EY Armernia Tax Alert March 2025

Effective from 1 January 2025, a series of amendments to the Tax Code of the Republic of Armenia were implemented, providing tax incentives to entities engaged in the high-tech sector and those involved in scientific research and experimental development (the “taxpayers”), with these benefits set to remain in effect until 31 December 2031.

Certain provisions of these amendments apply to relationships that arose from 1 January 2024.

This Alert provides a summary of the key points that the taxpayers¹ impacted by these changes should take into consideration.

CORPORATE INCOME TAX

1.  Applicable to the taxpayers engaged in high-tech sector activities : 

Effective from the 2024 tax year, the taxpayers within this category may apply an additional deduction of 200% of salaries and other payments equivalent thereto (the “salary”) of certain employees subject to the following conditions:

• At least 90% of the taxpayer’s income for the tax year must be derived exclusively from the activities included in the Government-approved list of high-tech sector activities.
• The additional deduction is computed on the basis of the salary calculated for professional services performed by employees engaged in the professions included in the Government-approved list of high-tech sector activities (excluding foreign nationals without the right of residence (residency status) in Armenia and individuals without citizenship).
• The additional deduction of 200% of salary amount may be applied irrespective of whether the salary is deducted from gross income, provided that the additional deduction does not exceed 50% of the corporate income tax base (excluding the additional deductions specified in this paragraph and the one that follows).

2. Applicable to the taxpayers engaged in scientific research and experimental development : 

Effective from the 2024 tax year, the taxpayers within this category may apply an additional deduction of 200% of the salary of certain employees subject to the following conditions:

• The taxpayer is engaged in scientific research and experimental development activities that conform to the standards defined by the Government and have received a positive evaluation from a professional committee (the “professional committee”) that recognizes the activities as scientific research and experimental development.
• The additional deduction is computed on the basis of the salary calculated for professional services performed by employees engaged in the professions included in the Government-approved list of high-tech sector activities (excluding foreign nationals without the right of residence (residency status) in Armenia and individuals without citizenship).
• The additional deduction of 200% of the salary amount may be applied irrespective of whether the salary is deducted from gross income, provided that the additional deduction does not exceed 50% of the corporate income tax base (excluding the additional deductions specified in this paragraph and the one that precedes).
• The restriction for the deduction not to exceed 50% of the corporate income tax base does not apply to the taxpayers who derive at least 90% of income for the tax year from exclusively scientific research and experimental development activities.

PERSONAL INCOME TAX

Applicable to the taxpayers engaged in scientific research and experimental development : 

Effective from the 2024 tax year, the taxpayers within this category will have the opportunity to apply a 10% personal income tax rate on the salary of certain employees, instead of the 20% rate, subject to the following conditions:

• The taxpayer is involved in scientific research and experimental development activities that conform to the standards defined by the Government and have received a positive evaluation from the professional committee.
• The taxpayer has submitted an application in accordance with the procedure and deadlines established by the decision to the Higher Education and Science Committee of the RA Ministry of Education, Science, Culture and Sports.
• The 10% personal income tax rate is applied to the salary of employees engaged in the professions included in the Government-approved list of high-tech sector activities (excluding foreign nationals without the right of residence (residency status) in Armenia and individuals without citizenship).

¹ This Alert applies solely to resident taxpayers operating under the general taxation system.