Changes in Armenian tax law 2025: Taxation Systems 2025

In 2025, Armenia’s tax rules changed in important ways. The new tax law in Armenia affects both businesses and freelancers, especially those in the IT sector.

The biggest update is the doubling of the turnover tax rate. Small businesses that once paid low taxes will now face higher costs. At the same time, the way turnover tax is calculated has changed: companies can now lower their taxes by including their business expenses.

The government has also introduced special incentives for IT and R&D, creating new opportunities, but only for those who meet the requirements. Reporting deadlines, VAT rules, and audits have also become stricter, which means staying compliant is more difficult.

This article explains the key changes in Armenian tax law 2025, from the higher turnover tax and its new calculation method, to IT sector incentives, new VAT rules, and stricter reporting deadlines. Step by step, we’ll look at how turnover tax works now, what the general taxation system requires, and what deadlines businesses must follow to stay compliant.

Overview of the 2025 Tax Law Changes in Armenia

The 2025 tax law changes brought some of the most significant reforms to taxation in Armenia in recent years. These updates affect how small and medium-sized businesses, freelancers, and IT companies manage their obligations.

1. Turnover tax rates have risen for many activities
   Thousands of SMEs that relied on low turnover tax rates now face heavier obligations. In sectors like trade, catering, and manufacturing, rates have doubled in some cases, making compliance more costly and complex (lsa.am).
2. New 1% turnover tax for IT and high-tech activities
   To support innovation, the government introduced targeted tax incentives. IT and R&D companies can now benefit from a 1% turnover tax if they meet eligibility rules. This creates opportunities for tech firms but also requires careful reporting and proof of qualifying activity (ey.com).
3. Deductible expenses under turnover tax
   A key update allows companies to reduce their taxable turnover by deducting some business expenses. This is a shift in how taxation in Armenia applies under the turnover regime, helping businesses manage their effective tax rate more efficiently.
4. Retroactive effect of amendments
   The March 2025 package was adopted late in the first quarter but applies retroactively to January 1, 2025. Companies must revisit previously filed declarations and adjust them under the new rules, adding administrative stress to an already busy season (kpmg.com).
5. Restrictions on turnover tax eligibility
   Certain professions, such as legal, accounting, consulting, and real estate, can no longer use turnover tax or the micro-enterprise regime. These businesses will need to switch to the general taxation system, adding to compliance complexity (orbitax.com).
6. Stricter VAT and reporting rules
   The government also introduced tighter VAT regulations and reporting obligations. For example, changes affect how free services are taxed and which expenses qualify under turnover tax. This reflects a broader trend in taxation in Armenia, more incentives for high-tech, but stricter rules for general businesses (vatupdate.com).

Turnover Tax vs General Tax System – What Changed?

Building on these reforms, one of the biggest questions businesses now face is whether to stay under the turnover tax regime or switch to the general taxation system. The 2025 changes to the Armenian tax code have made this decision much less straightforward.

• Turnover tax regime is less favorable now
  What was once a relief mechanism for SMEs has become more burdensome. With the increased turnover tax rates, many businesses that used to rely on this simplified regime to lower their obligations are now rethinking their choice.
• New deductions in the general taxation system help IT / R&D
  The general system now offers powerful incentives, especially for high-tech firms. A major update is the 200% salary deduction: eligible IT and R&D companies can deduct twice the salaries of qualified technical staff from taxable income, significantly reducing profit tax. However, this applies only if strict requirements are met.
• The choice is more complex than before
  With turnover tax now heavier and general taxation offering broader deductions, businesses must carefully compare both systems. Factors such as revenue size, expense levels, and eligibility for IT incentives all determine which system is more beneficial. Under the new taxation system in Armenia, this decision requires strategic planning rather than defaulting to turnover tax.

Incentives for IT and R&D – Armenia’s IT Tax Policies

Under the 2025 tax law changes, Armenia has introduced new Armenia’s IT tax policies to reward innovation and R&D. Here’s what’s changed, especially for freelancers in Armenia and high-tech companies:

• IT companies that qualify under the new rules can benefit from a 1% turnover tax rate. This is a major reduction compared to standard obligations. The incentive is in effect from January 1, 2025, and is guaranteed until December 31, 2031. 
• Several provisions of the law are back-dated, particularly for R&D activities. Companies already investing in innovation in 2024 can claim benefits retroactively, for example, certain deductions and allowances for R&D expenses apply as if the amended rules were in place in 2024.
• There are also new deductions under these policies: for example, a 200% salary deductibility for qualified technical / R&D staff under the general taxation system. Companies must meet specific conditions, such as having enough revenue from high-tech activities and following government criteria, to use these deductions.

