When foreign entrepreneurs research starting a business in Armenia, one of the first things they meet is the phrase “special tax regime.” It sounds straightforward. Pay less, report less, worry less. And for many years, that description was largely accurate.
But Armenia’s tax landscape has changed significantly since 2025, and the turnover tax regime – the most widely used simplified option – is no longer a one-size-fits-all solution. Rates have gone up for several industries, new business activities have been excluded from eligibility, and the rules around what counts as taxable turnover have been updated.
If you are setting up a company or operating as an Individual Entrepreneur in Armenia and considering the turnover tax regime, this guide gives you a clear picture of how the system works, what limits apply, who is excluded, how to apply, and what to expect in 2026.
Before going deep on turnover tax, it helps to see taxation system in Armenia. Armenia offers several tax regimes, each designed for different sizes and types of businesses.
General Taxation System (GTS) is the default. It applies corporate tax at 18% on profit (23% for IE) and VAT at 20% on applicable turnover. It offers full expense deductions and input VAT credits, but it also comes with more complex reporting requirements.
The Turnover Tax Regime replaces both corporate tax and VAT with a single flat tax applied to gross revenue. The main difference is that you pay taxes not from the profit but from the turnover. But from 2025 you can deduct your expenses and reduce turnover tax.
The Microbusiness Regime applies to very small operators – typically individuals with annual turnover up to AMD 24 million. It carries almost no tax burden, but it has strict activity restrictions.
Special IT and High-Tech Regime sits alongside these options as a targeted incentive for qualifying technology companies. More on this below.
For a foreign entrepreneur opening a company or registering as an Individual Entrepreneur in Armenia, the turnover tax regime is usually the first option worth evaluating – especially if your activity qualifies and your turnover stays within limits.
The turnover tax is a simplified tax that replaces both corporate tax and VAT. Instead of calculating profit, deducting expenses, and then paying 18% on the net result, you simply apply a fixed rate to your gross revenue. But from 2025 you can reduce your exnpenses too.
Reporting frequency: The Documentation in this tax regime is lighter. In General tax system you should submit monthly VAT tax report and annual Corporate tax regime when in Turnover tax regime you submit only quarterly turnover tax reports.
Payment deadlines: Tax is paid quarterly.
Base for calculation: Since 2025, businesses can reduce their taxable turnover by certain documented expenses before applying the rate. This is a meaningful change – previously, the rate applied to all gross revenue without deductions. But it is improtante to pay attention that before 2025 the main turnover tax rate was 5% when now it is 10%.
The 2025 tax reform updated turnover tax rates across business categories. Below is the current rate table:
| Activity Type | Turnover Tax Rate |
| Trade (retail) | 10% |
| Catering and food service | 12% |
| Manufacturing | 7% |
| Services (general) | 10% |
| Rent or Lease | 10% |
| IT and high-tech | 1% |
Note: Rates and exact classifications are defined in the Armenian Tax Code and can be updated by annual amendments. Always verify the current rate for your specific activity code before filing.
The rate increase for trade and catering is significant. A business that previously paid 5% on gross revenue now pays 10-12%. Since the tax applies to revenue – not profit – even thin-margin businesses pay the same rate as high-margin ones. This is where the turnover tax starts to look less attractive compared to the general system, especially for businesses with high operating costs.
The turnover tax regime is only available to businesses whose annual turnover does not exceed AMD 115 million (approximately USD 285,000-300,000 depending on exchange rate) per one tax year.
If your annual turnover crosses this threshold, you are required to switch to the general taxation system – meaning you will need to register for VAT.
What this means in practice:
Importantly, there is now an exemption for food and catering services. When you work in these sectors and your turnover exceeds the threshold, you can choose to continue operating under the turnover tax regime. But you should apply for it once again.
Let’s look at a simple scenario.
Business: A small consulting firm registered in Yerevan by a foreign founder, providing services to local and regional clients.
Monthly revenue: AMD 5,000,000 (approximately USD 12,500)
Annual turnover: AMD 60,000,000
Under the turnover tax regime at 10% (services):
Under the general taxation system (assuming AMD 3,000,000 in monthly costs, 18% corporate tax on profit):
In this scenario with higher costs, the general system produces a lower effective corporate tax. But if the firm has lower costs – say AMD 1,000,000 per month – the picture reverses. This is the key calculation every foreign founder should run before choosing a regime.
