ARMENIA Trends and Developments Contributed by: Mesrop Manukyan, Anahit Sargsyan, Maria Petrosyan and Ani Avetikyan, MB Legal
The designated autonomous body for cybersecurity has the authority to monitor standards and conduct audits. Entering the Armenian market now involves adherence to high-level digital safety protocols designed to enhance national economic resilience. Businesses are encouraged to develop internal cyber - security regulations that align with international ISO standards. This proactive approach to digital safety is a vital consideration for any enterprise relying on modern digital infrastructure in the region. The High-Tech Sector: A Fiscal Environment Built to Compete Armenia has been building its technology sector credentials for years, but a new package of incen - tives represents a qualitative step change. The Law on State Support for the High-Tech Sector, effective from 1 January 2025, introduced a suite of competi - tive incentives. This framework is structured around a new High-Tech Registry that identifies eligible busi - nesses and entrepreneurs. In our view, the resulting fiscal regime is now one of the most competitive for technology businesses anywhere in the region – and one that merits serious attention from international investors evaluating technology hub locations. International companies considering establishing technology centres or R&D functions in Armenia can benefit from substantial state support. For example, the state provides support equal to 60% of the cal - culated income tax for new employees and migrant workers – a meaningful subsidy that directly reduces the cost of scaling a local team. When combined with Armenia’s competitive local labour costs and a well- educated technical workforce, this creates a compel - ling commercial case for software development and engineering operations that goes beyond tax efficien - cy alone. A particularly significant feature of the current regime is the “super deduction” incentive for research and development. Article 123 of the Tax Code allows companies to deduct 200% of salaries paid to staff involved in R&D and specialised high-tech profession - al work from their taxable base. In practice, this means that for every AMD spent on qualifying R&D salaries, companies receive twice the deduction against corpo - rate income tax – effectively the state co-funding inno -
vation activity. For technology-intensive businesses, this is not a marginal benefit: it can materially alter the economics of locating R&D functions in Armenia versus higher-cost jurisdictions. Companies should, however, note that the list of qualifying job positions and activities remains subject to government approv - al, and careful structuring will be essential to ensure eligibility. The high-tech registry also facilitates tracking of sectoral growth and investment levels for future policy development. Registered entities are eligible for specific exemptions and support running until 31 December 2031 – a seven-year horizon that provides the legislative predictability capital-heavy technology projects require. We anticipate that this long-term commitment, combined with Armenia’s EU accession trajectory, will accelerate interest from European and international technology firms seeking a stable, well- regulated, and fiscally attractive base in the South Caucasus. Labour Market Transformation: Digitalisation and Contracts Armenia is modernising its labour market by pass - ing a significant compliance threshold regarding how employment is documented. From 1 January 2027, all employment contracts in Armenia must be exe - cuted through a digital system using an electronic digital signature. This requirement also applies to any amendments or terminations of existing employment relationships. This shift reflects a broader trend of digitalisation aimed at improving the efficiency of the domestic labour market. The mandatory use of the digital system for employ - ment contracts with foreigners is set to follow, with a full implementation target in July 2027. This digital platform will streamline the tracking of legal residency and work permissions for foreign staff. It is intended to reduce administrative burdens for both employers and the state migration services. Businesses must now ensure they have the necessary electronic sig - natures and system access to remain compliant with the Labour Code. The Labour Code has also been updated to provide clearer protections for vulnerable workers and clarify
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