State support in the sphere of IT in the Republic of Armenia
The overall IT market in the Republic of Armenia has recently received a significant development and now it remains one of the most promising directions for the RA economy. The Government of the Republic of Armenia attaches great importance to the development of information technology, as it contributes to the revitalization of businesses and attracts new and foreign investments to the RA. As a result of reforms in the sphere of information technologies in the RA, dated December 17th, 2014, The National Assembly of the Republic of Armenia adopted the Law “On the information technology assistance.” This law is designed to regulate the procedure in detail, activities in the field of information technologies, as well as, to provide participants with certain privileges in this sphere.
The context of the Law on Information Technology is defined as, all kinds of technologies used in computer-based, particularly, information systems software, maintenance or management, as well as, information in all formats, that is used to create, change, store, protect, handle, transmit and to receive data securely, including moving and stationary images in all image formats.
According to the law, the following activities may be subject to State support:
- The software;
- Any consulting activity in the field of computer technology;
- The management activities of computer systems;
- Data processing, hosting information on network(s) and related activities;
- Any activities related to web portals;
- The implementation of educational and research program(s) in the field of information technology.
In order to qualify to receive assistance from the State, IT businesses must comply with certain requirements. In the RA IT assistance is given to following business entities; entities engaged in activities on the introduction of innovative and advanced technologies; entities involved in educational and research programs in the field of information technologies, and business structures that promote development in the sphere of information technologies in the RA.
The State assistance is given in the form of encouraging financial environments for start-ups, creating environments that are conductive to growth, attracting investment and encouraging foreign economic activity. To this end, the Government of the RA has a designated authorized body that develops a financial incentives program approved by the Government. In addition, some entities may enjoy tax benefits if they have been certified as tax-exempt via established procedures. In the Republic of Armenian, the IT industry activities are registered in the administrative register of information technology, which is maintained by a specially authorized state body.
Certified and/or licensed entities must comply with certain requirements:
- Their certification must pass voluntarily;
- They must be created solely for the purpose of; software creation, advisory activities in the field of computer technology, operations management of the computer systems, development of data, placement of information in the network(s), as well as, related activities for the web portal(s), related activities with the implementation of educational and research programs;
- They must not be created as a result of the reorganization of a business entity and not be a subsidiary of another business entity;
- The number of employees cannot exceed 30 (thirty) persons;
- They cannot alienate residents of the RA operating in the IT sector, the results of the activities mentioned in the second paragraph, with the exception of the implementation of educational programs.
Any disposal of fixed assets in the validity of the given certificate(s), as well as, an opinion on the conduct of the joint venture agreement is not included in the activities noted in the second paragraph. The certificate(s) are provided by the Certification Board, which consists of five members. The Certification Board is the body reviewing and considering the application for tax exemption certificates and is the one, that makes decisions about their granting, amendment or refusal.
The closing date for receiving applications to obtain a tax exemption certificate or certificate of benefits in the field of IT is the 1stof December 2017. Tax exemption certificates are valid until the 1st of January 2020.
Taxation of information technologies in the Republic of Armenia:
As for existing taxes in the field of information technology, the legislator of the RA established a zero rate of income tax for businesses, excluding income derived from a commercial realization of information technology. Certified tax agent IE: the employer, within the certificate validity period shall calculate income tax on employees’ wages at the rate of (ten) 10%. Certified persons are obliged to provide reports on their activities every six months, by each 20th of each month following the half year reporting to the Board.
In case of conformity of the IT sector with all the requirements of the law, they must apply to the authorized body for the acquisition of a certificate no later than three months from the date of registration. They will need to provide the following:
- The application;
- The state registration number of legal entity;
- The full description and direction of their activities;
- A written statement explaining that in the period of use of the benefits, the applicant agrees to only be permitted to engage in activities of this law as described above;
- A written statement certifying that the establishment of the new IT business entity is not grounds for liquidation or reorganization of another business entity and that it is not a subsidiary of any company; data on the direct, or indirect participation of persons in the authorized capital of the applicant;
- Information about the number of employees and their data.
Thus, the Republic of Armenia has created favorable conditions for the effective operation and development of the IT sector. Those businesses that wish to expand their activities in the field of information technology in the territory of the Republic of Armenia, may contact ‘Vardan Khechyan LLC’ where they will find help with resolving any legal technicalities of the case.