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The consumer

Consumer Profile
With a GDP per capita of USD 4,130 (IMF, 2021), the Armenian consumer is the poorest in the Caucasus. The average consumer is 36.6 years old (CIA World Factbook, 2020), which puts Armenia somewhere between Saint Kitts and Nevis and Curaçao in terms of median age. Nevertheless, the population is declining (a -0.25% natural growth rate, according to the CIA's latest data available, coupled with an emigration ratio of 1.7 migrants/1,000 population - United Nations, 2019) and the share of the young population in the age structure is lower than in most neighbouring countries (people aged between 0-24 years account for 30.27% of the population - CIA World Factbook, 2020 est.). The urbanisation rate (63.2% in 2019 - World Bank, latest data available) is higher than other Caucasian countries, but also lower than Iran and Turkey at the same time.
While the local population has a low purchasing power, members of the Armenian diaspora, that live in the US or Europe, regularly visit the country and contribute to retail sales, mostly by purchasing traditional items such as carpets, wine and jewellery.
Consumer Behaviour
After decades of fixed price policy under the Soviet Union, the Armenian consumer has been exposed to the realities of a free market economy. The Armenian consumer is very price-sensitive but is also eager to be able to choose between several products. Foreign goods and brand names are very attractive to such consumers. Almost one-third of Armenian residents live under the poverty threshold. Furthermore, food expenditure takes up an important part of private consumption as wages are relatively low (on average AMD 19,377 per month spending at USD 36.7 in 2019 - Statistical Committee of the Republic of Armenia, latest data available). The country's new tax code, which entered into force in January 2018, introduced new excise duties on fuel, tobacco and alcohol, as well as a higher income tax. This reform is likely to impact consumer spending throughout the year and has already faced backlash from consumers.
Consumers Associations
Armenian National Association of Consumers
 

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Importing & Distributing

Import Procedures
Armenia has adopted the EAEU harmonised tariffs and fully applies the requirements of its Customs Code. EAEU regulations now deal with trade in the integrated customs zone. Despite this effort in harmonisation, customs clearance remains one of the main issues for foreign companies working in the Armenian market. According to EAEU requirements customs clearance, as a general rule, should be performed in the jurisdiction of the respective participants in foreign economic operations. For example, goods transiting to Armenia and/or Kazakhstan from foreign suppliers through Russia are customs cleared at the EAEU’s external frontier in Russia. This is the same procedure for items entering Armenia and Kazakhstan destined for other countries within the EAEU. Armenia does not have a common border with and EAEU members, all goods must transit through Georgia, adding complications that are yet to be fully resolved.

A uniform rate of 10% applies to the majority of the imports (all exports from Armenia are duty-free). Some essential goods like foodstuffs, raw material and fuel are exempt from customs duties. Customs requires importers to present a customs declaration form with a commercial invoice indicating the specifications, quantity, and value of goods being imported. The State Customs Committee has implemented an online declaration process (Direct Trader Input or “DTI”) which reduces personal contact between customs officials and importers. Tobacco and alcoholic beverages require a certificate of quality issued by the national certification body, Armexpertiza.

Also, according to the Customs Code, no duties are levied on goods in the following categories:
- Transit shipments;
- Imports into a customs warehouse;
- Imports into a customs-free warehouse;
- Imports into a duty-free shop;
- Temporary import for inward processing;
- Temporary imports

For more information, please visit the website of the Customs Service of Armenia.
Distribution market players
Business activity is concentrated close to 80% in the capital city of Yerevan (AT Kearney). Most imported products and services are managed by agents and distributors. Most businesses in Armenia are relatively small and family-owned, although there are some notable exceptions, including several major local and European supermarket chains (Carrefour opened its first hypermarket in 2014) and some department stores. Large companies representing several brands often have their own distribution hubs based in Yerevan.
The main actors of the food distribution are:
- Artashat Cannery (29% market share)
- Euroterm (27% market share)
- Ararat Food Factory (14% market share)
- Nicola International (11% market share)
- Sis Natural (11% market share)

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Operating a Business

Type of companies

Joint-Stock Company
Number of partners: Minimum 3 shareholders.The number of shareholders is not limited when it is an open joint-stock company while in case of a closed joint-stock company the total number of shareholders should not be more than 49.
Capital (max/min): No mandatory minimum capital requirement.
Shareholders and liability: The participants in a joint-stock company are not liable for its obligations and bear the risk of losses connected with the activity within the limits of the value of the shares of stock belonging to them.
Limited Liability Company
Number of partners: Minimum one.
Capital (max/min): No mandatory minimum capital requirement.
Shareholders and liability: The liability of its owners is limited to the initial investment.
General partnership
Number of partners: 2 or more partners.
Capital (max/min): 50,000 AMD.
Shareholders and liability: The partners jointly bear liability with all their property for the obligations of the partnership.
Limited partnership
Number of partners: 2 or more partners.
Capital (max/min): There is no minimum share capital required but share value is fixed by the Civil Code.
Shareholders and liability: Unlimited incase of full partnership, and limited (restricted to the amount of the partner's contribution in the partnership) in case of limited partnership.
 
Setting Up a Company Armenia Eastern Europe & Central Asia
Procedures (number) 3.0 5.3
Time (days) 4.0 11.8

Source: Doing Business - Latest available data.

