Taxes for sole traders in Armenia: 1%, 10% and more

The “1% in Armenia” line is repeated so often that people take it for a general rule for every sole trader. In practice it is the rate for a specific list of activities, while most services are taxed at 10%.

Here is how turnover tax works in Armenia, who gets the 1%, what is paid on top of the tax and when the reporting is due.

How turnover tax works in Armenia

Turnover tax is a special regime for small business. It replaces VAT, and for companies corporate income tax too; for a sole trader only VAT is replaced.

To stay on the regime, income for the previous year must not exceed AMD 115 million. Further limits apply to ownership, related parties and types of activity. Branches of foreign companies cannot join the regime at all.

The tax is calculated on revenue, with no deduction for costs. Trade is the exception: 9.5% of the cost of goods bought in the period is deducted from the tax, though the final amount cannot fall below 1% of turnover.

The 1% rate: who actually gets it

Rates differ by activity:

The separate IT status, previously known as the certificate, no longer exists as of 1 January 2025. The right to 1% now comes from the activity code itself: it must appear on the government's high-tech list, which covers software development, electronic systems design and data processing.

The practical conclusion: choose the code before registering, because it sets the rate. Help with that comes with the registration — opening a sole trader in Armenia from $450, including tax registration.

Fixed contributions: what you pay with no revenue

Beyond the turnover tax an entrepreneur pays mandatory contributions. Without employees that is roughly from AMD 11,500 a month:

• fixed social tax — AMD 5,000;
• fixed income tax — AMD 5,000;
• stamp duty — from AMD 1,500 to AMD 15,000, rising with turnover.

At high turnover the total reaches around AMD 25,000 a month. These payments do not depend on revenue, so a dormant business still costs money.

Once you have employees, payroll deductions are added: pension contributions are withheld at 5% of monthly income below AMD 500,000, and at 10% minus AMD 25,000 above that, with the base capped at AMD 1,125,000.

When the tax regime is chosen in Armenia

The regime is chosen twice: at registration and then every year. The application after opening a business is filed within 20 days, and for following years by 20 February.

Miss the deadline and you stay on the general regime with VAT and income tax at standard rates. There is no way to claim turnover tax retroactively; you wait for the next year.

Income tax in Armenia is 20% and dividends are taxed at 5%. Neither applies to a sole trader's turnover, but both matter for salaries and payouts to owners.

VAT in Armenia: when a sole trader pays it

The standard VAT rate is 20%. On turnover tax you do not pay VAT, but crossing the AMD 115 million threshold ends the regime and VAT appears.

Exporting services is worth knowing separately. Advertising, consulting, marketing, design, engineering, legal, accounting and audit services, along with data processing, are zero-rated when the client is outside Armenia.

For a freelancer with foreign clients that means VAT on their services stays at 0% even after moving to the general regime. The reporting does get heavier, though, which is when the books usually go to an accountant: accounting in Armenia keeps the records and files for sole traders and companies.

Reporting deadlines for sole traders in Armenia

On turnover tax the calculation is filed quarterly and the tax is paid within 20 days of the quarter ending. VAT payers report monthly, by the 20th of the following month.

Clients can pay by bank transfer without a cash register: an invoice is issued for each client, and for an individual client their passport details go on the invoice.

What to work out before registering

Four things that change the final tax bill:

1. 1Your activity code: is it on the high-tech list with the 1% rate?
2. 2Expected turnover: will it cross AMD 115 million for the year?
3. 3Fixed contributions: they run regardless of revenue.
4. 4Employees: payroll deductions are counted separately.

Armenia is often compared with Georgia — the two regimes are set side by side in a separate piece on where to register: Georgia or Armenia.

This article is for information only and is not legal advice. Requirements and fees change, so check the current conditions with a lawyer before you file: ask a question in a consultation.