IT Companies in Armenia: Registration and Tax Obligations

For a business with several founders, a growing team or plans to attract investment, a limited liability company, or LLC, is usually the first structure to consider. A specialist working independently may also operate as an individual entrepreneur. The choice affects personal liability, management arrangements and taxation.

A foreign individual or company can establish an Armenian LLC. In general, full foreign ownership is permitted. The founders need to choose a company name and registered address, determine their ownership interests, appoint a director and prepare the incorporation documents.

Documents issued abroad generally require an Armenian translation and appropriate certification. Whether an apostille or consular legalisation is needed depends on the document and the country where it was issued. Incorporation can also be handled through a duly authorised representative.

Once the documents are ready, an ordinary commercial LLC may be registered immediately or within one to two working days, depending on the procedure used. Opening a bank account can take longer: the bank will review the founders, the proposed business and the transactions it expects to process.

A foreign company considering an Armenian branch should assess that structure separately. Tax treatment available to an Armenian LLC does not automatically extend to a branch.

Suppose a company earns AMD 12 million in qualifying software development revenue during a quarter. Its turnover tax on that revenue would be AMD 120,000.

Payroll, office rent and software subscriptions do not reduce that calculation. The expense deductions available for certain other activities do not apply to revenue taxed at the special 1% rate.

The calculation uses revenue recognised for the reporting period. This will not always match the amount credited to the bank account during the same period. An advance payment, for example, needs to be assessed according to the applicable revenue recognition rules.

For an LLC, turnover tax replaces corporate income tax and VAT within the scope of that regime. The company remains responsible for other applicable taxes and payments.

An individual entrepreneur using the turnover tax regime generally also pays a fixed monthly profit tax of AMD 5,000. Exceptions may apply during a properly declared suspension of activity.

Revenue from qualifying software development services supplied to a foreign client can be taxed at 1% where the business meets the turnover tax conditions. That revenue also counts towards the AMD 115 million threshold. Receiving payment from abroad does not, on its own, make the income tax exempt.

VAT requires a separate assessment of where the service is treated as supplied. For software development, the client’s location and the establishment receiving the service can be decisive.

Where the place of supply is outside Armenia, the transaction falls outside the scope of Armenian VAT. This is different from a transaction subject to VAT at a zero rate. Electronically supplied services have their own rules and should be reviewed accordingly.

The contract should accurately describe what the client is buying. Developing a new product, licensing existing software and providing personnel can lead to different tax treatment. The agreement should also explain what intellectual property rights the client receives.

Payments in the other direction deserve attention too. Before paying a foreign supplier, the company should check whether Armenian withholding tax applies and whether a tax treaty changes the result.

A business ceases to qualify as a turnover taxpayer from the point at which its current-year sales turnover exceeds AMD 115 million.

It must submit the relevant declaration within the prescribed twenty-day period and move to the general tax regime. Where exceeding the threshold triggers VAT registration, VAT is calculated on the amount above the threshold, taking account of the VAT treatment of the particular transaction.

Under the general regime, an LLC is ordinarily subject to:

• Corporate income tax at 18% of taxable profit.
• VAT at the standard rate of 20%, where applicable.

These rates apply to different tax bases and cannot simply be added together and charged against revenue. Services supplied to foreign clients still require a place-of-supply assessment.

If signed contracts or a growing client pipeline show that the threshold will soon be exceeded, the transition should be planned in advance. This allows the company to review its pricing, accounting and eligibility for incentives available under the general regime.

The standard personal income tax rate on employment income is 20%.

A reduced rate of 10% may apply to certain specialists carrying out qualifying scientific research and experimental development. Eligibility depends on the work performed, a favourable opinion from the relevant expert commission and the other applicable requirements. The employee’s professional role and, where relevant, a foreign employee’s residence status in Armenia also need to be checked.

Routine programming work does not automatically qualify as research and development.

When agreeing on a net salary, the employer should also account for applicable pension contributions, mandatory stamp payments and universal health insurance premiums. These depend on the employee’s circumstances and the relevant rules. An offer based only on income tax may therefore understate the employer’s actual payroll cost.

Dividends paid to an individual shareholder are generally subject to 5% personal income tax. For a foreign shareholder, any applicable tax treaty should also be considered.

Paying 1% turnover tax at company level does not replace the tax due when profits are distributed as dividends.

Moving to the general regime does not necessarily mean losing access to tax incentives.

Eligible resident corporate taxpayers may claim an additional deduction equal to 200% of qualifying professional employees’ salaries and equivalent payments, alongside the ordinary payroll deduction.

The conditions concern the company’s activities, the composition of its revenue and the employees’ professional duties and status. The additional deduction is generally limited to 50% of the tax base calculated before applying the incentive. A separate exception is available for qualifying research and development businesses that meet specific revenue composition requirements.

The actual saving needs to be calculated using the company’s figures. An IT business should not assume that every employee or every payroll expense qualifies.

Certain research and development activities may also benefit from special fixed asset depreciation treatment and VAT exemptions, subject to their own conditions.

State support programmes operate separately from the tax incentives.

An eligible employer may receive support calculated as 60% of the personal income tax associated with qualifying newly hired professional employees. Support for qualifying specialist retraining may be calculated at 50%.

For this purpose, a “new employee” is not simply someone joining the company for the first time. The person must not have been employed by a high technology employer during the four years preceding the recruitment year and must have joined such an employer after 31 December 2024. The qualifying status is retained for the prescribed three-year period.

The support arrangement for qualifying labour migrants works differently. The 60% support belongs to the employee. The employer submits the application and receives the funds as an intermediary, then must transfer them to the employee within five working days.

For employees benefiting from the 10% research and development income tax rate, support is calculated using a special base equal to 20% of salary.

Eligible businesses can apply under either the turnover tax regime or the general regime. However, at least 90% of sales turnover for the reporting period must come from qualifying high technology activities.

The employee’s professional duties and employment status also matter. A specialist engaged under a civil law services agreement is not treated as an employee for these programmes.

Applications are submitted through the designated platform within quarterly deadlines. Missing a deadline prevents the business from later claiming support for that quarter.

Tax liabilities administered by the tax authority exceeding AMD 100,000 on the day before the application are grounds for refusal.

There is also a time limit for receiving support while remaining under the turnover tax regime. Once the third calendar year following the year of first receiving support has ended, continued support requires a move to the general regime. For example, where support is first received in 2026, this condition becomes relevant for continued participation from 2030.

Registration is only the start. The company needs accounting records, access to electronic filing systems and properly prepared employment documents before its operations become difficult to reconstruct.

The main recurring deadlines are:

• Turnover tax: the return and payment are due by the twentieth day of the month following each quarter.
• Payroll income tax: the return and payment are generally due by the twentieth day of the following month.
• VAT under the general regime: monthly returns and payments are due by the twentieth day of the following month.
• Annual corporate income tax: the return and final payment are due by 20 April of the following year.

Corporate income tax advance payments should be assessed separately.

The company must also submit its beneficial ownership declaration within forty days of incorporation, report subsequent changes and, by 20 February each year, confirm that its information remains accurate or provide updated details.

A small turnover does not make a software development business eligible for the micro-entrepreneurship regime. The nature of the activity remains decisive.

For software companies, employment and contractor agreements also serve an essential commercial purpose: they should clearly establish who owns the software and other work created. Unclear ownership can become a problem when the company signs a major client, raises investment or sells its product.