In 2019, Armenia's GDP grew by 7.6% - the highest rate in all of Europe. Foreign business owners and investors appreciate the pace of the economic reforms, Armenia's safety, freedom and openness. Many prefer to visit Armenia in person and register a business as a first step to enter the market.
A knowledgeable local lawyer can help you to minimize risks by ensuring compliance with tax, labor, immigration and other regulations, avoid pitfalls and take advantage of tax benefits and other government assistance programs, especially if you do not speak Armenian or plan to run your business remotely.
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.
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).
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 AMD 115 million (approximately, $240,000) can qualify for this tax regime.
Companies can opt for turnover tax or micro-business regimes within 20 calendar days following the registration of the company.
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). Starting from January 1, 2020, personal income tax is applied at a single flat rate of 23%, irrespective of the amount of compensation. This rate will be gradually brought down to 20% over the next few years.
In addition to PIT, employers are required to withhold social security payments at the rate of 5% (income up to 500,000 drams or $1,030) or 10% (income in excess of 500,000 drams). However, 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.
For example, as of the first and second quarters of 2020, an employee with a monthly salary of AMD 600,000 ($1,251) will pay 23% tax on its entire income, which results in income tax of 138,000 ($288). The employee will also pay 12,500 in social security payments (because of the temporary cap) and the flat military tax of AMD 1,000. The after-tax income will be 448,500 (600,000-138,000-12,500-1,000) or $935, which results in a total tax burden of 25.25%.
Starting from May 18, 2019, a newly registered business (company and private entrepreneur) working in the IT sector has the option to apply for an IT Start-Up certificate, a document that exempts the business from corporate income tax until Dec. 31, 2022. The certificate also reduces the payroll tax (personal income tax withheld by the employer) to 10% from the normally applicable 23-28%. The petition for obtaining the certificate must be filed within 90 days following the business registration. These tax benefits are not available to larger companies with 30 or more employees and to subsidiaries or branch offices of foreign companies. The IT Start-Up certificates are issued by the Ministry of High-Tech Industry.
The following businesses can take advantage of these tax benefits:
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.
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.
Area: 29,700 SQ.KM.
Capital: YEREVAN (1,075,000)
LITERACY RATE: 99.6%
KNOWLEDGE OF ENGLISH: 40%
climate: summer 35c; winter 0c
Currency: Dram ($1 = 475 AMD)
average salary: $378
gdp growth: 7.6%
gdp per capita: $4,212
WB DB rank: 41
inflation (2018): 2.5%
Copyright 2020 - Vardanyan & Partners LLC
We are a team of licensed lawyers based in Armenia and Georgia. Our primary commitment is to provide quality service to clients at a compelling value that helps manage risk, overcome regulatory issues and advance their personal and business goals.
You may be eligible to apply for Armenian citizenship after three years of residency. The decision is normally made in 6-8 months after you apply. The law does not require that you stay in Armenia for a certain number of days. On the other hand, you will have to take a test on the knowledge of the Armenian Constitution in Armenian language, which presumes that you will have to show at least an elementary knowledge of Armenian language. Also, you have to keep in mind that each applicant's case is examined separately and citizenship is not issued automatically.
Buy a ticket and fly to Armenia
Stay in Armenia for a few days to complete the formalities related to investment and residence permit application
Make a bank transfer of the investment amount
Collect your residence permit delivered by FedEx
LL.M. Georgetown University
New York Bar | Armenia Chamber of Advocates
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