 

Cost of Labour

Minimum Wage
In 2020, the net minimum wage was AMD 68,000 per month according to the data from the IMF Armenia Office.
Average Wage
In 2021, the average monthly nominal wage is AMD 192,459 according to the Statistical Committee of the Republic of Armenia.
Social Contributions
Social Security Contributions Paid By Employers: None
Social Security Contributions Paid By Employees: For the year 2021: if the monthly gross salary is less than AMD 500,000, the employee's contribution is 3.5% of the amount, and if the monthly gross salary is greater than AMD 500,000, the employee's contribution is 10% of the amount minus AMD 32,500.
 

Intellectual Property

National Organisations
The authority protecting the intellectual rights in Armenia is called Intellectual Property Agency. It was established in March 2002 and works under the Ministry of Trade and Economic Development.
Regional Organisations
Armenia has signed regional and international agreements in terms of intellectual property such as the Paris Convention for the Protection of Industrial Property, the Eurasian Patent Organization, the Wipo Copyright treaty, among others.
 

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Tax Rates

Consumption Taxes

Nature of the Tax
Avelacvats arzheqi hark (AAH) - Value-Added Tax (VAT)
Tax Rate
20%
Reduced Tax Rate
Exempt supplies include: certain educational services, books, supply of services related to the care of children, newspapers and magazines, pension insurance, insurance and reinsurance, supply of financial services by banks, persons participating in securities’ markets, payment and settlement organizations and lending organizations, casinos, gambling, etc.
Zero-rated items include: exports, international transportation and related services (goods, maintenance, etc.), goods in transit, goods for the official use of diplomatic representations, transactions on the delivery of services by a telecommunication operator or postal communication operator, etc.
The turnover tax, which varies between 1.5% and 20%, replaces VAT for the goods and services provided by SMEs (turnover up to AMD 115 million).
Other Consumption Taxes
Excise tax is levied on the import of spirits, beer, wine, tobacco substitutes, crude oil, gas (except compressed natural gas), petroleum and diesel fuel.
A tax applies on motor vehicles and means of water transport, according to the number of seats and horsepower. The annual property tax on motorcycles is calculated at the rate of AMD 40 for each horsepower of the tax base. The annual rate of property tax on watercraft is calculated at AMD 150 for each horsepower of the tax base. Beginning from the fourth year after the year of production, the tax base for motor vehicles and means of water transport is reduced by 10% per year, up to a maximum reduction of 50%.
 

Corporate Taxes

Company Tax
18%
Tax Rate For Foreign Companies
Residents are subject to tax on worldwide income whereas non-residents are only taxed on their Armenian-sourced income. An individual is considered resident for tax purposes if they spend more than 183 days in Armenia per year or if their centre of vital interests is in Armenia.
Capital Gains Taxation
Capital gains are taxed at the ordinary corporate income tax rate of 18%. Non-residents are taxable on the realised capital gains from the increase of the value of the assets located in Armenia.
Capital gains derived by a non-resident firm from the sale of securities are exempt.
Main Allowable Deductions and Tax Credits
Documented expenses incurred in the course of business activities are generally deductible.
Depreciation of tangible and intangible assets is tax-deductible (except for land). Goodwill cannot be amortised for tax purposes.
Start-up and interest expenses are generally tax-deductible. The portion of interest exceeding the double of the settlement rate fixed by the Central Bank of Armenia on December 31st of the taxation year is not deductible (the current rate is 24%). Rental payments and bad debts are also deductible. Receivables that are not collected between 91 and 180 days after their cut-off date are deductible by 25%. The rate is 50% for outstanding debts between 181 and 270 days after the cut-off date and 75% between 271 and 365 days. Debt deductibility is capped at AMD 100,000. Larger claims must be settled through the legal process.
Donations to charitable organisations are deductible up to 0.25% of gross income. Expenses for business trips outside Armenia are limited to 5% of the gross income of the tax year. Representative expenses are limited to 0.5% of the gross income of the reporting year or AMD 5 million, whichever is lower.
Commercial fines are tax-deductible, as opposed to those paid to municipal or national authorities. Non-refundable taxes are deductible.
Certain IT companies as well as income from agricultural activities and tapestry are exempt from corporation tax.
Tax losses can be carried forward up to five years. The carryback of losses is not permitted.
Other Corporate Taxes
Employers are not required to contribute to social security. Nonetheless, they are required to withhold social contributions from the monthly employment income according to progressive rates.
SMEs are subject to a turnover tax that replaces VAT and corporation tax. Rates vary between 3.5% (a reduced rate of 1.5% applies to the sale of secondary raw materials and newspapers by publishing companies) and 25% depending on the type of income and apply to any SME with an annual turnover below AMD 115 million.
Starting from 1 January 2021 the tax on immovable property and vehicle property came into force and replaced the law on property tax and land tax have lost its force. The immovable property tax is assessed and collected at the municipal level on the buildings, lands and its improvements. The value of the land is determined according to the land cadaster. Tax on land tax for agricultural land is calculated at 15% of the net income determined by the cadastral evaluation (in case of nor non-agricultural land, the rate is 0.25% to 1.0% of the cadastral value). Cadastral value should be assessed based on the value closed to the market value.
The taxes on vehicles depend on the number of seats and horsepower.
Other Domestic Resources
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
See the list of the tax conventions signed by Armenia (Tax Service of the Republic of Armenia)
Withholding Taxes
Dividends: 0% (resident companies)/5% (dividends attributable to 2020 or after)/10% (dividends attributable to 2019 or before), Interest: 0% (resident companies)/10% (individuals and non-resident companies), Royalties; 0% (resident companies)/10% (individuals and non-resident companies).

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