Tax Incentives for IT Startups in Armenia
Armenia has made the IT sector a priority industry since the year 2000. Several initiatives have been adopted over the years to encourage the development of the IT industry, such as tax incentives for IT startups.
The system of granting tax incentives to IT startups first came into force in 2015 based on the law “On State Assistance to the Information Technology Sector”. It is designed to provide IT startups with tax breaks for the first years of their activity. Low rates set under the law are intended to provide motivated behavior for investment and reduce the risk of tax evasion.
In April 2019, the Armenian parliament adopted a set of amendments and additions to the law “On State Assistance to the Information Technology Sector”, which extends the term of the above-mentioned tax breaks. As a result, the deadline for applying for and obtaining a certificate for tax breaks has been extended to 1 December 2022.
IT startups operating in the following fields can benefit from state support:
- Software development,
- Consulting activities in the field of computer technology,
- Computer system management activities,
- Data processing, network distribution, and related activities,
- Activities related to web-portal development,
- Implementation of educational or research programs in the field of information technologies,
- Electronic systems design, testing and production, computer animation and modeling, as well as design and testing of integrated circuits.
Tax break certificates are granted on a case-by-case basis by the Special Commission established by the Government.
The tax breaks granted to Armenia-based IT startups exempt them from paying corporate tax of 20% (a zero rate applies under this Law), as well as providing a reduced income tax flat rate of 10% (instead of generally 20-21%) for employees.
Companies applying for a certificate must meet certain requirements, particularly:
- They must be trade organizations or Private Entrepreneurs registered in the Republic of Armenia. The certificate cannot be applied to subsidiaries, economic associations, branch offices, or representatives of foreign legal entities.
- The number of employees should not exceed 30
- They shall not sell their fixed assets
- At least 70% of turnover must derive from the types of activities defined above, etc.
Armenia is a welcoming country, and among the mentioned, there are multiple reasons to choose Armenia as a business location.