We are accustomed to complaining about anything that has to do with the Armenian government. So it is only natural that the Armenian wasn’t listening to the country’s tech community and laws were not being updated to accommodate new business structures and labor environments. Well, I am delighted to tell you that it’s finally happening, legislation is being drafted which will help propel the small, landlocked Caucasian nation into the technology startup big leagues…
The National Assembly recently released the details about a new draft law on technology startups which would make founding, operating, and growing a tech startup in Armenia much easier and simpler.
The new legislation, which was adopted on the 14th of December 2014, will affect your startup, and you need to know how you could use it to your benefit.
Why are they doing this?
Having finally understood that supporting the tech sector, which accounts for $450 million a year, or 5% of the entire country’s GDP, can be immensely beneficial for a country with no ports, and 2 out of 4 borders closed to trade, and in no small part thanks to constant lobbying efforts, Union of Information Technology Enterprises (UITE) which closely cooperated with legislators, the government recognized the importance of this sector and its effect on the country’s economy and continued sustainability. Having done so, the Government, along with UITE, and international partners have identified four main objectives in enacting this legislation:
Increasing competitiveness in the industry;
Empowering and training a well-paid skilled workforce;
Providing capital for research and development;
Attracting direct foreign investment.
Who qualifies for the benefits?
The new legislation applies to Startups, Techno-parks, Technology Centers, Incubators and Accelerators, as well as educational and research organizations. Falling in one of these categories doesn’t automatically mean you qualify for tax privileges; the government requires you to apply for an additional special license. Companies have to be established and operating under the law on State Support of IT Sphere, and their activities are limited in the 3rd article of the same law.
In order to be eligible for this new program, you would need to be involved in the technology sphere in one way or another. This could mean software and internet companies, consulting, computing systems, data mining, hosting services, network administration, online media companies, education and research in IT and others.
Furthermore, your company has to be newly established and independent. This means you can’t just dissolve your currently existing startup, and conveniently re-charter it in order to qualify! It also means that companies which are established branches of foreign entities also do not qualify. To make things even more interesting, this license also excludes companies with more than thirty employees.
Companies eligible for this new tax break can’t sell or otherwise transfer the results of its operation under the certificate to other RA resident or business entity that works in the IT sphere, except for educational purposes.
And just in case you thought it would be easy to quality and never have to worry about a thing again, the new law requires eligible companies to provide quarterly reports ensuring that the startup continues to meet the requirements.
Where do I sign up?
Though Armenia is notorious for its bureaucratic antics, this procedure seems poised to be breaking that trend. All you need is the following:
The application document (Arlis 312, 2015)
Proof that your startup is a newly-established legal entity (your company should have been chartered no sooner than 3 months before the law passed to be eligible)
A written description of the main directors
A written statement containing the names, office positions and contact information of your employees
A list of shareholders
Proof that the company isn’t a local branch of a foreign company
As a side note, be careful about who you invite as a board member. The law insists that this person have a “clean” history. Also, keep in mind that if your business changes its focus after receiving this tax status, it would need to reapply for changes in its certificate.
Applications will be accepted until the first of January 2017, and the tax benefits will last until 2020, so don’t waste your time and apply. Stepan Khzrtyan and Narek Ashughatoyan from LegalLab Law Boutique specialize in small businesses and Startups in Armenia, and would be helpful in answering any questions you may have about this new legislation.
Raffi Elliott
