Incorporating in Armenia

Laws

Armenia enacted investor friendly incorporation laws which have been regularly amended. The main act regulating most of the aspects of corporate formation and activities is the Law on Corporations dating from 2001. Armenian law provides for fast incorporation, low maintenance fees and use of corporate form to engage in any legitimate business, such as investing, trading, and property holding. Unlike foreign natural persons, corporations are allowed to own interest in land.

Limited Liability 

Armenian corporations enjoy limited liability and are not responsible for debts of their shareholders. Shareholders, in their turn, are not responsible for debts of the corporation, and the doctrine of corporate veil piercing is not applicable in Armenia.

Formation 

A corporation is formed by filing a statute (articles of incorporation) with the State Registry. Armenian law provides for same day company incorporation and the whole process can take as little as 30 minutes. Moreover, it is possible to submit all necessary documents online. It is therefore not necessary for incorporators to come to Armenia as long as they have a local agent in Armenia or a proper e-signature certificate. Articles of incorporation must be filed in Armenian but the use of parallel languages is not restricted. A single shareholder is sufficient to create a corporation. It is not necessary for a corporation to have directors but it must have an executive officer who can be the shareholder himself. Shareholders and the executive officer can be corporate entities. The corporation must maintain a registered office (legal address) in Armenia but no local secretaries are required. The corporation's life can be specified in the articles of incorporation. Armenia is party to the Apostille convention and incorporation documents are eligible for an apostille. Registration fees do not depend on the value of share capital and amount to approximately $45. Armenian law does not recognize migration of domicile.

Trade Name 

Trade names are registered in Armenian but it is lawful to use their translations into other languages. Corporations are required by law to use endings stating the limited liability. Trade names shall not contain words like "bank" or "insurance," unless the corporation has a proper license. Words "Armenia" or "Armenian" can be used only after a formal authorization by the Government is granted. It is possible to check the availability of names online.

Share Capital Requirements 

Corporations may issue shares in variety of forms and classifications: preferential or common, voting or non-voting. Bearer shares and no par value shares are not authorized. There are no minimum or maximum limits on the amount of share capital. Share capital can be paid in Armenian currency or by transferring other non-cash assets. Share register must be kept and maintained by a licensed registry other than the corporation.

Privacy and Confidentiality 

Nominal shareholders are allowed, and particulars of beneficial or nominal shareholders and directors are not part of public record. However, articles of incorporation, information on executive officer, local address and share capital are available to public.

Maintenance and Administration 

A corporation must at least have an executive officer. Company staff, local directors and secretaries are not required. The executive officer and directors can be corporate entities. Officers, directors and employees can be foreign citizens and residents of any country. Registration fees are paid only once, and no annual fees are payable to the Registry. Books and records must be maintained but there are no requirements for filing them with the Registry, except for amendments to articles of incorporation and changes of executive officers. There are no requirements for annual audits. Annual meetings can be anywhere in the world, and shareholder can be represented by proxies.

Taxation 

Entities incorporated in Armenia are taxed on their worldwide income, and the standard corporate tax rate is 20%. Foreign tax credits are available. Incomes and expenses are recognized on accrual basis. As a general rule, dividends are exempted from taxation.

Court System in Armenia

Armenian judicial system has undergone various reforms in recent years and currently comprises four tiers:

• First instance courts
• Courts of Appeal
• Court of Cassation
• Constitutional Court

The first tier is represented by two types of courts: courts of general jurisdiction and the Administrative Court. The latter has jurisdiction primarily over cases involving public authorities, including tax and customs services, whether they act as respondents or plaintiffs. 

Cases not subject to the special administrative jurisdiction, including civil and criminal cases, are tried by the courts of general jurisdiction, irrespective of the amount involved.

The second tier consists of three intermediate-level appellate courts: the Civil Court of Appeals, the Criminal Court of Appeals and the Administrative Court of Appeals. The former two adjudicate appeals against decisions of the courts of general jurisdiction in civil and criminal cases respectively, while the latter hears appeals brought against decisions of the Administrative Court.

