Armenia IT Tax Incentives: 1% Tax Rate Until 2031 (Complete Guide)

Tax Regimes in Armenia

Before applying IT incentives, every company must choose one of two taxation regimes:

1. General Taxation Regime

• Corporate income tax: 18% on net profit
• VAT: 20% (no threshold — applies from the first transaction)
• No turnover limit

2. Simplified Regime (Turnover Tax)

• Tax rate depends on the type of activity (1–12% on turnover)
• For IT companies qualifying for the incentive: 1% on turnover
• Annual turnover must not exceed 115 million AMD (~$291,000)
• Must be elected within 20 days of company registration
• Fully exempt from VAT

The 1% Tax Rate for IT Companies

Companies engaged in qualifying high-tech activities may apply a 1% turnover tax rate under the simplified regime. This is one of the most competitive IT tax rates in the world, making Armenia an attractive jurisdiction for technology businesses and remote teams.

The legal basis is the Armenian Tax Code, Article 258.

What Counts as a Qualifying IT Activity?

Not every company with a laptop and a Wi-Fi connection qualifies for the 1% rate. The Armenian government maintains an approved list of high-tech activities. Your company's actual business must match one of those categories.

Activities that typically qualify include:

• Software development and custom programming
• IT consulting and system integration
• Cybersecurity services
• Mobile application development
• SaaS and cloud-based products
• Data processing and analytics

The full list is defined by a Government of Armenia decree and is updated periodically. If a new technology category emerges, it may be added — but you cannot assume it qualifies automatically.

A common mistake: companies that resell IT services or act purely as intermediaries often do not qualify. The 1% rate is reserved for direct IT production and development — your company must be the one actually building or delivering the technical product or service, not brokering someone else's.

If you are unsure whether your activity qualifies, MOSTAR reviews this as part of the initial consultation — before you register, not after.

Benefits Under the General Regime

Even under the general regime, IT companies can access significant benefits:

• 200% salary deduction for IT employees — double the actual salary paid can be deducted from taxable income
• The deduction is capped at 50% of taxable income
• Applies only to employees who are Armenian tax residents

A Real Example: How the Numbers Work

Abstract percentages are hard to feel. Here is what they mean in practice for a small IT company.

Say your IT company earns $100,000 in annual revenue. Your costs are $40,000, leaving a profit of $60,000.

Under the General Regime, you would pay:

• 18% income tax on $60,000 profit = $10,800
• 20% VAT on all your invoices — an added administrative and cash-flow burden

Under the Simplified Regime with the 1% IT rate, you would pay:

• 1% on $100,000 revenue = $1,000. That's it. No VAT on top.

The difference — $9,800 in this example — stays in your company. For an early-stage business, that is runway, salaries, or product development.

One important limit: the simplified regime is available only while your annual turnover stays below 115 million AMD, which is roughly $291,000 at current rates. If you cross that threshold during the year, you automatically move to the general regime for the remainder of that tax year.

This makes the simplified regime ideal for solo founders, small IT teams, and companies in their first two to three years of operation — exactly the stage when keeping costs low matters most.

Additional State Support Programs

1. Migrant Specialists

• Until December 31, 2025: 60% of the income tax of migrant employees is subsidized — reimbursed to the employing company
• From 2026 onwards: the benefit is paid directly to the employee rather than the company

2. New Employees

• 60% income tax subsidy on salaries of newly hired employees
• Valid for 3 years per employee

3. Training and Retraining

• 50% income tax subsidy on training-related costs
• Applies to professional staff development

Duration of Benefits

All IT tax incentives described above are currently valid until December 31, 2031. Correct structuring from day one is essential to remain eligible.

The 20-Day Rule — Don't Miss It

This is the single most common and costly mistake MOSTAR sees from founders who registered their company without legal help.

When you register a company in Armenia, you have exactly 20 calendar days from the date of registration to file an election for the simplified (turnover tax) regime. This is not a suggestion. It is a hard statutory deadline.

If you miss the 20-day window:

• You default to the General Regime automatically
• You cannot switch to the simplified regime until the start of the next calendar tax year
• You could spend up to 12 months paying 18% income tax and 20% VAT instead of the 1% rate

On $100,000 in revenue, that missed deadline could cost you roughly $9,800 or more in avoidable tax — in just the first year.

MOSTAR files the tax regime election for clients as part of the standard company registration package. You do not have to track this deadline separately — it is handled on the day of or within 48 hours of registration, with written confirmation provided to you.

If you are working with a different lawyer or registering on your own: make sure regime election is confirmed in writing before you leave the process. Ask for the confirmation document explicitly.

Important Considerations

• Correct classification of activities as 'high-tech' is critical — this determines eligibility for the 1% rate
• Tax regime must be chosen within 20 days of registration — this deadline cannot be extended
• Annual turnover must not exceed 115 million AMD to remain in the simplified regime
• Incorrect structuring can result in loss of incentives and retroactive tax liability

Frequently Asked Questions