Corporate Taxation


Corporate tax system


Armenian entities and foreign entities with permanent establishment in Armenia are subject to corporate income taxation. The standard rate is 20%. For investment funds the rate is 0.01% of net assets of the fund. Taxpayers engaged in designated activities including public catering, transportation activities, and auto repair shops are subject to presumptive taxation or license payments.


Companies must generally deduct withholding tax from dividends paid to foreign entities at a rate of 10%. A lower rate may apply under a particular tax treaty. Dividends derived by one Armenian entity from another are exempt from tax.


Resident corporate entities are defned as legal and business entities whose existence is established under Armenian law, whereas non-resident entities are those whose existence is established under foreign law. Resident entities are liable for payment of Armenian tax on their worldwide income. Foreign tax payments count as credit against Armenian tax liabilities, up to the amount of Armenian tax payable on the foreign income. However, non-resident entities are liable to Armenian tax only on income from sources in Armenia. In broad terms, income is considered to be sourced in Armenia if:

  • The income arises from activities performed or property located in Armenia; or
  • In the case of passive income (e.g., dividends, interest, and royalties), fnancial services and insurance services, the income is paid by a resident of Armenia.


There is no system of holding company taxation in Armenia. Members of a holding company must fle separate tax returns. There are no provisions to offset the losses of holding company members against the profts of another member.

Permanent establishments

The domestic defnition for a permanent establishment essentially adopts the defnition for permanent establishment found in the OECD Model Tax Convention. When a foreign company conducts business in Armenia through a permanent establishment and maintains separate accounting records for that permanent establishment, taxable income is determined on the same basis as for domestic entities. The law “On Proft Tax” indicates that a permanent establishment is taxable on dividends received from Armenian companies and may not carry forward losses, which differs from the treatment of domestic entities. However, it may be able to overcome this restriction under a relevant tax treaty.

If it is not possible to determine taxable proft based on the direct method (taxable income less deductible expenses), income is determined based on an agreed method between the taxpayer and the tax authorities. The law “On Proft Tax” explicitly recognizes the allocation method, whereby the taxpayer allocates a portion of its worldwide income and expenses to Armenia, as a possible approach.


Several tax incentives are available to enterprises operating in free economic zones created in the territory of Armenia. See more detailed information in the “Free Economic zones” chapter of this guide. Businessmen engaged in agricultural production are exempt from tax on that income.

Gross income

Accounting period

The reporting year for companies follows the calendar year.

Business profits

Taxable profts are defned to be the difference between a taxpayer’s gross income and deductible expenses. Gross income encompasses revenues received by a taxpayer from all economic activities, unless expressly exempted under the law. Deductible expenses encompass all necessary and documented expenses that are directly related to conducting business or earning proft, unless a specifc provision in the law restricts the deduction.

Accounting for income

Income should be recognized using the accrual method. Specifcally, income should be recognized when an unconditional right to receive the income exists, or when a taxpayer has fulflled all of the obligations for a transaction or contract; and income from services should be recognized when the provision of services is complete.

Exempt income

Dividends derived by one Armenian entity from another are exempt from tax.

Deductibility of expenses

Business expenses

Properly documented expenses that are legitimately incurred in the furtherance of a taxpayer's business activities should be deductible, unless a specifc provision in the law indicates otherwise.

Non-deductible expenses

The following items are not deductible for corporate income tax purposes:

  • Expenses that are not supported by relevant documents are not deductible
  • Undocumented expenses may be deducted in the amount of AMD 3 million per month and AMD 300 thousands per transaction
  • Undocumented expenses are subject to personal income tax at an 11% rate
  • Expenses incurred for advertising outside Armenia are limited to 3% of gross income or 20% of the value of services or goods exported from Armenia, whichever is greater
  • Training of staff outside Armenia is limited to the lesser of 4% of the gross income of the reporting year or AMD 3 million (approximately USD 7,690) per employee
  • Expenses for foreign trips are limited to 5% of the gross income of the reporting year
  • Representative expenses are limited to the lesser of 0.5% of the gross income of the reporting year or AMD 5 million (approximately USD 12,800)
  • Voluntary funded pension contributions made by employers for an employee are limited to 5% of salary of an employee.

