What You Need to Know about Armenia’s New Startup Laws


By Raffi Elliott

Special to the Mirror-Spectator and Abaka

YEREVAN — We are accustomed to complaining about anything that has to do with the Armenian government. So it is only natural that the Armenian government wasn’t listening to the country’s tech community and laws were not being updated to accommodate new business structures and labor environments. Nonetheless, it is finally happening: legislation is being drafted which will help propel the small, landlocked Caucasian nation into the technology startup big leagues.

In November 2015, the National Assembly released the details about a new law on technology startups which would make founding, operating, and growing a tech startup in Armenia much easier and simpler. The new legislation was adopted on December 14, 2014.

The government finally understood that supporting the tech sector, which accounts for $450 million a year, or five percent of the entire country’s GDP, can be immensely beneficial for a country with no ports, and two out of four borders closed to trade. In no small part, this was thanks to the constant lobbying efforts of the Union of Information Technology Enterprises (UITE), which closely cooperated with legislators. The government, UITE, and international partners have identified four main objectives in enacting this legislation: 1) increasing competitiveness in the industry; 2) empowering and training a well-paid skilled workforce; 3) providing capital for research and development; and 4) attracting direct foreign investment.

The new legislation applies to startups, technoparks, technology centers, incubators and accelerators, as well as educational and research organizations. Falling in one of these categories does not automatically lead to qualification for tax privileges, as the government requires applying for an additional special license. Companies have to be established and operating under the law on state support of the internet technology (IT) sphere, and their activities are limited through the third article of the same law.

Thus, in order to be eligible for this new program, a company would need to be involved in the technology sphere in one way or another. This could mean software and internet companies; consulting, computing systems, data mining, or hosting services; network administration or online media companies; and those that work in education and research in IT. Furthermore, the company must be newly established and independent. It also means that companies which are established branches of foreign entities also do not qualify.

Companies with more than thirty employees are excluded. Companies eligible for this new tax break cannot sell or otherwise transfer the results of their operations under the certificate to other residents or business entities of the Republic of Armenia that work in the IT sphere, except for educational purposes. The new law requires eligible companies to provide quarterly reports ensuring that the startup continues to meet the requirements.

Though Armenia is notorious for its bureaucratic antics, this procedure seems poised to be breaking that trend. All you need is the following: the application document (Arlis 312, 2015);

proof that your startup is a newly-established legal entity (your company should have been chartered no sooner than 3 months before the law passed to be eligible); a written description of the main directors; a written statement containing the names, office positions and contact information of your employees; a list of shareholders; and proof that the company is not a local branch of a foreign company.

As a side note, the law insists that board members must have a “clean” history. Applications will be accepted until the first of January 2017, and the tax benefits will last until 2020. In the last four months, almost 40 new companies, which had previously been working unofficially, have been registered, and the numbers continue to grow.

 

(Raffi Elliott is a Montreal-born entrepreneur and founder of the medical travel startup www.gettreated.com currently based in Yerevan. He frequently comments on socioeconomic and tech-related issues in Armenia.)