Parliament approves long-term tax incentives for Armenia's IT industry

YEREVAN, 4 December. /ARKA/. The Armenian Parliament on Wednesday approved in the second and final reading a package of amendments to the law On State Support to High Technologies Industry and a number of related laws.

The amendments envisage long-term tax benefits for IT companies for 7 years – starting from 1 January 2025 to 1 January 2032 with the possibility of prolongation (previously, in the last few years, tax benefits were set for 1 year, after the expiration of which they were prolonged).

According to the new assistance package, the turnover tax rate for IT companies is reduced from the current 5% to 2%. This clause applies to companies and sole proprietorships with annual turnover of less than AMD 120 million.

Employment of new staff members is stimulated - for companies with up to 30 employees the amount of income tax refund will be 100% against the current 20%. The government will reinvest these funds in the company itself, assisting in the creation of new jobs in cooperation with universities. For companies with 30 or more employees, the income tax refund will be 50%.

Another area of assistance is about labour migrants. Companies that attract them to the production process will be able to count on a 50% income tax refund. This measure is aimed at attracting qualified personnel from international markets.

Also, startups will be reimbursed 50% of income tax on employees sent to retraining programmes. For larger companies, the compensation will be 25 per cent. For IT companies that will send employees for retraining abroad (the list of universities and training centres will be agreed upon in the future), the government will reimburse 70% of the travel expenses (within $5,000).

For companies that will be involved in R&D activities, the income tax rate will be reduced from 20% to 10%.

About Armenia's IT sector

According to the government data, more than 32,000 employees work in the IT sector of Armenia.

By the end of 2023, the turnover of the country's IT sector exceeded 640 billion drams (almost $1.6 billion); this corresponded to more than 7% of the country's GDP.

The tax incentives for IT start-ups valid until the end of 2024 envisage income tax at the rate of 10% (for other sectors of economy it is 20%).

By the government's decision of 8 May 2024, in 2024-2025. IT companies will receive financial support of 7 billion drams. ($1 - 402.72 drams). -0-