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Tax Breaks Spur Armenian IT Startups


Armenia - An information technology center in Gyumri, 4Jun2016.
Armenia - An information technology center in Gyumri, 4Jun2016.

More than a hundred new information technology (IT) firms have been set up in Armenia since the government introduced tax breaks for them in January 2015, Prime Minister Hovik Abrahamian said on Friday.

Abrahamian said that the measure has thus given a further boost to Armenia’s burgeoning IT industry.

Under a government bill passed by the Armenian parliament in late 2014, startups employing up to 30 people can be exempt from profit tax until 2020. They are also eligible for a preferential income tax rate for their employees, equivalent to 10 percent of their gross wages. The minimum payroll tax rate in Armenia is set at 24.4 percent.

The tax breaks are granted on a case-by-case basis by a special commission comprising not only government officials but also representatives of the IT sector. Startups can apply for them by December 2017.

“I am very pleased to note that within one year 111 new companies have been created in the sector and 98 of them have qualified for the tax privileges, creating a total of 470 jobs,” Abrahamian told an annual IT forum in Yerevan.

Only 16 such firms were reportedly registered in 2014, suggesting that the tax breaks have indeed had a tangible impact on the sector. Deputy Economy Minister Emil Tarasian said in March that the government will likely ask the parliament to extend them.

IT is the fastest growing sector of Armenia’s economy, having expanded by an average of over 20 percent annually in the past decade. According to the Armenian Economy Ministry, around 15,000 people currently work for 400 or so IT firms operating in the country. The biggest of them are subsidiaries of U.S. software giants like Synopsis and National Instruments.

Government data put the sector’s combined revenue in 2015 at $550 million. The figure is equivalent to roughly 5 percent of Armenia’s Gross Domestic Product.

“In the field of information technology, Armenia now has a serious competitive edge both in the region and beyond it,” declared Abrahamian. He said his government will continue to support the sector’s further expansion.

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