When starting a business in Armenia, it is crucial to choose the right legal structure (organizational and legal form – OLF) to avoid unexpected business liquidation and it is good to know about taxes in Armenia.
Armenia offers the following legal forms for business entities:
Individual Entrepreneur (IE)
An IE is a sole proprietorship where an individual registers with the State Register and obtains a Taxpayer Identification Number (TIN). This is the simplest and most accessible form of business registration for a single owner. IE registration in Armenia can be done remotely.
Limited Liability Company (LLC)
An LLC is the most common type of legal entity in Armenia, offering limited liability to its shareholders (up to 49 members). It is preferred due to low setup and maintenance costs, fewer formalities, and simple management.
Joint Stock Company (JSC)
This corporate structure is better suited for medium and large enterprises with multiple shareholders. It provides greater privacy and offers more options for structuring share capital.
Partnership
A partnership can be formed in two ways:
- As a legal entity, or
- Through a contract between partners.
Compared to other legal structures, partnerships are less regulated, allowing greater flexibility and operational freedom.
Cooperative
A cooperative is an association where each member has one vote, and profits are distributed based on contributions rather than capital shares. This structure is more suitable for small businesses.
Private Equity Fund
A company registered with the Central Bank of Armenia, used for investments in real estate, securities, and other assets. It offers tax benefits and duty-free profit distribution.
Non-Profit Organizations
This type of organization is usually a foundation or public association, but it can still engage in business activities. In such cases, its income is taxed at the same rates as commercial organizations.
The most common business structures in Armenia are Individual Entrepreneurs (IE) and Limited Liability Companies (LLC). Below is a comparative table of their main parameters:
| Parameter | Individual Entrepreneur (IE) | Limited Liability Company (LLC) |
|---|---|---|
| Accounting | Minimal documentation, registration is done on-site | Requires a full documentation package, registration is completed within two business days after submission |
| Tax Obligations | Tax reporting and payment required | Tax reporting and payment required |
| Employees | Can hire employees | Can hire employees |
| Address | Registered at place of residence without a mandatory business address | Must have a business address |
| Liability | Personally liable with all owned assets | Founder is not liable for business obligations (except for secondary or criminal liability) |
| Income Management | Free disposal of income | Profits are distributed as dividends after taxation |
Taxes in Armenia in 2025
The Republic of Armenia has general and special taxation systems.
Under the general system, companies are subject to Value Added Tax (VAT) and/or Corporate Income Tax.
Under the turnover tax system (simplified tax system – STS), organizations pay a turnover tax, which replaces VAT and/or corporate income tax.
Newly registered companies can apply for STS taxation within 20 days of registration. After this period, they cannot switch to the special tax system.
Microbusinesses
Businesses with annual revenue below 24 million AMD (approximately $62,000 USD) that qualify for Microbusiness Status are exempt from corporate income tax and VAT. However, certain types of activities are excluded from this system, such as marketing, consulting, engineering, and others that cannot apply for microbusiness status.
Small Businesses
Businesses with annual revenue up to 115 million AMD (approximately $287,500 USD) pay a turnover tax of 5%, which replaces both corporate income tax and VAT.
Below are industries eligible for STS with tax rates different from 5%:
- Restaurants: 6%
- Manufacturing: 3.5%
Despite favorable conditions, certain business activities are prohibited under Armenia’s small business regime. This is intended to prevent tax evasion and ensure fair competition. The following activities do not qualify for small business taxation:
- Production and sale of tobacco and alcohol
- Mining and raw material processing
- Financial activities, including banking, insurance, and leasing
- Real estate transactions, except when the company is officially registered as a professional real estate market participant
- Gambling and lottery operations
IT Taxes in Armenia
One of the most common categories of non-residents looking to register as individual entrepreneurs (IE) in Armenia is IT specialists. Until early 2024, Armenia had IT certificates, a special tax benefit program that provided full exemption from corporate income tax.
In 2024, IT certificates were suspended, and IT specialists now pay 5% on turnover. However, a preferential income tax rate of 10% on employee salaries remains in place, benefiting companies and entrepreneurs hiring staff.
