New Benefits for the IT Sector in Armenia

In Brief

• 60% personal income tax refund for specialists hired from abroad
• 60% personal income tax refund for newly hired employees in the IT sector
• 50% reimbursement of employee training costs
• 1% turnover tax for eligible IT companies
• Additional corporate income tax deductions and R&D incentives

Background

Previously, Armenia offered two major IT tax incentives: a 0% corporate income tax rate and a reduced 10% personal income tax instead of 20%. These benefits expired at the end of 2023. To qualify, companies had to obtain an IT Certificate and employ no more than 30 people.

In 2024, only the 10% personal income tax benefit was extended, and only for one year.

The New Incentives

The first measure targets specialists relocating from abroad. Companies can receive a 60% refund of the personal income tax paid on the salaries of foreign employees to encourage the attraction of qualified international talent.

Important notes:

• The incentive does not apply if the employee holds both Armenian and another country’s citizenship.
• In 2025, the refund is paid to the employer; from 2026, it will be replaced with direct payments to employees.

The second measure supports the hiring of new employees in the IT sector. Companies can receive a 60% refund of the personal income tax paid for newly hired staff, helping them expand their workforce.

Companies that invest in employee training can receive a 50% reimbursement of the personal income tax paid, calculated on a quarterly basis.

The turnover tax rate for eligible IT companies will be reduced from 5% to 1%. This regime applies to companies and sole proprietors with annual turnover below AMD 115 million, replacing VAT and corporate income tax.

Important note:
If an IT company using the turnover tax regime provides services to a business operating under the general taxation regime, the customer cannot deduct those expenses when calculating corporate income tax.

For Companies Engaged in Research and Development

• Personal income tax reduced to 10%
• Accelerated depreciation of assets, potentially within one year
• Small companies (up to 50 employees and suppliers) may recognize targeted funding as income only when the related asset costs become deductible
• R&D expenses can be deducted from taxable income in the same year they are incurred, regardless of whether the work is performed internally or outsourced
• Companies may claim an additional deduction equal to 200% of researchers’ salaries when calculating corporate income tax

In practice, these measures can reduce the effective corporate income tax burden for many large companies from 18% to approximately 9%.

Read more here.