Taxes in Armenia in 2024 and 2025

At the initial stage of opening a business in Armenia, it is important to choose the right organizational and legal form (OLF) to avoid unscheduled liquidation of the business.

The following types of legal entities operate in Armenia:

Individual entrepreneur (IE):

An individual entrepreneur can be an individual who registers in the State Register and receives a tax identification number. This is the simplest and most accessible form of registration and running a business owned by one person.

Limited Liability Company (LLC):

This is the most common type of legal entity in Armenia, providing limited liability to shareholders (maximum 49 members). LLC is chosen for its low costs of establishment and maintenance, fewer formalities and simple management.

Joint-Stock Company (OJSC):

This corporate form is more suitable for medium and large enterprises with several shareholders. It provides greater privacy and more options for structuring share capital.

Partnership:

The creation of a partnership can take two forms: the formation of a legal entity or the conclusion of an agreement between the partners. Compared to other legal entities, partnerships are less regulated, allowing for greater freedom and flexibility.

Cooperative:

This type of organization refers to an association of workers where each has one vote. Profits are distributed based on contribution rather than capital. The form is more suitable for small businesses.

Private equity fund:

The company, registered by the Central Bank of Armenia, is used for investments in real estate, securities, etc., with tax benefits and duty-free distribution of profits.

Non-profit organizations:

This type of organization is usually a foundation or public association that may still engage in entrepreneurial activity. In this case, income is taxed at the rates established for commercial organizations.

Most often, businesses are registered in the organizational and legal forms of individual entrepreneurs and LLCs. The main parameters in the comparative table:

Taxes in Armenia in 2024

In the Republic of Armenia there are general and special taxation systems.

Under the general system, organizations are subject to value added tax (VAT) and/or income tax.

Within the framework of the turnover tax system, the simplified tax system (STS) Organizations are subject to turnover tax, which replaces VAT and/or income tax.

Newly registered companies can apply for the simplified taxation system within 20 days of registration. After this period, the company will not be able to switch to a special taxation system.

Microenterprises

Businesses with an annual turnover of less than 24 million drams (approximately 62 thousand US dollars) that have the status of Microbusiness are exempt from income tax and VAT. However, there is a list of excluded activities that cannot benefit from this taxation system, for example, marketing, consulting, engineering, etc., cannot claim the status of microbusiness.

Small business

With annual revenues of up to 115 million drams (approximately US$287,500), small businesses pay a turnover tax set at 5%. This replaces both the profit tax and VAT.

Below are the enterprises that fall under the simplified tax system with tax rates different from 5%:

Despite the preferential conditions, some types of activities are prohibited for small businesses in Armenia. This is done to prevent tax evasion and ensure fair competition. These types of activities include:

• Production and sale of tobacco products and alcohol.

• Extraction of minerals and processing of raw materials.

• Financial activities, including banking, insurance and leasing.

• Activities related to the turnover of real estate, except in cases where this is the main type of activity and the company is registered as a professional participant in the real estate market.

• Organization of gambling and lotteries.

Taxes for IT in Armenia

The most common category of non-residents who want to open an individual entrepreneurship in Armenia are IT specialists. Until the beginning of 2024, IT certificates were in effect in Armenia, a special form of benefit for IT specialists offering full exemption from income tax.

In 2024, the certificates were suspended, and in 2024, an IT specialist pays 5% of turnover, but the preferential tax rate on employee wages of 10% was retained, which is relevant for companies and individual entrepreneurs hiring personnel.

It is already known that in 2025, the same rate will remain for IT companies, but we would like to hope that the abolition of certificates is a temporary measure aimed at replenishing the country's budget, and they can return in the foreseeable future. And at the moment, taxes for individual entrepreneurs – small IT businesses in Armenia are significantly lower than tax rates in Kyrgyzstan and Georgia. On the other hand, if compared with Georgia, Armenia wins in terms of ease of legalization, obtaining a residence permit, and has a wide range of commercial banks that closely cooperate and is better suited than Georgia for entrepreneurs doing business from Russia.

Income tax

Resident and non-resident Armenian companies conducting business in Armenia through a permanent establishment are subject to corporate income tax. Armenia taxes residents on their worldwide income, while non-residents are taxed only on income derived from Armenian sources. The standard rate is 18%.

Companies are required to keep records and submit income tax reports in accordance with Armenian legislation. Key deadlines include:

• The annual declaration must be filed no later than April 20 of the year following the reporting year.

• Advance tax payments are paid once per quarter no later than the 20th day of the last month of the quarter.

Nuances and features of profit taxation

In Armenia, it is permitted to write off depreciation of fixed assets in tax accounting. Different depreciation rates are set for different categories of assets, which allows their wear and tear to be taken into account in the tax base.

Losses incurred by a company in the current tax period can be carried forward to the next five years, which allows for a reduction in the taxable base in the future.

Tax incentives and exemptions may be available for certain types of activities and regions. For example, companies engaged in innovative activities or operating in free economic zones may qualify for income tax incentives.

