Certification of IT startups for tax exemptions
What is the purpose of certification?
The certification of newly-founded information technology companies entitles them to tax exemptions and privileges.
What is the rate of income and payroll tax for certified IT startups?
IT startups are exempt from income tax since revenue earned from the sale of information technologies is not considered revenue for the purposes of the RA Law “On Income Tax” the relevant provisions of which will still be in effect until 1 November 2023. It is worth noting that the basic rate of income tax in Armenia, including for non-certified IT companies, is 18%.
Certified IT startups pay a payroll tax of only 10% instead of the current progressive rate of 23-36%.
This privilege will remain valid until 1 November 2023.
(Articles 445 § 1(4), (5) of the Tax Code, Article 8 of the RA law “On Income Tax, Article 10 of the RA law “On Revenue Tax”).
Is there a time-limit or a deadline for certification?
Applications must be submitted within 3 months after the registration of the business.
What form of incorporation can an IT startup have?
Both sole proprietors and companies can be eligible, with the exception of subsidiaries or partnerships as well as branches or representative offices of foreign companies.
What is an IT business?
IT business is a company or sole proprietorship which has at least 70% percent of its revenue generated, in broad terms, from the following activities:
consultancy in the sphere of computer technology,
management of computer systems,
data processing, distribution of data within a network and related activities (including hosting services),
web portal operations,
educational and research activities in the area of information technology,
design, testing and production of electronic systems, computer animation and modeling, design and testing of integrated circuits.
What businesses are ineligible?
Businesses applying for certifications must meet the following requirements:
the total number of employees must not exceed 30 both at the time of application and throughout the entire period when the certificate is valid,
have been founded exclusively for the purpose of operating within the above-mentioned spheres (minimum 70% of total revenue generated from IT),
have not been created as a result of the reorganization of another legal entity,
no one of its shareholders (participants) is a former shareholder (participant) in a liquidated IT startup,
no one of its shareholders (participants) is a shareholder (participant) in another IT startup which holds a certificate or has applied for certification,
no one of its shareholders is going through bankruptcy proceedings,
no one of its shareholders (participants) owns or within the proceeding three-year period has owned a stake in another IT business.
Which government body issues the certificate?
The decision to issue a certificate is taken by the certification committee formed by the government of Armenia. Applications and accompanying documents are submitted to the Minister of High-Tech Industry. Applications can also be sent online to email@example.com.
What information and documents must be submitted with the application?
The following must be submitted:
company registration number,
a detailed description of spheres of operation and activities,
a statement confirming that the company will operate in the spheres specified above throughout the entire period when exemptions and privileges are in effect,
the number, positions and full names of employees,
a statement confirming that the establishment of the startup is not a basis for liquidation or reorganization of another company nor is the applicant a subsidiary of another company,
information about any company which either directly or indirectly owns a stake in the applicant company.
How long does the process take?
The decision is made within 30 days after the application.
What special obligations do IT startups have after certification?
Certified startups have to:
submit a statement confirming that it continues to satisfy the requirements for certification from November 1st to December 1st of each fiscal year,
submit a declaration about the results generated throughout each fiscal semester within 20 days following the semester,
inform the committee of any additional sphere of activity that was not specified by the applicant during the certification process.
Relevant forms are available here (in Armenian).
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