Accounting for expenses

Expenses should be recognized on an accrual basis. Administrative and fnance costs are deducted in the year in which they are incurred.


Fixed assets must be depreciated using the straight-line method. The minimum periods for depreciating fixed assets can be found in Table 7. Land may not be depreciated. Intangible assets may be amortized using the straight-line method over the asset's useful economic life. If it is not possible to calculate the asset’s useful economic life, then the amortization period must be 10 years or more.

Table 7. The minimum periods for depreciating fixed assets

Description of assets Minimum depreciation period
Hotels, resorts, rest houses, educational institutions 10 years
Other industrial and commercial buildings, constructions and transmission devices 20 years
Robot equipment and assembly lines 3 years
Calculating devices and computers 1 year
Fixed assets with the value up to AMD 50,000 (approximately USD 135) 1 year
Industrial and commercial buildings, constructions and transmission
devices located in a designated disaster area (currently Gyumri)
1 year
Other fixed assets with the value exceeding AMD 50,000 5 years

Expenses on fixed assets

Expenses incurred in the repair and maintenance of a fxed asset are deductible, unless the expense improves the condition of the fxed asset. The deduction is limited to 10% of the cost of the asset. Any excess is capitalized and included in the base for depreciation purposes.


Interest will generally be deductible if the related debt is used to fund business activities of the taxpayer. The maximum deductible interest rate is capped at twice the offcial CBA rate, which is currently 24%. In addition to the existing cap (twice the Armenian Central Bank’s settlement rate), from January 2012 deductible interest expense within the tax year should not exceed:

  • Nine times the value of net assets of a taxpayer, if the interest is for debt contracted from banks and credit organizations, or
  • Twice the value of net assets of a taxpayer, if the interest is for debt contracted from other entities.

Foreign exchange

Realized foreign exchange gains and losses are taxable and deductible.

Bad and doubtful debts

Bad debts may be claimed as a deduction.

Royalties and services fees

Royalties and service fees are deductible payments


Lease payments on operating leases are deductible. The lessor can claim a deduction for depreciation of leased assets.

Financial leasing is treated for tax purposes as if a sale had been made. The lessee may include the value of the property in the relevant group of fxed assets and claim depreciation charges. The lessee may also deduct the interest and commission components of the lease payments in the period for which they are payable. Similarly, the lessor would recognize taxable income for the total principal amount of the lease at the time when the asset is transferred, and would recognize the interest and commission component of the payments over the term of the lease.

Employee remuneration

Employee remuneration is deductible.

Social security contributions

axable income is reduced by the amount of mandatory employee contributions for social security.

Other deductions

Expenses incurred on industrial research and for geological research related to the extraction of natural resources should be capitalized and amortized over their useful life, or over a minimum of 10 years if their useful life cannot be determined. Expenses for scientifc research, experiments, design and innovation activities in IT may be deducted at the time incurred. Charitable donations and contributions to non-proft organizations are deductible up to 0.25% of gross income. Armenian taxes, other than income tax, are generally deductible. Revenues and expenses are determined net of VAT.


Companies are entitled to carry forward losses for up to fve years.

Related party transactions

The law “On Proft Tax” permits tax authorities to adjust prices for tax purposes when the conditions of a transaction between a non-resident and another person differ from usual practice. The implementing rules have not yet been developed in detail, so the rule has limited application in practice.

Other taxes

Excise tax

Excise tax is payable on alcoholic beverages, tobacco products, petrol and diesel fuel, whether imported or produced domestically.

Land tax

Land tax is paid by landowners and the permanent or temporary users of state owned land. Tax on rented land is levied on the lessor. The land “cadastre” (valuation system) value is used to determine the value of the land. Land tax for agricultural lands is calculated at 15% of the net income established by the cadastral evaluation. For non-agricultural land, the rate is 0.5% to 1.0% of the cadastral value of the land.

Property tax

Property tax is assessed on buildings, motor vehicles and means of water transport. The tax base for buildings is cadastral value based on original cost and subsequent revaluations carried out every three years by the relevant state authority. The annual tax rate on public and industrial buildings is 0.3% of the property value.

Local taxes and duties

Land and property taxes are assessed by local authorities.

Holding companies

There is no provision permitting the pooling or consolidation of income and losses among a commonly owned company group. Dividend income received from another company is not subject to tax.

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