These policies give Armenia’s tech ecosystem a competitive edge. But for freelancers in Armenia, startups, or early‐stage businesses, proving eligibility and keeping proper documentation is now more important than ever to avoid compliance risks. Improper documentation could mean losing incentives or facing penalties.

Reporting & Filing Deadlines – New 2025 Tax Calendar

Because of the 2025 tax law changes, Armenia has updated its deadlines for income declaration in Armenia for individuals and how they pay taxes. Here’s what you need to know about how to pay taxes in Armenia under the new schedule:

• The deadline for the annual income tax (personal income / universal income declaration for the 2024 year) has been extended from May 1 to November 1, 2025. This gives taxpayers more time to prepare accurate reports.
• Correspondingly, any payment obligations for additional tax liabilities (unsatisfied income tax due) are also due by November 1, 2025. This shift gives businesses and individuals breathing space, but concentrates obligations toward the end of the fiscal year. 
• While the extension offers more time, it also increases risk. Delaying until close to November 1 may lead to cash flow issues or penalties if something goes wrong (missing documents, technical problems, etc.). Early preparation is strongly recommended under the new rules.

Procedural Updates – Recording and Audits

The tax code of Armenia has also introduced important procedural reforms in 2025 that change the way businesses report, track, and prove their tax obligations. From January 1, all outstanding tax liabilities and payments are automatically displayed in each taxpayer’s personal account card through the e-cabinet system. This means companies can no longer rely on manual tracking; instead, their balances and obligations are updated directly in the state platform, increasing transparency and accountability under the Armenian tax code.

Tax audits are now being conducted more frequently in electronic form. Instead of on-site inspections, companies are required to upload contracts, invoices, and expense documents directly into the e-tax system. This shift to remote audits speeds up reviews but also leaves less room for errors, since missing or incomplete files are immediately flagged.

At the same time, penalties have become stricter. Under Article 70 part 2 of the Armenian Tax Code, repeated violations such as late submissions, incorrect invoices, or misreporting of VAT can result in harsher fines. Combined with the electronic reporting system, this creates greater pressure on taxpayers to submit accurate and timely information.

For businesses and freelancers, these procedural updates make early preparation essential. Accurate bookkeeping, proactive audit readiness, and familiarity with the e-cabinet are now critical to avoid compliance risks and costly penalties.

VAT and Article 70 Part 2 – Clarifications

The tax law in Armenia has also brought new clarifications on VAT and compliance requirements under the Armenian tax code. Exemptions remain in place for micro-businesses and NGOs that do not exceed the legal thresholds, helping smaller players avoid unnecessary tax burdens. At the same time, VAT remains one of the most closely monitored areas of compliance, and its interaction with turnover or general taxation systems can create confusion for businesses.

For freelancers and SMEs, it is especially important to understand how VAT obligations apply alongside other taxes. Incorrect invoicing, failure to apply the reverse charge mechanism, or underreporting taxable transactions can quickly result in fines. Under Article 70 part 2 of the Armenian Tax Code, taxpayers are required to self-assess VAT on certain cross-border services and transactions, meaning that even small mistakes can have costly consequences.

These clarifications show that VAT is not just a concern for large companies. Even freelancers and small enterprises must carefully check their reporting and ensure that every transaction is handled in line with the updated Armenian tax code, otherwise they risk penalties and disputes with the tax authorities.

Why Professional Help Matters – Role of Accounting & Business Consulting

The Armenian tax system has become more complex than ever after the 2025 reforms. Higher turnover rates, new IT incentives, shifting deadlines, and stricter audit procedures mean that businesses and freelancers now face greater risks if they make the wrong choices. Errors in regime selection, VAT application, or failure to meet incentive requirements can easily lead to lost opportunities or heavy financial penalties.

This is why working with an experienced accounting firm in Armenia is no longer optional but essential. Professional support ensures that companies not only stay compliant but also take advantage of every available relief under the reformed system. With the right tax and management consulting, businesses can better understand whether to remain under turnover tax or move to the general system, how to properly apply deductions, and how to prepare for electronic audits.

As one of Armenia’s trusted business consulting companies, Profin Consulting helps both SMEs and freelancers optimize their tax strategies, avoid costly mistakes, and confidently navigate the new legal and financial landscape.

Action Plan for Businesses & Freelancers (2025)

The 2025 tax law changes mean that both companies and freelancers in Armenia must act quickly to stay compliant and competitive. Start by reviewing your tax regime to decide whether turnover tax or the general system is more beneficial under current rules. Check if you qualify for IT or R&D incentives and make sure all documentation is in order to secure preferential treatment. Update your accounting and reporting processes early so you know exactly how to pay taxes in Armenia without risking penalties. 

Finally, seek expert support, Profin Consulting can guide you through the reforms, ensuring compliance while helping you benefit from new opportunities.