Armenia – the heaven R&D center with rapidly evolving startup ecosystem
Guide for launching your legal presence in Armenia
Armenia is a heaven to set up an R&D center: far from hectic mega-cities, lots of cafes, beer pubs, wine bars, guaranteed safety and peace of mind, excellent tech talent. This is the feedback you will get from companies such as WICASTR, Benivo, Vineti, and others (finding high quality developers is challenging as everywhere else, but there are ways to deal with that).
On a parallel note, the startup ecosystem is rapidly developing since 2013. We are proud of our early birds such as Picsart, Joomag, Teamable, SoloLearn, gg, Menu Group, Integrien, Monitis, LiveLook – and this is just the beginning, as more and more companies are on the way.
This article is a practical introductory guide for a founder seeking to set up a company in Armenia or a foreign startup seeking to set up an R&D center in Armenia.
How to incorporate
Armenia is ranked 9th by the World Bank’s Doing Business report for ease of starting a business. It is really easy to incorporate and usually the interactions with government agencies are very limited.
If you plan to be headquartered in Armenia, then the best option is to set up a CJSC. Unlike LLC, where a shareholder may withdraw from the company at any time and receive the value of her share from the company, CJSC is more protective to the remaining shareholders. All the shareholders have preemptive rights to purchase the shares before they are offered to third parties
If you don’t expect to attract investments in the near future it makes sense to set up an LLC which can later be transformed to CJSC right before investment. We recommend that you approach a lawyer for setting up a CJSC.
If you plan to be (or already are) headquartered in foreign jurisdiction, the best option is to set up an LLC in Armenia. It does not have to be a subsidiary of the HQ company, and you can sign a service contract between the HQ and the Armenian LLC while assigning all the IP to the HQ.
Technically, you can register your LLC in Armenia online, or by visiting the State Register of Legal Entities here. You can check the availability of the company name (search should be in Armenian) and the trademark. Make sure you take your passport with you. If you are foreign citizen, then make sure you have notary certified translation of your passport. There are many notary offices in Yerevan, try anyone in your proximity.
In less than 1 hour you will get the full pack of documents related to your newly established LLC (including the Tax ID).
Please note, that Armenia is party to Apostille Convention, so any certified copy of documents issued in foreign jurisdiction should have an apostille to be valid in Armenia*.
Open a bank account
Setting up a bank account for your company is very easy. Take your incorporation documents and passport to the bank, fill in the application forms (you will be required to fill in also FATCA forms).** Most of the banks in Armenia have online and mobile banking. You may consider InecoBank, HSBC, Ameria. Be aware there might be complications for Iranian citizens.
Hire your accountant (and lawyer)
Tax filings for very simple startup operations can be handled on your own, however, we recommend that you hire an accountant to do that for you. We trust Concern Dialog Law Firm which has a solid legal, tax planning and accounting practices (through affiliated accounting partner Freeway Finance) and is very friendly to startups. There are numerous other companies and individuals in the market. For your information, the monthly fee for basic tax accounting can start from $65 and high profile legal consulting usually will not exceed $100 per hour.
Your lawyer/accountant will help you also in drafting typical labor contracts and other related documents. If you don’t have any specific requirements, this will usually be provided to you by your accountant/lawyer without additional cost.
Apply for tax incentives
Newly established IT companies are eligible to apply for tax breaks. The eligibility criteria include: (1) the entity should not be a subsidiary of another company, (2) the number of employees does not exceed 30. Other limitations apply, but most probably they will not be related to you. See the Law of the Republic of Armenia on State Support to the IT Sector (in Armenian) for more details. You can find all the relevant forms for application here.
The applicable tax breaks include: payroll income tax reduced to 10% (otherwise minimum is 24%) and corporate income tax reduced to 0 (otherwise 20%). According to current legislation the tax break will be in force until 2020 (there's a possibility of prolonging it as it was in the past).
Rent an office
If your staff is below 4-5 people it makes sense to rent a co-working space. Consider choosing from the list here. For larger staff, consider renting an office space (see for options here). We can find free of charge temporary hosts (from among our friends in the ecosystem) for promising startups with small teams.
Find the right talent
SmartGateVC partners helped many startup founders and companies with equipping them with relevant talent in Armenia. Let us know your needs, and we can try to help. Like anywhere else, the best way to hire is through referrals.
So good luck in Armenia and let us know if you need any help!
* Apostille is a way to make life easier, and instead of requesting consular verification (which is usually more complicated and non standardized procedure and vary from consular institution to consular institution), apostille is more standardized solution. So if a country, where the documents come from, is not member to the Apostille convention, then the Consular verification is the only solution (the list of members is here). Besides, Armenia is also party to Minsk and Chisinau Conventions (between the CIS countries), which foresee that official documents from countries with stamp with coat of arms doesn't need any further verification.
** In many banks one doesn't need to take any documents. All banks are connected to the state registry via official API, and they can request and receive electronic documents (verified) from the registry. So technically the director only needs his/her passport and the name of the company, and the bank will take all the documents. Many banks already also do not request stamp.