During its March 13 session the Government of Armenia approved a draft law on “State Support in the IT Sector.” A legislative package of changes and additions to different laws that were considered “urgent” were also approved and will be proposed to the National Assembly for approval.
After the session the Minister of Energy, Vahram Avanesyan, told reporters that this legislative package aims to further develop the IT sector and to raise Armenia’s ranking and competitiveness in the IT sector within this region.
The package foresees that all startup IT companies with a staff of less than 15 people will be exempt from profit tax for three years and income tax for its employees will be 10%. In Armenia a salary of 120,000 AMD is taxed is by 24.4%, and if higher by 25%.
According to the minister, Armenia has already started losing its ranking as an IT competitor compared to other countries in the region that provide tax exemption to the IT sector. “Different groups in Armenia are working, creating products and when that product is ready they register a company in another country (mainly in the US) and sell their products through that company,” said the minister, adding that tax exemptions may foster those non-formal working groups to register in Armenia.
When asked about the fact that large companies or other non IT companies may try to evade paying their taxes through this new exemption, the minister explained that according to the new law, companies have to be certified and won’t be exempt if they are connected to larger companies. Those IT startup companies that will be exempt will not be allowed to provide services for other IT companies working in Armenia. “For example, a company that sells computers cannot benefit from this new law,” noted Avanesyan.
Many assess that through this new initiative 40-60 new companies may be created. According to the minister, by approving this new legislative package there will be no decrease in revenues to the state budget, because the proposed draft will exempt only certified startup IT companies. This new tax exemption can also serve as an important stimulus for non-registered IT groups to register and work within the law.
When asked if this new package is an attempt from the government to calm discontent from those who are protesting against the new mandatory accumulative pension plan – most of whom are representatives of the IT sector – the minister said that this new exemption applied only to startup companies and those protesting are already working for current companies.
