According to a study by the consulting firm Modex, there were 109,431 micro, small, and medium-sized enterprises (SMEs) operating in Armenia in 2023—an increase of 7,899 businesses, or 8%, compared to the previous year.
The research revealed that 70% of all SMEs in the country are concentrated in three key economic sectors. Half (50%) are engaged in wholesale and retail trade, 11% operate in manufacturing, and 9% are active in the information and communication sector.
Earlier, BMG reported that Armenia’s Ministry of Finance is planning a significant reform of SME taxation. Starting in July 2025, the ministry intends to shift certain professional activities to the VAT system, which could significantly impact the existing SME sector.
Currently, businesses with an annual turnover of up to $291,000 operate under a simplified taxation system, paying a turnover tax: 5% for commercial activities and 3.5% for production. This system, introduced in January 2020, covers small and medium-sized enterprises, individual entrepreneurs, and notaries.
However, studies by the Ministry of Finance have highlighted a substantial disparity in tax burdens between the general tax system and the turnover tax system. Specifically, in manufacturing, the combined tax burden from VAT and profit tax is twice that of the turnover tax.
Even more significant differences are observed in other sectors: in construction and trade, the tax burden is 2.6 times higher; in food service, it is three times higher; and in professional and scientific activities, it is 2.8 times greater.
