The Armenian government on Thursday moved to offer small information technology (IT) companies significant tax breaks which it hopes will give a further boost to one of the most dynamic sectors of Armenia’s economy.
The government approved a package of draft legal amendments that would exempt newly established IT firms employing up to 15 people from profit tax for three years. The bill also envisages a preferential income tax rate for their employees, equivalent to 10 percent of their gross wages. The minimum payroll tax rate in Armenia is currently set at 24.4 percent.
Presenting the bill that will almost certainly be passed by parliament, Economy Minister Vahram Avanesian said the government expects that between 40 and 60 IT startups will emerge each year thanks to the tax breaks. He said they will also encourage foreign software and microchip design companies already present in Armenia to register their subsidiaries with local tax authorities.
Prime Minister Tigran Sarkisian also stressed the importance of the proposed incentives for Armenia’s burgeoning IT industry. “In terms its development, the IT sector has reached a point where new and qualitative changes are needed so that Armenia can occupy a special place on the world IT map with its comparative advantages and specificities,” he said at a weekly session of his cabinet.
Sarkisian promised government support for the sector when he touted its rapid expansion at a conference held in Yerevan last October. He said IT firms have become “comparable” to Armenia’s export-oriented mining enterprises in terms of output and workforce involved.
There are currently some 300 such firms employing between 7,000 and 10,000 engineers. According to government data, the sector grew by an average of 23 percent annually from 2008-2012. Its combined output was worth around $244 million in 2012.
Earlier in 2013, Sarkisian and Russian Transport Minister Maxim Sokolov inaugurated Armenia’s first-ever tax-free business zone created for high hi-tech manufacturing companies. It is located in the premises of an electronics plant and a research institute in Yerevan run by a Russian company.
A U.S.-Armenian joint venture, Armtab Technologies, became in December one of the first companies allowed by the Armenian government to operate in the tax haven. Armtab plans to start assembling tablet computers there this year.