ARMENIA: An Introduction to General Business Law

The following Overview featured in Global 2023 and is awaiting update from the firm.

The Republic of Armenia is located in the north-eastern part of a mountainous region historically referred to as Armenian Highlands, a landlocked region between Mediterranean, Black and Caspian Seas forming the northern part of the Middle East region. The neighbouring countries are Republic of Georgia, Islamic Republic of Iran, Turkey and Republic of Azerbaijan.

The Republic of Armenia has a territorial area of 29,743 square kilometres.

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 judicial precedent’s institute into the legal system.

The Constitution is based on legal traditions of the developed western countries, including the reference to the 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 personal freedoms.

Judicial system 

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 specialised 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 specialised 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 for with regards to constitutional matters.

Taxation 

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 etc, excise tax and new forms of taxation such as ecological tax, ecological exploration payments tax on roads, real property tax and vehicle tax. Another innovation of the Tax Code is VAT returns for investors being made semi-annual. To encourage transit, storage services and transportation, VAT is no more applied for re-export with 180 days after importation; procedures are made clearer and are regulated in detail and comprehensively.

Currency 

Armenian currency rules are rather liberal with regulations and restrictions mainly concerning the currency of Armenia, Armenian dram (AMD), being 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 legislation of foreign countries. Residents and non-residents may unrestrictedly and without declaration transport, deliver, 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.

Business environment 

Since independence, Armenia has applied continuous albeit sometimes slow efforts to ameliorate business environment. Despite corruption and pure state of rule of law 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, the equal and sometimes favourable regime for doing business for foreign investors.

For the creation of a favourable business environment and increase in volumes of foreign and domestic investments, special importance is given to the 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 to increase 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. The latter gives the opportunity to delay VAT payment terms up to three years in the scope of investments projects exceeding AMD300 billion.

International economic cooperation of the Republic of Armenia is implemented on the liberal basis. Productive integration of the Republic of Armenia in global economy, increase of domestic goods export volume, creation of appropriate legal framework and favourable environment for international economic cooperation, investment attraction, and foreign trade efficiency raising infrastructure development are the main priorities of the international economic cooperation policy.

The implementation of balanced policy in the field of international economic cooperation is due to the selected priorities within the framework of bilateral and multilateral cooperation development and the establishment and development of the new advantageous directions in foreign economic relations of the Republic of Armenia.