Starting a Business in Armenia

Start a business



When starting a business, other than the plan itself, you have to look at the legal aspect. Is it a company you wish to register or a private entrepreneurship? If a company, is it an LLC, CJSC, OJSC or public company? Both commercial and non-commercial organizations must register. You may do it yourself or pick up a lawyer to do the registration for you. Information in this article is taken mainly from www.armenian-lawyer.com, alongside both local and international sources.

Pros of Starting a Business in Armenia

There are many pros and cons to starting any business in any country. In Armenia, the legalities lean more towards the pros. It often takes less than a single business day to register a company. Registration costs are low. There are no minimum capital requirements to starting a business. There are few reporting requirements throughout the year. Tax exemptions exist for small and medium enterprises, with generally low tax rates on businesses. There are no requirements for local directors or employees, nor connections with local banks. Nationality restrictions do not exist, nor is there a need for a local shareholder. Furthermore, the considerable network of Double Tax Treaties with 41 countries, as well as the Free Trade Agreements, gives Armenia a large market to work with. Free Economic Zones offer tax exemptions on income, profits and property taxes, as well as VAT exemptions. There are no restrictions on foreign investments and ownership, foreign currency exchange, or the repatriation of profits.

Differences in Company Formation

LLC

An LLC, or limited liability company, are generally SMEs in Armenia. There are no minimum share capitals needed, shareholders are liable to the extent of their investments only, at least one investor must be included, and shareholder meetings should occur annually at a previously specified time, but which can occur remotely, with written votes. The manager need not be a shareholder or of Armenian citizenship, while a board of directors is optional. A shareholder can withdraw from the company at any time and receive the value for the share owned. If the manager of the company is a foreigner who will stay in Armenia for longer than the visa allows, a temporary residency should be obtained. One can work with a regular visa without a work permit, but only so long as the visa allowance, and not a day more. In such cases, residency, temporary or permanent, must be filed for.

JSC

While a JSC, or joint-stock company, is similar to an LLC in how it functions in Armenia, though there are certain differences in the details of ownership, exit strategy and management. The share capital can be represented by common or preferred, voting or non-voting shares, at least one investor is necessary, with the shareholders liable to the extent of their contributions only, while a meeting done annually can occur anywhere in the world and be represented by a proxy. In companies with 50+ shareholders, a board of directors including at least 3 persons is required. In both the case of an LLC and JSC, an annual account is necessary, including an annual report, the balance sheets and profit/loss accounting, all approved at the shareholder meeting within 6 months from the end of the fiscal year. Publicly traded companies have separate laws in terms of annual accounting, while larger companies with a turnover exceeding 1 billion AMD have certain added filing and publishing requirements. Contributions outside of cash must be assessed by an external auditor, and in the event of an OJSC, shares can freely be sold to third parties.

Note: Corporation are required by law to add the type of company at the end of the name, such as LLC, LTD, CJSC, OJSC, etc. They cannot contain the words “bank” or “insurance” without proper state licensing, nor can they include “Armenia” or “Armenian” in the name without government approval.

Procedure and Costs of Company Formation in Armenia

Start with company registration at the State Register for Legal Entities in Yerevan. It has no associated costs and the Business Entry One-Stop Shop was launched within the Ministry of Justice in 2011. Name reservations, business registration and tax identification numbers are all issued here. The TIN is issued by the State Registrar. Maximum amount of time this all can take is 3 business days.

Electronic registration is also available at www.e-register.am/am/ and is gaining in popularity, but you require an electronic signature. The site also allows you to do a company search by name or person. There are no fees to open an LLC or JSC, unless it is a non-profit organization or a company branch.

In order to register the company, the information necessary includes:

Applicants have a few documents that may be needed, though most all can be drawn up at the registration office`

-Name of the company
-List of partners or owners
-Manager of the company
-Registration address (no certificate of ownership or lease required- Must be Armenian)
-Amount of charter capital
-Registration form that includes information of shareholders and managers responsible
-Shareholder resolution, signed by all
-The charter of the company
-Confirmation payment of state overhead (a payment check or through e-payments.am)
-Personal information about the head of the executive body, including passport and social security ID
-Beneficial ownership certificate, certifying the beneficial owners of the company, to be disclosed to the Central Bank of Armenia.

Trademark the company name. In Armenia, you can choose any name for the company as long as it is not previously registered by the state. Trademarking adds an extra layer of legal protection to your brand. Follow by ordering a company seal, which can take up to 1 day and cost 8,000 AMD and up. This is not required by law.



Tax Rates in Armenia

Armenia has a flat corporate tax rate of 20%, with a worldwide tax base. This applies to both local companies and branches or subsidiaries of foreign companies. Turnover tax also exists, where it is 1% on trade, 3.5% on manufacturing, and 5% on all other activities. This is optional. You get a pick between turnover tax and profit tax + VAT. You can only choose turnover tax if your annual sales do not exceed 115 million AMD. If you own property through your business, property and land taxes are applicable. Employee income tax is 24.4% on gross numbers up to 120,000 AMD, increasing to 26% + 29,280 AMD up to 2 million AMD, where it increases once again to 36% + 518, 080 AMD for any salary exceeding that amount. This can also be paid online, along with the 20% VAT. These numbers are expected to change slightly come January 2018.

Branch Office vs Subsidiary Company

Information generously provided by Nerses Isajanyan, director of Vardanyan & Partners - www.armenian-lawyer.com

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Branch Office

Company (Subsidiary)

Tax Factors

Taxation on worldwide income

No, only income from Armenian sources is taxed

Yes

Repatriation of profits in the form of dividends

Non-taxable intra-company transfer

Normally taxed at 10%

Repatriation of profits in the form of interest

Non-taxable intra-company transfer

Normally taxed at 10%. Deductible expense for the subsidiary

Deduction of losses

Normally losses can be deducted by the head office

Losses are not transferred to the parent but can be carried forward for 5 years

Can share in head office overhead expenses

Yes

No

Allocation of profits and expenses is straightforward

No

Yes

Transfer of assets from the parent company

Non-taxable intra-company transfer

May trigger taxes (capital gain) for the parent company

Can benefit from Armenian double-tax treaties

No

Yes

Advance payments of corporate income tax

Semi-annual

Quarterly

Dividends received are taxable

Yes

No

Tax benefits for companies with government-approved business plans

No

Yes

Non-Tax Factors

Limited liability for shareholders

No

Yes

Armenian corporate law applies

No

Yes

Corporate formalities shall be respected (e.g. annual shareholder meetings)

No

Yes

Must use the name of the head office

Yes

No

Director must have a POA

Yes

No

Currency control

Less strict

More strict

Capital

No capital

Must have capital but no minimum amount is set by law

Can obtain residence status for foreign managers/employees

Yes

Yes

Can open bank account

Yes

Yes

Documents necessary for registration

Certificate of incorporation & articles of incorporation (all translated into Armenian and legalized)

Certificate of incorporation & articles of incorporation (all translated into Armenian and legalized)

State duty for registration

AMD 12,000

No

Information on shareholders available to public

No

Yes (for LLCs)



Tamar Najarian



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