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Armenian Government to Lower Taxes for IT Companies and Compensate Expenses for New Employees for Seven Years

IT_Sector
Arshaluis Mgdesyan
24.10.24 13:45
69

The Armenian government has approved a comprehensive support package for the tech sector, including a reduction in turnover tax from 5% to 2% and full compensation of income tax for startups when hiring new employees. This was announced by Minister of High-Tech Industry Mkhitar Hayrapetyan during a government meeting on October 24.

The new bill on state support for the high-tech industry is designed for a seven-year period and provides several significant tax benefits. Startups with up to 30 employees will receive 100% compensation of income tax when hiring new workers, while companies with more than 30 employees will receive 50% compensation.

To encourage research and development (R&D) activities, income tax for employees engaged in R&D will be reduced from 20% to 10%. This measure applies not only to the tech sector but also to all companies conducting research activities.

IT companies will also be eligible for 50% compensation of income tax when hiring labor migrants. Small businesses with up to 30 employees will receive compensation for training and professional development expenses up to 2 million drams.

'Armenia must transform from a country providing IT services to a country supplying products to international markets,' emphasized Minister Hayrapetyan.

The bill also provides corporate tax benefits, including the possibility of an additional reduction of the taxable base by 200% of the salary fund for professional employees, but not exceeding 50% of the total taxable base.

These measures are a continuation of the current IT sector support programs, which are set to expire at the end of 2024, and are aimed at the institutional development of the high-tech industry as one of the priority sectors of Armenia's economy.

Former Minister of Economy of Armenia Vahan Kerobyan recently reported a significant downturn in the country's IT sector. According to his statement on Facebook, the industry shrank by approximately 13% in the first half of this year.

Earlier, BMG reported that, according to a study by the consulting company Modex, the turnover of Armenia's IT sector in 2023 amounted to 837 billion drams ($2.12 billion), which is 252 billion drams (over $630 million) or 43% more than in 2022. Of this turnover, about 87% or 755 billion drams ($1.91 billion) was generated in foreign markets (i.e., exported), while 13% or 114 billion drams was realized in the domestic market.

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