Not every business activity qualifies for the turnover tax regime. Following the 2025 amendments, several professional activities were excluded. Businesses operating in these categories must work in the general taxation system regardless of their turnover size.
Activities that can’t work in the turnover tax regime:
If your company’s registered activity falls into any of these categories, the turnover tax regime is not available to you. This applies regardless of how your revenue is structured or how small your operation is.
Why does this matter for foreign founders specifically?
Many foreign entrepreneurs arriving in Armenia come from consulting, advisory, or professional services backgrounds. They register a company, assume the simplified system is available, and structure their pricing accordingly – only to discover later that their activity is excluded. The correction process is manageable, but it involves retroactive adjustments, back filings, and sometimes penalties.
For foreign entrepreneurs in the technology space, Armenia’s tax incentives for IT and high-tech companies deserve a dedicated look.
Since 2025, qualifying IT and high-tech companies can access a 1% turnover tax rate – one of the lowest effective rates available to any business entity in Armenia. This regime is guaranteed until 2031, giving companies medium-term planning certainty.
Who qualifies:
What the 1% rate covers:
The 1% turnover tax replaces both Corporate tax and VAT, just like the standard turnover tax regime. The difference is the rate – and the documentation burden is higher, since you must demonstrate and maintain eligibility.
Additional IT incentives under the general system:
For IT companies that prefer or are required to use the general taxation system, there is a separate set of benefits: a 200% salary deduction for qualifying technical staff (meaning you can deduct twice the salary amount from taxable profit), and a reduced personal income tax rate of 10% for R&D and technical employees rather than the standard 20%.
If you are setting up an IT company, software agency, or digital product business in Armenia, the 1% regime is one of the most compelling reasons the country attracts technology founders. But eligibility must be confirmed and maintained – not assumed.
Applying for the turnover tax regime in Armenia is not automatic. You must apply for it after 20 days from registering your business. If you do not make this election, you must work in General tax regime in that tax year.
What you need:
After approval:
Once you are registered under the turnover tax regime, you file quarterly tax reports by the 20th of the month following each quarter and make your tax payments accordingly. The SRC’s digital system tracks submissions and balances.
Clean, consistent invoicing from day one is not optional – it is what keeps your declarations accurate and protects your business during any future audit.
If your turnover crosses AMD 115 million during the year, you do not wait until January 1 to switch. The transition to the general taxation system is triggered at the point of exceeding the threshold.
This means:
Planning for this transition before it happens is significantly easier than managing it after the fact. If you are growing and see the threshold approaching within the next two quarters, start the preparation early – adjust pricing, notify key clients about VAT registration, and update your accounting workflows.
There is no universal answer, but here is a practical framework:
Turnover tax tends to work well when:
The general taxation system tends to work better when:
The 2025 rate increases made the turnover tax less attractive for trade and catering businesses specifically. For service companies with lean cost structures, it can still be the right choice. The key is running the numbers for your specific situation – not choosing based on the word “simplified.”
| Parameter | Detail |
| What it replaces | Both Corporate tax and VAT |
| Who can use it | Companies and Individual Entrepreneurs with annual turnover under AMD 115 million, in eligible activities |
| Standard rates | Services/Rent 10%, Trade 10%, Catering 12%, Manufacturing 7%, IT certified 1% |
| Excluded activities | Legal, accounting, consulting, financial services, and others |
| How to apply | Active application to SRC after the start of the tax year |
| Reporting | Quarterly declarations due by the 20th of the month following the quarter |
| Threshold breach | Triggers mandatory switch to general system (VAT + corporate tax) |
If you are a foreign entrepreneur evaluating Armenia as a base for your business, the turnover tax regime can be a genuinely efficient starting point – but only if your activity qualifies, your numbers support it, and you understand the rules before you commit.
Have questions about whether your business activity qualifies for the turnover tax regime or which tax system makes sense for your setup in Armenia? Profin Consulting has more than 10 years of experience in accounting sector and can help you to settle a company in Armenia, Choose the right tax regime, provide accounting and financial services.
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