Armenia: Business Environment

Accounting Rules

Tax Year: The tax year is the calendar year.
Accounting Standards: The Accounting Standards of the Republic of Armenia which have been adopted by the Ministry of Finance and Economy are based on IAS (International Accounting Standards). Activities on standardization and conformity assessment are performed according to the law on Standardization adopted by the Parliament in 1999, amended in 2004 and "On Conformity Assessment" adopted by the Parliament in 2004.
In accordance with the Law, the national standards are voluntary, but a part of them contains mandatory requirements.
Accounting Regulation Bodies: Government of the Republic of Armenia
Central Bank of the Republic of Armenia
Accounting Reports: The presentation and preparation of financial statements should be performed in accordance with the Law on Accounting. The full package of financial statements includes:
- the balance sheet;
- the income statement;
- a statement of changes in equity;
- a cash flow statement;
- notes to financial statements.
Publication Requirements: All organizations with minor exceptions are required to submit their annual financial statements to the tax inspectorate.
Professional Accountancy Bodies: AAA , Association of Accountants and Auditors
Certification and Auditing: For Joint-Stock companies, banks and insurance companies, the annual financial statements have to be audited by an independent auditor. For other companies, this step is not required.
KPMG, Ernst & Young, PricewaterhouseCoopers, Grant Thornton Amyot.
Accounting News

Tax Rates

Consumption Taxes

Nature of the Tax: Avelacvats arzheqi hark (AAH) - Value-Added Tax (VAT)
Tax Rate: 20%
Reduced Tax Rate: Exempt supplies include: certain educational services, books, supply of services related to the care of children, newspapers and magazines, pension insurance, insurance and reinsurance, supply of financial services by banks, persons participating in securities markets, payment and settlement organizations and lending organizations, casinos, gambling, gratuitous supply of goods by non-governmental, charitable and religious organizations, gratuitous
performance of works and rendering of services; supply of services to the organizer and operator of a free-economic zone and the supply of goods in the territory of a free-economic zone; tourism services provided to foreign tourists; etc.
Zero-rated items include exports, international transportation and related services (goods, maintenance, etc.), goods in transit, goods for the official use of diplomatic representations, transactions on the delivery of services by a telecommunication operator or postal communication operator, etc.
The turnover tax, which varies between 1.5% and 20%, replaces VAT for the goods and services provided by SMEs (turnover up to AMD 115 million).
Other Consumption Taxes: Excise tax is levied on the import of spirits, beer, wine, tobacco substitutes, crude oil, gas (except compressed natural gas), petroleum and diesel fuel.
A tax applies on motor vehicles and means of water transport, according to the number of seats and horsepower. The annual property tax on motorcycles is calculated at the rate of AMD 40 for each horsepower of the tax base. The annual rate of property tax on watercraft is calculated at AMD 150 for each horsepower of the tax base. Beginning from the fourth year after the year of production, the tax base for motor vehicles and means of water transport is reduced by 10% per year, up to a maximum reduction of 50%.