For 2025, the same tax rates for IT businesses will remain. However, many hope that the cancellation of IT certificates is only a temporary measure to increase state budget revenues, and they may be reinstated in the future. At present, IT-related taxes in Armenia for small businesses (IEs) in Armenia remain lower than in Kyrgyzstan and Georgia. On the other hand, compared to Georgia, Armenia offers easier business legalization, residency permits (VNZH), and better banking infrastructure, making it more convenient for entrepreneurs operating from Russia.
UPDATE: New IT Tax Benefits in Armenia (2025-2032)
Starting in January 2025, Armenia is launching a new government support program for the high-tech sector, which will be in effect for seven years until January 2032, with the possibility of extension.
The key benefits and incentives for IT companies include:
- Reduced turnover tax rate: IT companies with an annual turnover not exceeding 120 million AMD (~$300,000) will see their turnover tax reduced from 5% to 1%.
- Income tax reimbursement for foreign employees:
- In 2025, employers can claim a 60% refund on income tax paid for foreign specialists.
- From 2026 to 2031, this reimbursement will be directly provided to the specialists.
- Income tax refund for new IT employees:
- Employers can receive a 60% refund on income tax paid for employees who enter the IT sector for the first time between 2025 and 2031.
- Subsidized training and retraining costs:
- Employers will receive a 50% refund on income tax paid on the salaries of employees who undergo training or retraining from 2025 to 2031.
- Reduced income tax rate for researchers:
- Specialists engaged in research and development (R&D) will be subject to a reduced income tax rate of 10% instead of 20%.
- Additional corporate tax deductions:
- Companies can apply a double deduction of salary expenses for relevant employees when calculating corporate income tax, with a cap of 50% of the taxable base.
Corporate Income Taxes in Armenia
Both resident and non-resident companies operating in Armenia through a permanent establishment are subject to corporate income tax.
- Resident companies are taxed on worldwide income.
- Non-resident companies are taxed only on Armenian-sourced income.
- The standard corporate income tax rate is 18%.
Companies must maintain accounting records and submit tax reports in accordance with Armenian tax laws. Key deadlines include:
- Annual tax return: Due by April 20 of the following tax year.
- Quarterly advance tax payments: Due by the 20th of the last month of each quarter.
Key Aspects of Corporate Taxes in Armenia
Depreciation and Asset Write-Offs
- Depreciation of fixed assets is allowed for tax purposes in Armenia.
- Different asset categories have different depreciation rates, allowing businesses to reduce taxable income over time.
Carryforward of Losses
- Losses incurred in a given tax period can be carried forward for up to five years, reducing taxable income in the future.
Tax Exemptions and Incentives
- Certain industries and regions qualify for tax incentives and exemptions.
- Innovative businesses and companies operating in free economic zones may benefit from corporate tax reductions.
Controlled Foreign Company (CFC) Rules
- Armenia has Controlled Foreign Company (CFC) regulations, requiring taxpayers to declare income earned through foreign-controlled entities and include it in their taxable base.
Value Added Tax (VAT)
The standard VAT rate for domestic sales of goods and services, as well as for imported goods, is 20%. Exported goods and related services are subject to a 0% VAT rate.
Personal Income Tax (PIT)
Individuals in Armenia are subject to personal income tax and social contributions.
- As of January 1, 2023, the personal income tax rate was reduced to 20%.
Tax Return Deadlines:
- For monthly declarations: 20th day of the month following the reporting period
- For annual declarations:
- May 1 for individuals
- April 20 for tax agents
- Final tax payment deadline: 20th day of the month following the reporting period
Withholding Taxes in Armenia
Withholding tax rates for non-residents may be reduced or exempted under the applicable Double Taxation Avoidance Agreement (DTA). Taxes are applied at the following rates:
- Employment income: 20%
- Income under civil contracts: 20%
- Interest income: 10%
- Dividends: 5%
- Royalties: 10%
- Rental income: 10%
Social Contributions
In addition to personal income tax, employees are required to pay social contributions, which are calculated as follows:
- If gross monthly salary is below 500,000 AMD: 5%
- If gross monthly salary exceeds 500,000 AMD: 10% minus 25,000 AMD
- The maximum salary threshold for calculating social contributions is 1,125,000 AMD.