The Court of Cassation is the main court of last resort, which hears appeals for cassation against decision of all three courts of appeal and is responsible for ensuring the uniform interpretation and implementation of law by stating legally binding precedents. It examines only matters of law and does not try facts.

The Constitutional Court is specifically charged with constitutional review and can declare immediately ineffective acts of Parliament if they are not compatible with the Constitution. A constitutional appeal can be brought only after all other remedies are exhausted and only if violations of constitutional rights are alleged.
Judges use three procedural codes: the code of civil procedure, the code of criminal procedure and the code of administrative procedure. Cases are adjudicated by one judge in the first instance courts, by three judges in the courts of appeal and by at least six judges in the Court of Cassation. There are nine seats on the Constitutional Court.

There are no jury trials in Armenia, and facts are tried by professional judges. Proceedings are adversarial in nature, and the right to cross-examination in guaranteed. However, judges are entitled, and sometimes required, to act of their own motion in order to establish the truth. Proceedings are conducted in Armenian language and, with several exceptions, are open to public.

Interpretations of law by the Court of Cassation are legally binding upon lower courts. Opinions and findings of lower courts are not binding but must be taken into account as persuasive authority.

Provisions on alternative dispute resolution are primarily contained in the Law on Commercial Arbitration based on the UNCITRAL Model-Law and the Law on Financial System Mediator aimed at protection of consumers of financial services.

Penalties for Illegal Business Toughened

Penalties for illegal entrepreneurship were increased by amendments to the Law on Taxes effective from January 1, 2012. Conducting business activities without registering with tax authorities is henceforth punishable by a fine of 50% of the sales turnover (gross income) but not less than 200,000 drams (approx. $513). Penalties are doubled if the violation reoccurs within one year.

Where business is subject to licensing, failure to obtain such license is punishable by a fine of ten times the amount of the state duty payable for the license in question but not less than 500,000 drams (approx. $1,280). Here again, penalties are doubled if the violation reoccurs within one year. In addition, damages in the amount of the state duty are recoverable.

Parliament Rejected Bill Restricting Cash Payments

The Parliament rejected a draft bill, which sought to extend restrictions on cash operation to natural persons. The bill was introduced by the Government with a view to combat tax evasion. Its provisions would prohibit cash payments in excess of 3 million drams (approx. $7,700), including payments for real estate transactions. Currently such restrictions are imposed only on business by virtue of the Law on Cash Operations.

Chain Stores to Be Restricted in Number

The Government introduced a draft bill seeking to restrict the number or supermarkets in Yerevan and other regions. The bill is aimed at protecting interests of small and medium traders and makes building new supermarkets contingent upon authorization by municipal authorities. Representatives of chains consider the bill to be premature given the relatively small share of supermarkets in the trade volume (10-15%).

E-Registration of Real Property Rights

The Government passed a resolution requiring the Real Property Registry to accept online applications for registration of property rights. Application files need to be submitted at the official website of the Registry (www.cadastre.am) and authenticated with a digital signature. The resolution is aimed at implementing article 26 of the recently amended Law on State Registration of Property Rights, which provides for an electronic application system to operate parallel to the paper application system.

In order to improve the affordability of digital signature certificates the Government will provide a $27,000 subsidy, which is expected to reduce the price of a digital signature certificate from $34 to $9.

Tax Exemptions for Armenian Apostolic Church

According to the amendments to the Land Code, lands owned by the state and municipalities can be transferred to the Armenian Apostolic Church (Mother See of Holy Etchmiadzin) for purposes of constructing and maintaining church buildings. Such lands and buildings are exempted from taxes on land and property taxes. Although the sums involved make tax exemptions largely symbolic, religious minorities expressed their discontent with granting special privileges to the Armenian Apostolic Church.

Appraisal Licensing Eliminated

The Parliament eliminated licensing requirements for real estate appraisal. Instead a requirement for certification was introduced. Individual wishing to obtain a certificate have to pass an exam and pay a fee of 20,000 drams. Under old law appraisers had to pay 150,000 drams annually to keep the license active. Appraisers are also required to purchase professional responsibility insurance. Amendments provide for restrictions on interested transactions with related parties. Individuals without a certificate are prohibited from signing appraisal reports, under penalty of a fine of 100,000 drams.