Corporate Taxes

Company Tax: 18%
Tax Rate For Foreign Companies: Non-resident companies are subject to the same tax treatment as resident firms but are only imposed on their Armenia-source income. Non-resident firms are exempt from tax on interest gains deriving from Armenian government bonds in foreign currency and on income derived from the sale and exchange of such bonds.
Resident entities, registered permanent establishments, and individual entrepreneurs are required to withhold income tax at source on payments to non-residents not having a registered PE in Armenia.
Capital Gains Taxation: Capital gains are taxed at the ordinary corporate income tax rate of 18%. Non-residents are taxable on the realised capital gains from the increase of the value of the assets located in Armenia.
Capital gains derived by a non-resident firm from the sale of securities are exempt.
Main Allowable Deductions and Tax Credits: Documented expenses incurred in the course of business activities are generally deductible.
Depreciation of tangible and intangible assets is tax-deductible (except for land). Goodwill cannot be amortised for tax purposes.
Start-up and interest expenses are generally tax-deductible. The portion of interest exceeding the double of the settlement rate fixed by the Central Bank of Armenia on December 31st of the taxation year is not deductible (the current rate is 24%). Rental payments and bad debts are also deductible. Receivables that are not collected between 91 and 180 days after their cut-off date are deductible by 25%. The rate is 50% for outstanding debts between 181 and 270 days after the cut-off date and 75% between 271 and 365 days. Debt deductibility is capped at AMD 100,000. Larger claims must be settled through the legal process.
Donations to charitable organisations are deductible up to 0.25% of gross income. Expenses for business trips outside Armenia are limited to 5% of the gross income of the tax year. Representative expenses are limited to 0.5% of the gross income of the reporting year or AMD 5 million, whichever is lower. Expenses on management services received from non-resident companies or individuals are limited to 2% of the gross income of the reporting year. Funded contributions made within the framework of the voluntary funded pension scheme are limited to 7.5% of the salary of the employee.
Commercial fines are tax-deductible, as opposed to those paid to municipal or national authorities. Non-refundable taxes are deductible.
Certain IT companies as well as income from agricultural activities and tapestry are exempt from corporation tax.
Tax losses can be carried forward up to five years. The carryback of losses is not permitted.
Other Corporate Taxes: Employers are not required to contribute to social security. Nonetheless, they are required to withhold social contributions from the monthly employment income according to progressive rates (4.5% of the monthly gross income up to AMD 500,000; above this threshold, 10% of the monthly gross income - capped at AMD 1,020,000) - minus AMD 27,500).
SMEs are subject to a turnover tax that replaces VAT and corporation tax. Rates vary between 3.5% (a reduced rate of 1.5% applies to the sale of secondary raw materials and newspapers by publishing companies) and 25% depending on the type of income and apply to any SME with an annual turnover below AMD 115 million.
Starting from 1 January 2021 the tax on immovable property and vehicle property came into force and replaced the law on property tax and land tax have lost its force. The immovable property tax is assessed and collected at the municipal level on the buildings, lands and its improvements. The value of the land is determined according to the land cadaster. Tax on land tax for agricultural land is calculated at 15% of the net income determined by the cadastral evaluation (in case of nor non-agricultural land, the rate is 0.25% to 1.0% of the cadastral value). Cadastral value should be assessed based on the value closed to the market value.
The taxes on vehicles depend on the number of seats and horsepower.
Other Domestic Resources: Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Country Comparison For Corporate Taxation

	Armenia	Eastern Europe & Central Asia	United States	Germany
Number of Payments of Taxes per Year	15.0	13.9	10.6	9.0
Time Taken For Administrative Formalities (Hours)	264.0	226.2	175.0	218.0
Total Share of Taxes (% of Profit)	22.6	36.5	36.6	48.8

Source: Doing Business - Latest available data.

Individual Taxes

Tax Rate

Income Tax rate	21% from 1 January 2022 20% from 1 January 2023 (was 22% in 2021)
Income from royalties and interest	10% (when not exempt)
Income from lease of property	10% (+10% for incomes in excess of AMD 60 million)
Income from the sale of property	10% or 20% (according to the type of property and the nature of the buyer) The sale of non-entrepreneurial property to individuals is exempt from tax
Dividends attributable to 2020 and subsequent reporting periods	5% (instead of 10%)

Allowable Deductions and Tax Credits: Individual taxpayers enjoy the following deductions:
- Paid benefits
- Pension and insurance benefits
- Insurance premiums (paid by employers on behalf of their employees - up to AMD 10,000 per month)
- Amounts of single-sum assistance in case of an employee’s (or family member’s) death
- Work, service or assets received free of charge from non-commercial organisations
- Monetary prizes received at competitions (up to AMD 50,000 per prize).
Special Expatriate Tax Regime: Residents are taxed on their worldwide income whereas non-residents are only taxed on their Armenia-sourced income.

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed: See the list of the tax conventions signed by Armenia (Tax Service of the Republic of Armenia)
Withholding Taxes: Dividends: 0% (resident companies)/5% (dividends attributable to 2020 or after)/10% (dividends attributable to 2019 or before), Interest: 0% (resident companies)/10% (individuals and non-resident companies), Royalties; 0% (resident companies)/10% (individuals and non-resident companies).