Stamp Duty
Residents of Armenia, whether working inside or outside the country, must pay stamp duty to the state budget. For non-residents, taxable income includes earnings from work performed in Armenia.
Stamp Duty Rates:
- Income up to 100,000 AMD: 1,500 AMD
- From 100,000 to 200,000 AMD: 3,000 AMD
- From 200,000 to 500,000 AMD: 5,500 AMD
- From 500,000 to 1,000,000 AMD: 8,500 AMD
- Above 1,000,000 AMD: 15,000 AMD
Tax Incentives
In addition to tax benefits for small and medium-sized businesses, Armenia offers the following tax incentives:
- VAT Deferral for 3 Years:
- Applicable for imported goods under investment programs initiated by companies and individual entrepreneurs selected by the Armenian government.
- Corporate Income Tax Exemptions:
- Companies producing handmade carpets are exempt from corporate income tax.
- Companies with a government-approved business plan (excluding those in the trade or financial sectors) can deduct additional wages from corporate income tax for two years, up to 30% of the total corporate tax due.
- Reduced Corporate Tax for Large Export Projects:
- 5% corporate tax for exports worth at least 40 billion AMD.
- 2% corporate tax for exports worth at least 50 billion AMD.
- Excludes exports of minerals, precious metals, gemstones, and excise goods.
- Tax-Free Operations in Border Areas:
- Businesses in border zones of Armenia are exempt from VAT and corporate income tax.
- Investment Projects in Dilijan (Tavush Region):
- Projects with investments of at least 2 billion AMD are exempt from VAT and corporate income tax.
- Free Economic Zones (FEZ) Incentives:
- Businesses operating in Armenia’s Free Economic Zones (FEZ) are exempt from:
- Corporate income tax
- VAT
- Property tax
- Customs duties
- Businesses operating in Armenia’s Free Economic Zones (FEZ) are exempt from:
Taxes in Armenia in 2025
In June 2024, the Armenian Parliament approved amendments to the Tax Code in the second and final reading, introducing new tax rates for small and medium-sized businesses (SMEs).
These changes double the main tax rates:
- Retail businesses will now pay 10% instead of 5% on turnover.
- Manufacturing companies will be taxed at 7% instead of 3.5%.
- Catering businesses will pay 12% instead of 6%.
This adjustment aims to reduce the gap between tax rates for small and large businesses (turnover tax vs. corporate income tax). Additionally, law firms, notary offices, and lottery businesses will be required to switch to VAT and corporate income tax, without the option to remain in the turnover tax system.
The Prime Minister of Armenia has proposed gradually phasing out the turnover tax system, arguing that it distorts the economy and creates false incentives. The tax burden in the simplified regime has been and remains 2-3 times lower than corporate taxation. According to the Ministry of Finance, over half of all companies in Armenia operate under the simplified tax system (STS), but they contribute only 2.3% of total tax revenues.
Changes to the Turnover Tax System and Microbusiness Regime
- From October 2024, the government plans to review the turnover tax system.
- From 2025, the eligibility criteria for microbusinesses (full tax exemption) will be narrowed.
- Currently, businesses with an annual turnover of up to 115 million AMD are subject to the turnover tax system, which replaces VAT and corporate income tax. This applies to SMEs, individual entrepreneurs (IEs), and notaries.
- The turnover tax threshold will remain at 120 million AMD per year. Companies exceeding this limit will be required to switch to VAT and corporate income tax.
The new tax rates will take effect from January 1, 2025, except for catering businesses in regional areas, where the new rates will apply from January 1, 2026. High-tech companies (IT sector) will continue to pay the existing 5% rate, provided their annual turnover does not exceed 120 million AMD.
Microbusiness Tax Regime Changes
The microbusiness regime (full tax exemption) will also be revised. The government has proposed removing certain businesses from the microbusiness register, including:
- Retail companies
- Hair salons
- Brokerage firms
- Auto repair workshops
These businesses will be required to operate either under the turnover tax system or under the VAT and corporate tax system.