Taxation of micro-businesses in Armenia

What is considered a micro-business (micro-entrepreneurship, microenterprise)?

Businesses whose annual turnover does not exceed AMD 24 million (approx. USD 50 000) can be considered microentrepreneurs if they meet certain requirements under the Armenian tax code.

What taxes do micro-businesses pay in Armenia?

Microbusinesses are exempted from almost all taxes that could be otherwise accrued in relation to their activities (also from the obligations to act as a tax agent and make a payment of advance corporate income tax).

Microbusinesses are not exempted only from:

  • Import taxes

  • Personal income tax for employees (AMD 5000 for each employee)

  • Excise tax

  • Environmental tax

  • Road tax

This means that micro businesses do not pay corporate income tax, VAT or turnover tax. In terms of personal income tax that is withheld from employees’ wages and paid on their behalf, microbusinesses only pay AMD 5000 per employee.

 

What type of entities can qualify as a micro business?

The following entities can do business under the micro-entrepreneurship system:

  • Commercial organizations

  • Sole proprietors

  • Physical persons who do not have registered sole proprietorship

 

What should businesses do to be taxed under the micro-entrepreneurship system?

To be considered a microbusiness a taxpayer must submit a statement to that effect to the tax service before 20 February of each tax year. Newly registered businesses and those that resume their operations after suspension must submit the statement within 20 days following the registration or resumption. Qualified physical persons who do not have a registered sole proprietorship can submit their statements at any time and benefit from the system for the period following the submission of their statement.  They receive a certificate attesting their status as a micro-entrepreneur.

Which entities cannot qualify as a microbusiness?

 

Irrespective of their annual turnover, the following entities cannot qualify for the micro-entrepreneurship system:

  • Banks, credit organizations, insurance companies, investment companies, professional participants of a securities market, pawnshops, dealers and brokers engaged in securities trade, investment funds, fund managers, payment-settlement organizations, notaries, casinos, gambling and lottery organizers,

  • Consulting, legal, accounting, audit, engineering, advertisement, design, marketing, translation, expert examination, medical, dentist technician services providers, those who do data processing, scientific, research, experimental design, experimental-technological works, foodservice operators in Yerevan (except for hostels that provide meal services directly related to their core business operations), as well as workers and service providers similar to those mentioned in this paragraph,

  • Organizations and sole proprietors engaged in wholesale and retail business in Yerevan, and organizations and sole proprietors who trade in dedicated facilities, shopping centers or fairs outside of Yerevan, as well as car dealers and entities engaged in e-commerce,

  • Public transportation providers,

  • Wending machine operators,

  • Coin-operated gambling machine (such as a slot machine) operators,

  • Organizations and sole proprietors who violate cash register (receipt machine) regulations third time in a given tax year. This limitation applies until the end of the tax year following the year when the second violation was recorded,

  • Affiliated entities. Companies are considered affiliated for tax purposes if one business controls at least 20% shares of the other or another physical person controls at least 20% shares in two businesses (Article 30 of the Tax Code),

  • Entities that have been declared affiliated due to various factors by the head of the tax service, if their combined annual turnover exceeds AMD 24 million,

  • Organizations and sole proprietors that are a party to a partnership, commission, supply or agency agreement,

  • Physical persons with no formal registration who use in their business the work of other physical persons with no registration,

  • Organizations and sole proprietors engaged in sales who have supplied goods to other organizations and sole proprietors

 

Is there a limitation on the number of persons that a microbusiness can employ?

 

No. There is no limitation on the number of employees. However, physical persons who run microbusiness without registering a company or sole proprietorship cannot benefit from the micro-entrepreneurship system if they use the work of other physical persons similarly with no registration.

 

Which microbusinesses can operate without formal registration?

The following microbusinesses can operate without registering a commercial organization or sole proprietorship:

  • Hostel services

  • Language courses

  • Private tutoring

  • Other specialized training

  • Dance classes

  • Performing arts and related activities

  • Creative work

  • Toastmaster work

  • Educational work, areas of extracurricular sports and gymnastics,

  • Household services

  • Smithing (blacksmiths)

  • Repair of watches, other time measuring devices and musical instruments

  • The following works done at the request of individual customers:

    • Shoemaking, production and renovation of leather goods and other similar works

    • Production and repair of clothes and hats

    • Production and repair of rugs and carpets

    • Making of wooden items, repair of furniture and home decorations

    • Production and repair of costume jewelry

    • Repair and software maintenance of computers, TV sets, washing machines, air conditioners and other home appliances

    • Production of bicycles and wheelchairs, repair of other personal or household items,

    • Production of pottery, ornate ceramics or other porcelain or ceramics goods

    • Tin making

 

Note that, as mentioned above, they still need to submit a statement to the tax service and receive a certificate attesting their status.

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