ARMENIA: An Introduction
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The Republic of Armenia is located in the northeastern part of the mountainous region historically referred to as the Armenian Highlands, a landlocked region between the Mediterranean, the Black and the Caspian Seas that forms the northern part of the Middle East region. The neighbouring countries are the Republic of Georgia, the Islamic Republic of Iran, Turkey and the Republic of Azerbaijan.
The Republic of Armenia has a territorial area of 29,743 square kilometres.
The current major energy resources for Armenia are hydropower, natural gas-based thermal power and nuclear power.
The legal system of Armenia is mainly based on the continental (civil law) system. However, the recent changes in the legislation have resulted in the import of common law elements into the legal system of Armenia. In particular, the Judicial Code of Armenia has introduced the institute of the judicial precedent into the legal system.
The Constitution is based on legal traditions of the developed western countries, including the reference to human rights and liberties. The Constitution stipulates the division of powers among the executive, legislative and judicial branches, providing also for an independent judiciary and for personal freedoms.
The Armenian court system is regulated by the Judicial Code. The Code provides for a three-tiered court system, comprising courts of first instance, courts of appeal and the Court of Cassation. First instance courts comprise courts of general jurisdiction and specialized courts – administrative courts and insolvency courts. The jurisdiction of administrative courts covers all disputes with state and municipal bodies. The jurisdiction of insolvency courts covers all disputes arising out of insolvency relations. The jurisdiction of courts of general jurisdiction covers all other disputes that are not heard by specialized courts. The appellate courts comprise criminal, civil and administrative appellate courts. The civil appellate court also hears appeals in commercial matters. The Court of Cassation is the highest court, except with regards to constitutional matters.
The Armenian system of taxation is currently based on the Tax Code in force since January 2018. The Code envisages both traditional forms of taxation like corporate profit tax, individual income tax, VAT, property tax and excise tax, as well as new forms of taxation such as ecological tax, ecological exploration payments tax on roads, real property tax and vehicle tax. Other innovations of the Tax Code are: VAT returns for investors are made semi-annual; VAT is no longer applied for re-export within 180 days after importation in order to encourage transit, storage services and transportation; procedures are made clearer and are regulated in detail and comprehensively.
Armenian currency rules are rather liberal with regulations and restrictions mainly concerning the currency of Armenia, the Armenian dram (AMD), which is the only legitimate tender for payment and quotation between the residents. Prices for sale of goods (property), provision of services, payment of salaries and payments equivalent to salary, assessment of property and execution of works and use of property within the Republic of Armenia are quoted in Armenian dram.
No restrictions are applied to current currency operations. Residents may carry out currency operations outside Armenia without limitations, in accordance with the legislation of foreign countries. Residents and non-residents may unrestrictedly and without declaration transport, deliver and import currency values to Armenia and transport, deliver and export currency values from Armenia. The Central Bank is entitled to define terms and conditions of transportation, delivery, import, export and declaration of currency values
Since independence, Armenia has applied continuous, albeit sometimes slow efforts to ameliorate the business environment. The Armenian business environment ranks high enough in the world doing business index, being rather liberal and open for foreign investment. A distinctive feature of the Armenian business environment is the almost unrestricted regime of capital inflow and outflow with no restriction of import and export of any currency, cash and non-cash currency values, creating an equal and sometimes favourable regime for doing business for foreign investors.
In order to create a favourable business environment and an increase in the volume of foreign and domestic investments, special importance is given to the problem of overcoming of bureaucratic obstacles in the business environment. Steps are taken for an essential change in the structure of competitive advantages of the country, taking into account modern trends in foreign direct investments.
State support tools
In order to mitigate the impact of the global financial crisis on the economy, to create favourable conditions for the development of industrial sectors, to promote local production and to create new jobs, the Armenian Government applies complex tools of state support aimed at increasing export and import substitution by creating favourable conditions for new investments.
The Armenian Law on “Making Amendments to the Armenian Law 'On Value Added Tax'" is among the above-mentioned tools. This gives the opportunity to delay VAT payment terms up to 3 years in the scope of investments projects exceeding AMD 300 billion.
International economic cooperation in the Republic of Armenia is implemented on a liberal basis. The main priorities of the international economic cooperation policy are: the productive integration of the Republic of Armenia into a global economy; the increase of the volume of domestic goods exported; the creation of an appropriate legal framework and a favourable environment for international economic cooperation; increasing investment attraction; and developing infrastructure to improve foreign trade efficiency.
The implementation of a balanced policy in the field of international economic cooperation is due to the selected priorities within the framework of bilateral and multilateral cooperation development agreements and the establishment and development of the new advantageous directions in foreign economic relations of the Republic of Armenia.