Dec 18 2024

Brief on Benefits for the high-tech sector in Armenia

On December 4, 2024, the Armenian parliament adopted the package of laws introducing new benefits (support measures) for the high-tech sector. This package includes a new Law on State Support to the High-Tech Sector, and a set of amendments in the Tax Code. The measures will be in place from January 1^st 2025 till December 31^st 2031.

The benefits are available to locally registered companies and private entrepreneurs 90% of whose revenue is attributed to high-tech activities. The list of such activities is yet to be defined by the government.

The Law on State Support to the High-Tech Sector introduces the following support measures:

1. Refunds to employers for engaging migrant workers in the high-tech sector. The refund amount will be equal to 60% of the income tax levied on the migrant worker’s salary and equivalent payments. Migrant workers are defined as persons who do not have Armenian citizenship and have a right to work in Armenia.
2. Refunds to employers for engaging new employees. The refund defined amount will be equal to 60% of the income tax levied on the salary and equivalent payments of the new employee (i.e. the employee who has begun working in a high-tech profession for the first time in their career). This refund will be provided for the first 3 years after the new employee begins working in a high-tech profession.
3. Refunds to employers of training and retraining expenses (for professional training high-tech sector), in the amount of 50% of the income tax levied on the salary and equivalent payments of the trained employees professional employee.
4. Refunds to migrant workers in the high-tech sector in the amount equal to 60% of the income tax levied on the migrant worker’s salary and equivalent payments.

The total amount of refunds mentioned above is capped at 50% of total income tax reported by the company in the given period. Details pertaining to calculation and payment are yet to be defined by the government. At that, employers operating in the turnover tax system may receive support for no more than 3 calendar years, after which they shall either switch to the general taxation system or lose further support and benefits.

The amendments to the Tax Code introduce the following tax benefits:

1. Decreasing the turnover tax rate for high-tech activities to 1% (compared to the current rate of 5%, which was set to increase to 10% from 2025).
2. Allowing for accelerated amortization (as fast as 1 year) for fixed assets imported or purchased within the scope of approved R&D projects. Criteria and procedure for approving R&D projects are yet to be approved by the government. 
3. Allowing for deducting R&D expenses for corporate income tax purposes in the year they are incurred.
4. Applying a 200% deduction of salaries and equivalent payments to local workers working on approved R&D projects, and local workers working high-tech jobs. The list of jobs in question is yet to be approved by the government. The total deductions under this point are capped at 50% of the total taxable revenue (this cap does not apply to taxpayers with least 90% of their revenue derived from R&D).
5. Lowers personal income tax rate (10% instead of the regular 20%) for salaries and equivalent payments to migrant workers working on approved R&D projects.