A Guide to Tax Optimization for Small Businesses in Armenia

This guide will cover the most common tax regimes for small businesses in Armenia: Micro-enterprise and Turnover Tax.

1. Micro-enterprise: What it is and who it's for

The micro-enterprise system is one of the most effective and simple tax regimes for small businesses. It was created specifically for individual entrepreneurs and organizations with low turnover.

Main condition: The turnover for the given year must not exceed 24 million AMD.

Tax rate: Micro-enterprises are exempt from all types of taxes (profit tax, VAT, turnover tax), with the exception of:

• Income tax for salaried employees (20%),
• Stamp duty for employees (as per the law).

Important: Despite the tax exemption, it is mandatory to keep records of income and expenses and submit an annual report.

Who is it beneficial for? The micro-enterprise system is ideal for businesses with an annual income of up to 24 million AMD. For example, small shops, workshops, freelancers, beauty salons, and similar businesses.

2. Turnover Tax: For businesses in transition and growth

The turnover tax regime is suitable for businesses whose annual turnover exceeds 24 million AMD but has not yet reached the VAT threshold (115 million AMD).

Main condition: The annual turnover should be between 24 and 115 million AMD.

Tax rates:

• 5% for trade and production sectors.
• 1.5% for certain other sectors (e.g., sale of agricultural products).
• 4% for notarial services.
• 6% for other service sectors.
• 5% for rental income.

Important: Businesses paying turnover tax are also exempt from profit tax and VAT, but are required to pay income tax and social contributions for their employees.

Who is it beneficial for? This regime is suitable for growing businesses whose turnover has already surpassed the micro-enterprise threshold but are not yet ready to transition to the more complex VAT system.

How to Optimize and Save

1. Make the right choice from the start: When registering your business, it is essential to choose the correct tax regime based on your projected turnover.
2. Transition in time: If your business is growing and its turnover is approaching the micro-enterprise threshold, you must transition to the turnover tax field in a timely manner. This will help you avoid fines and unwanted consequences.
3. Seek consultation: Despite the simplicity of this guide, it's always recommended to consult with a professional, an accountant or a tax advisor. They can assess your specific situation and provide the most effective advice.

Details on tax legislation can be found on the official website of the State Revenue Committee of the Republic of Armenia at petekamutner.am.

This is a simplified guide to the tax system. Every case has its nuances, and a correct assessment of them is key to your business's success.