy each for the employee and the employer. These agreements must conform to the provisions outlined in the Labor Code and other relevant labor regulations. Employment contracts may be of fixed or indefinite terms, with a probationary period typically capped at three months. While the enforceability of restrictive covenants like non-compete and non-solicitation clauses remains somewhat uncertain, judicial precedent leans toward validating such limitations for independent contractors. There is a possibility that these clauses could be upheld for employees as well, provided their implementation is reasonably necessary to safeguard the employer's business interests.

Work Schedule and Leaves: Armenia adheres to a regular five-day work week, Monday to Friday. However, a six-day work week—Monday to Saturday—can be adopted at the employer's discretion. Regardless of the work week structure, weekly working hours should not surpass 40 hours. Employees are entitled to an annual leave of 20 working days (24 days for a six-day work week). Maternity leave ordinarily spans 140 days (70 days prior to and 70 days following childbirth). The nation observes 12 non-working public holidays, including December 31 to January 2, January 6, January 28, March 8, April 24, May 1, 9, and 28, July 5, and September 21.

Compensation: The minimum monthly salary in Armenia stands at AMD 75,000 (approximately $194). However, the average monthly wage in the country tends to be around $690. IT professionals, particularly those in managerial capacities, generally receive substantially higher wages. Higher compensation rates are mandated for overtime work, non-working day assignments, and night shifts.

Termination: Termination of employment can be done through mutual agreement between the employer and employee. Employees typically possess the unilateral right to terminate an employment contract—fixed or indefinite—by providing a 30-day notice. Employers can initiate the termination of indefinite-term employment if valid grounds such as economic fluctuations, incapacity to fulfill job requisites, long-term disability, regular failure by employee to perform his/her duties, loss of confidence in the employee, and more, are substantiated. For detailed information, please check the employment webpage.

#7. Immigration (work and residence permits)

Employees: Armenia has emerged as a favored destination for professionals, particularly software developers from foreign countries such as India and Iran (Iranian nationals benefit from visa-free travel to Armenia, while Indian citizens are eligible for e-visas). Prospective foreign employees typically necessitate the acquisition of a work permit before starting employment with a local Armenian employer. Exceptions to this requirement exist, with a noteworthy exemption for IT specialists performing roles such as computer technicians and web designers. Additionally, further exclusions extend to individuals working within border regions, citizens of Eurasian Economic Union (EAEU) member states (namely Russia, Kazakhstan, Belarus, Kyrgyzstan, etc.), as well as foreigners engaged in equipment installation, repair, or local staff training associated with said equipment. Additional insights regarding work permits are available on the corresponding webpage. The process of getting a work and residence permit for foreign employees typically involves a period of 2 months.

Employees of a Foreign Company Temporarily Assigned to Armenia: Employees remaining on the payroll of a foreign company—thus not becoming part of the local Armenian company's workforce—are generally exempt from the requirement of a work permit. However, their residency in Armenia is confined to the validity period of their visas (typically up to 180 days for visa-free eligible foreigners), with limited prospects for securing a residence permit.

Managers: Foreign executive managers enjoy the privilege of working in Armenia without the necessity of a work permit. Additionally, their employment status serves as the basis for securing a residence permit.

Freelancers and Digital Nomads: Freelancers may stay in Armenia only for the duration of their visas (normally up to 180 days for foreigners who can stay in Armenia visa-free). A viable route to obtaining such a permit for freelancers can be registering with Armenian tax authorities as sole proprietors (private entrepreneurs). Normally a 5% tax would be assessed on any income reported by the private entrepreneur together with flat taxes of around $23 per month.

#8. Data protection

The regulatory framework governing data protection is established by the Personal Data Protection Act. This legislation contains both procedural and substantive obligations concerning the processing of personal data—information that possesses the potential to identify a natural individual. The scope of "processing" is comprehensive, encompassing activities such as data collection, input, systematization, organization, storage, utilization, alteration, restoration, transmission, rectification, blocking, and deletion of personal data.

Special legal provisions govern personal data that pertains to matters of state and official secrets, banking, notarial and insurance confidentiality, legal professional privilege, anti-money laundering, and related domains. Compliance with the Personal Data Protection Act is entrusted to the Personal Data Protection Agency of the Ministry of Justice. Failure to conform to these regulations may result in regulatory repercussions, including administrative penalties such as fines of up to $1,000, or potentially even criminal penalties in the form of monetary fines or imprisonment.

Apart from the regulatory framework, a significant number of outsourcing agreements incorporate comprehensive clauses addressing crucial aspects such as data ownership, data transmission, confidentiality, procedural protocols for data processing, technological and information security measures, as well as provisions for indemnification in the event of breaches.

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2020.05.23 Outsourcing
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Country Overview

Area: 29,700 SQ.KM.

Population:   2,962,000

Capital: YEREVAN (1,075,000)

Religion: Christianity




climate: summer 35c; winter 0c

Currency: Dram ($1 = 480 AMD)

average salary: $414

gdp growth: 6.1%

gdp per capita: $4,267

WB DB rank: 47

unemployment: 17%

inflation (2021): 6.9%

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It is always daunting when dealing with immigration, visas etc in a foreign country. The team at Vardanyan & Partners made the process for registering the business and applying for residency so much easier. I had no worries at all. The team overall really went out of their way to accommodate and assist us.

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The team members were all professional, knowledgeable and most importantly, honest. They are hard-working and patient and were always responsive to my messages and questions. What I like most is, they are very well organised and have a modern system of work.

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Armenia is a captivating nation with a rich history and a promising future. Our firm is wholeheartedly committed to supporting individuals and businesses that recognize Armenia's potential and are eager to contribute to its ongoing success.

We trust that this website will serve as a valuable resource for you in gathering the information you need. Should you have any questions or require further assistance, please feel free to get in touch with us. You can easily contact us through various channels, such as completing the form on our website, emailing us directly at [email protected], or reaching out via phone or popular messaging apps like WhatsApp, Viber, Telegram, and Skype at +374. We are always available to assist you in any way possible.

Nerses Isajanyan
Managing Attorney
LL.M. Georgetown University, licensed to practice in both Armenia (license no. 903) and New York (license no. 5148945)

About Us

Vardanyan & Partners is a reputable law firm situated in Yerevan, Armenia, which has been providing excellent legal services since its establishment in 2012. Our team of locally licensed, English-speaking attorneys specializes in immigration, incorporation, and compliance matters, ensuring that clients receive expert legal guidance.  We are committed to staying up-to-date with the latest changes in legislation and regulations, ensuring that our clients receive the most relevant and accurate advice. At Vardanyan & Partners, we place a strong emphasis on honesty, transparency, and client care. 

  • 10+ years of specialized experience in immigration and busines setup.
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