Sources of Fiscal Information

Tax Authorities: Overview of Armenia's tax measures in response to Covid-19
Tax Service of the Republic of Armenia
Other Domestic Resources: Armenia Tax Legislation
Doing Business in Armenia - Embassy of the Armenia to the United States

Intellectual Property

National Organisations: The authority protecting the intellectual rights in Armenia is called Intellectual Property Agency. It was established in March 2002 and works under the Ministry of Trade and Economic Development.
Regional Organisations: Armenia has signed regional and international agreements in terms of intellectual property such as the Paris Convention for the Protection of Industrial Property, the Eurasian Patent Organization, the Wipo Copyright treaty, among others.

National Regulation and International Agreements

Type of property and law	Validity	International Agreements Signed
Patent Law on Patents, 1999.	20 years, when the patent was granted on a basis of a substantive examination (principal patent), or for 10 years, when it was granted without carrying out of a substantive examination (preliminary patent).
Trademark Law on Trademarks, Service Marks and Appellations of Origins	10 years initial period	Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks
Design Law on Patents (Industrial Property Legislation)(1999)	15 years.
Copyright Law on Copyright and Neighboring Rights (2006)	The author’s economic rights shall run for the whole life of the author and for 50 years after his death. The economic rights of the author holding copyright can be transferred by inheritance.
Industrial Models Law on Patents	10 years.

Legal Framework

Independence of Justice: The judiciary is not fully independent and is subject to political pressure from the executive branch. The new constitution of 2005 increased the power of the legislative branch and allowed for more independence of the judiciary. However, corruption is still present.
Equal Treatment of Nationals and Foreigners: The principle of equal treatment is laid down as a fundamental right in the Constitution. According to this text, everyone is equal before the law.
The Language of Justice: The judicial language in the country is Armenian, though Russian is also widely used.
Recourse to an Interpreter: There is no particular framework for a non-speaking defendant case in a court of justice in Armenia.
Independent interpreters can be reached mainly in big cities and can be helpful in a court case.
Sources of the Law and Legal Similarities: The Constitution (adopted in 1995, amended in 2005) is the main source of the law in the country.
Checking National Laws Online: Ministry of Justice
Armenian Young Lawyers Association

Standards

National Standards Organisations: SARM, National Institute of Standards
Integration in the International Standards Network: The National Institute of Standards (SARM) is a joint-stock company operating under the Ministry of Trade and Economic Development. This Institute carry out works on development and examination of Armenian (AST) and Interstate (GOST) standards, which refers to mandatory standards applied in the former Soviet Union, classification (AC) as well as scientific and methodological works in the field of standardization.

SARM is a member body of ISO since 1996.
Classification of Standards: In the Republic of Armenia, standards are classified into two types, those mandatory and those voluntary.
For the preparation and application of standards, SARM follows the WTO agreement on Technical Barriers to Trade (TBT) Code of Good practice.
The great part of the standards applied in Armenia are international and regional standards (GOST).
Online Consultation of Standards: Catalogue of the National Institute of Standards.
Certification Organisations: SARM National Institute of Standards.

Business Practices

General Information: Business Practices in Armenia
Official website of Armenia Tourism
Opening Hours and Days: Most businesses operate five days a week. The usal opening hours for financial institutions, commercial organizations are from 9.00 am to 6.00 pm with a one hour lunch break at 1.00 pm.
Retail stores' opening hours vary from their location and size but they usually open from 8.00 am to 9.00 pm.

Public Holidays

New Year	December 31-January 2
Christmas	January 6
National Army Day	January 28
Women's International Day	March 8
Motherhood and Beauty Day	April 7
Armenian Genocide Remembrance Day	April 24
Worker's Day	May 1
Victory and Peace Day	May 9
First Republic Day	May 28
Constitution Day	July 5
Republic Independence Day	September 21
Earthquake Memorial Day	December 7

Holiday Compensation: When a public holiday falls on Saturday, companies close on the following Monday to compensate.

Periods When Companies Usually Close

Closure for New Year	First week of January (Armenian Christmas)
Closure during Summer	One week around Mid-August

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