Armenia has implemented controlled foreign company rules that require taxpayers to declare income earned through controlled foreign companies and include it in their taxable base.

Value Added Tax (VAT)

The standard VAT rate on domestic sales of goods and services, as well as on imports of goods, is 20%. Exported goods and related services are taxed at zero rate.

Income tax

Individuals in Armenia are subject to income tax and social benefits. From January 1, 2023, income tax was reduced to 20%.

Declaration filing deadline:

• For monthly declarations: 20th day of the month following the reporting period

• For annual declarations: May 1 for individuals, April 20 for tax agents

• Deadline for final tax payment: 20th day of the month following the reporting month

Withholding taxes

Withholding tax rates for non-residents may be reduced or exempted under the relevant Double Taxation Agreement. Taxes are payable at the following rates:

• Income from employment: 20%

• Income based on civil contracts: 20%

• Interest: 10%

• Dividends: 5%

• Royalty: 10%

• Rental income: 10%

Social payments

In addition to income tax, employees are required to pay social contributions. The rate of social contribution depends on the amount of monthly salary:

• If the monthly gross salary is less than 500 thousand drams: 5%

• If the monthly gross salary exceeds 500 thousand drams: 10% minus 25,000 drams

The maximum threshold for calculating social contributions is 1,125 thousand drams.

Stamp duty

Residents of Armenia working in the territory of the RA or abroad must pay stamp duty to the state budget. For non-residents, the object of taxation is income received from work performed in the territory of the RA.

Stamp duty rates:

• Income up to 100 thousand drams: 1.5 thousand drams

• From 100 thousand to 200 thousand drams: 3 thousand drams

• From 200 thousand to 500 thousand drams: 5.5 thousand drams

• From 500 thousand to 1 million drams: 8.5 thousand drams

• Over 1 million drams: 15 thousand drams

Tax incentives

In addition to tax incentives for small and medium-sized businesses, the following tax incentives apply in Armenia:

• Deferral of VAT payment for 3 years when importing goods within the framework of investment programs by organizations and individual entrepreneurs selected by government decision.

• Taxpayers of income tax who produce hand-woven carpets are exempt from paying income tax.

• Companies implementing a business plan approved by the Government of the Republic of Armenia (except for residents operating in the trade or financial sector) may deduct the amount of additional salaries from the amount of profit tax for two years, but not more than 30 percent of the amount of profit tax payable, in accordance with the decision of the government.

• For those implementing a major export project approved by the government (to perform certain works outside Armenia or supply goods outside Armenia, with the exception of minerals, precious metals and stones and their products, goods subject to excise tax), the income tax rate is 5% for exports worth at least 40 billion drams, 2% for exports worth at least 50 billion drams.

• Activities in the border areas of Armenia are exempt from VAT and income tax.

• In the Dilijan community of Tavush region, activities within the framework of projects with investments of at least 2 billion drams are exempt from VAT and income tax.

• Businesses operating in free economic zones of Armenia are exempt from obligations to pay income tax, VAT, property tax and customs duties.

Taxes in Armenia in 2025

In June 2024, the Armenian parliament approved in the second and final reading amendments to the Tax Code, which concern tax rates for small and medium-sized businesses.

These changes double the basic tax rates: retail businesses will now pay 10% instead of 5% of turnover, manufacturing businesses will pay 7% instead of 3.5%, and catering businesses will pay 12% instead of 6%. This change will reduce the gap between tax rates for small and large businesses (between turnover tax and profit tax). In addition, law firms, notaries, and lottery businesses will be required to switch to the VAT and profit tax regime, without the option of remaining in the turnover tax system.

The Prime Minister of Armenia proposed to gradually abandon the turnover tax system, as, according to him, it distorts the economy and creates false incentives. The tax burden in the simplified regime was and remains 2-3 times lower than under profit taxation. According to the Ministry of Finance, more than half of all companies in Armenia use the simplified tax system, but pay only 2.3% of taxes.

From October 2024, the government intends to revise the turnover tax system, and from 2025, it plans to narrow the circle of those who use the microbusiness system (complete tax exemption). Currently, the turnover tax (replacing VAT and income tax) is required to be paid by entities with an annual turnover of no more than 115 million drams. This applies to SMEs, individual entrepreneurs and notaries.

The turnover tax cap will remain at 120 million drams per year. Companies exceeding this threshold will switch to VAT and profit tax. The new rates will come into force on January 1, 2025, with the exception of catering companies in the regions, for which this will happen on January 1, 2026. High-tech companies, i.e. the IT sector, will be able to continue paying the previous rate of 5% if their annual turnover does not exceed 120 million drams.

The changes will also affect the micro-business regime (complete tax exemption). It is proposed to exclude trading companies, hairdressers, brokerage firms and auto repair shops from the micro-business register. They will be able to operate either under a simplified turnover tax system or under a VAT and profit tax system.