New tax breaks for IT sector in Armenia take state support to another level - lawyer (EXCLUSIVE)
YEREVAN, April 15. /ARKA/. Recent tax incentives introduced in Armenia for IT companies have significantly enhanced state support, according to Aram Khachatryan, a lawyer representing the Enterprise Incubator Foundation (EIF).
Khachatryan explained that these changes represent a shift in the Tax Code, introducing a new framework designed to address the challenges that arose under previous regulations. For the past two years, the IT sector benefited from a 0% profit tax alongside a 10% income tax. However, this approach led to complications, prompting the government to pause these harmful regulations and replace them with more effective alternatives.
Following extensive discussions involving various ministries and departments, a more focused strategy emerged. “Ten key initiatives were identified, three of which are attributed specifically to the Ministry of High-Tech Industry under the 'On State Support' law. This includes financial aid for foreign labor migrants, which allows for a 60% profit tax compensation. The crucial requirement is that these individuals possess the right to legal employment,” Khachatryan stated.
He also mentioned that the procedures have been streamlined for citizens of the Eurasian Economic Union (EAEU). “To support the recruitment of new employees, high-tech companies are eligible for a 60% profit tax reimbursement. Additionally, organizations can receive 50% of the costs covered for training or retraining their staff,” he noted.
Khachatryan highlighted that regulations concerning research and development (R&D) have already been approved, while others are in development, with new regulations for migrants set to take effect in 2026.
**New Incentives for IT Startups
Under the latest 7-year support program, IT startups in Armenia will benefit from tax breaks starting January 1, 2025, lasting until January 1, 2032, with a chance for extension based on specified criteria. A refund of income tax is available if certain conditions are fulfilled.
Startups currently operating with fewer than 30 employees that have hired foreign labor migrants or new staff since 2022 will qualify for a 60% income tax refund. A further initiative proposes a three-month subsidy that includes a 50% income tax refund for employees who have participated in professional retraining programs.
Moreover, the turnover tax rate for IT firms is being reduced from the existing 5% to just 1%. For companies engaging in research and development, the income tax rate is also being lowered from 20% to 10%.
About the IT sector of Armenia
According to the data of the Ministry of High Technologies of the Republic of Armenia, by the end of 2024, about 41.5 thousand employees were working in the field of high and information technologies in Armenia.
The share of the technology sector in Armenia's GDP is 7-8%. The turnover of the entire high-tech sector reached 1.15 trillion drams, of which 915 billion drams were contributed by the information technology sector.-0-