EY Armenia Tax alert on Adoption of Law on State Support for the High-Tech Sector Effective January 2025

Facts

On 4 December 2024, the National Assembly of the Republic of Armenia adopted Law No. HO-498-N On State Support for the High-Tech Sector, which defines the main principles of state support for the high-tech sector and aims to:

1. Increase competitiveness in the high-tech sector,
   
   
2. Attract new workforce.
   
   
3. Continuously improve the employees’ skills,
   
   
4. Strengthen the position of Armenia as an exporter of high-tech products.

The following entities can apply for state support if their high-tech sector operations generate at least 90% of their turnover from all types of activities (defined by the Government) declared in their VAT and/or turnover tax calculations during the reporting period (quarter):

1. Commercial organizations with state registration in the Republic of Armenia,
   
   
2. Individual entrepreneurs registered in the Republic of Armenia.

The state support is provided to the entities for:

1. Labor Migrants: Foreign citizens or persons without citizenship who have the legal right to work in Armenia and perform professional work as employees of the entity. The state support provided to the entity is calculated as 60% of the personal income tax on the remuneration of the labor migrant (including those working under civil law contracts). This state support becomes effective as of 1 January 2025 and remains in force until 31 December 2025.
   
   
2. New Employees: To engage individuals entering the high-tech sector for the first time and performing professional work as employees. The state support provided to the entity is calculated as 60% of the personal income tax on the remuneration of the new employee (including those working under civil law contracts). This state support becomes effective as of 1 January 2025 and remains in force until 31 December 2031. It is important to note that state support for new employees is provided for three calendar years from the date of their first professional employment.
   
   
3. Preparation and Training: Preparation and training of personnel performing professional work necessary for performing the activities based on the classifiers of economic activity subject to state support as defined by the Government. The state support provided to the entity is calculated as 50% of the personal income tax for the reporting period on the remuneration of the employee (including those working under civil law contracts) performing professional service who passed the training. This state support becomes effective as of 1 January 2025 and remains in force until 31 December 2031.

The state support is provided to:

1. Labor Migrants (including those working under civil law contracts) employed by the entities engaged in the activities defined by the classifiers of economic activity subject to state support as defined by the Government: State support provided to the labor migrant is calculated as 60% of the personal income tax on their remuneration. This state support becomes effective as of 1 January 2026 and remains in force until 31 December 2031.

The total state support provided for the reporting period under the above provisions cannot exceed 50% of the total personal income tax calculated on the remuneration of all employees (including those working under civil law contracts) of the entity for the same reporting period.

The state support procedures are defined by the Government.

Organizations or individual entrepreneurs operating under the turnover tax system can continue to benefit from the state support after the expiry of the third calendar year following the calendar year in which they started receiving the state support, if they operate under the general taxation system.

Who’s affected:

• Commercial organizations registered in the Republic Armenia and engaged in Government-defined high-tech activities
• Individual entrepreneurs registered in the Republic Armenia and engaged in Government-defined high-tech activities
• Labor migrants
• New employees entering the high-tech sector

How EY can help?

• Eligibility assessment and advice to the taxpayers under the new criteria
• Application support
• Ongoing monitoring and support

*Disclaimer: This material is provided for informational purposes only and may not encompass all major and significant points related to the application. It is not intended to be construed as advice or a comprehensive guide. For thorough understanding and proper application of the information, we strongly advise you to contact us directly. 

Contacts

For additional information, please contact:

Kamo Karapetyan | Partner | Head of Tax Practice at EY in Armenia
EY Armenia
Vazgen Sargsyan 2, Kamar Business Center, 0010, Yerevan, Armenia
Office: +374 (60) 50 7777
Mobile: +374 (99) 88 67 00
Kamo.Karapetyan@am.ey.com

Mikayel Arzumanyan | Manager | Tax & Law
EY Armenia
Vazgen Sargsyan 2, Kamar Business Center, 0010, Yerevan, Armenia
Office: +374 (60) 50 7777
Mobile: +374 (44) 80 80 05
Mikayel.Arzumanyan@am.ey.com