Online Government Procurements

Government Resolution No. 1917-N, 29 Dec. 2011

Armenian Government passed a resolution on electronic government procurement. The procurement system will allow registered suppliers to electronically receive notifications, place bids and sign contracts. The resolution requires all executive agencies to place orders through the electronic procurement system starting from January 1, 2012. Suppliers are invited to register at the official website of the procurement system, www. armeps.am. However, several documents still need to be filed in paper to complete the registration. In 2010 government procurements amounted to 450 billion drams.

Law on Foreigners Amended

Law 355-N, 8 Dec. 2011


The following important amendments were made to the Law on Foreigners:

• Foreigners enjoying a visa free regime can stay in Armenia for up to 180 days in a year instead of 90 days under former law.
• Foreigners without a valid passport or visa can exit Armenia upon submission of proof of payment of a fine (50,000 to 100,000 drams) imposed on them under article 201 of the Administrative Code.
• Children and parents or temporary residents are eligible for temporary residency. Under old law only spouses were eligible.
• All ethnic Armenians can obtain a visa at the border without invitation. Under old law citizens of a number of countries could obtain a visa only at Armenian consulates abroad and only upon invitation. The list of proofs of Armenian ethnicity is to be established by the Government.
• Travel tickets or entry visas to third countries shall be submitted to obtain a transit visa only if transit involves crossing air border. Under old law these documents had to be presented for crossing land borders as well.
• Entrepreneurs doing business in Armenia are entitled to permanent residency. Under old law such entrepreneurs could be granted permanent residency.

Law on Advocacy Amended

Law 339-N, 8 Dec. 2011

The following amendments were made to the Law on Advocacy:

• Persons other than advocates are prohibited from representing clients in courts on a regular basis or on a fee basis, unless such persons represent their close relatives without compensation or represent legal entities predominantly owned by close relatives
• Persons other than advocates are prohibited from representing clients in criminal cases
• Attorneys admitted to practice in foreign countries can represent clients after being accredited with the Chamber of Advocates
• Public authorities are required to respond to an advocate's request for information not later than ten days after receiving such a request
• Advocates are entitled to private meetings with defendants without restrictions as to the number or duration of such meetings
• The following persons are entitled to free representation by a public defender:
• Disabled people
• Unemployed people
• Pensioners living alone
• Veterans
• Members of families below a certain poverty level
• People not having sufficient income who do not live with employed family members, do not own real property except for a primary residence, and do not own a car, except for one of less that one million drams in worth
• Refugees and people granted asylum
• Parentless children
• Family members of fallen soldiers
• Convicted criminals
• Legal entities are prohibited from using the words "advocate," "advocacy" and their derivative in their names
• To become eligible for the bar exam candidates must complete an educational program with the Advocacy School.

Tax Amendments for 2012-14

Government Resolution 1865-N, 29 Dec. 2011

Government plans to reduce tax exemptions and increase tax revenue


Government approved a schedule of tax legislation amendments for the period of 2012-14. The schedule provides for the following amendments:

• Reviewing current VAT regime for financial services
• Restricting tax incentive periods to a maximum of five years and requiring cost and benefit analysis for future tax incentives
• Eliminating minimum taxes and improving the advance payments system
• Introducing declining-balance depreciation with pooling of assets
• Considering elimination of tax breaks for the Pan Armenian Bank
• Introducing automatized systems for real property assessment
• Eliminating discretionary tax exemptions by municipal authorities
• Introducing mechanisms to ensure refund of VAT debit balances to taxpayers
• Implementing the accrual principle in VAT taxation
• Disallowing educational expenses deduction
• Taxing capital gains
• Improving the excise and VAT taxation of gasoline and diesel fuel
• Bringing cadastral values of real property in line with market prices to increase the collection of property taxes
• Eliminating VAT exemptions for the sale of tobacco products, books and periodicals, precious and semi-precious stones, jewellery, carpets, and provision of touristic services to foreigners.