ARMENIA: An Introduction

Armenia is a landlocked country in the South Caucasus. The country serves as a bridge between Europe and Asia, offering a strategic location for trade and investment. Despite geopolitical challenges, Armenia maintains strong economic ties with key partners such as the EU, Russia and the Middle East. The country has made significant strides towards improving its business climate, with a growing tech sector, investment-friendly policies and a skilled workforce driving economic modernisation.

The official language of Armenia is Armenian, and the official currency is the Armenian dram. As of 1 October 2023, the permanent population of Armenia was 2,993,800 according to the Statistical Committee of the Republic of Armenia.

Armenia adopts an “open-door” approach to foreign investments, offering one of the most liberal investment environments among Commonwealth of Independent States (CIS) countries. The country's legal framework facilitates the easy establishment and operation of businesses, with mechanisms in place to protect investments through both domestic and international agreements.

Armenia has entered into more than 50 bilateral investment treaties (BITs) and double taxation treaties (DTTs) with countries such as the United States, Canada, Switzerland and China. The country is also a party to key multilateral agreements, including the ICSID Convention and the Energy Charter Treaty, which promote and safeguard investments. These agreements offer investors legal protection, tax benefits and greater predictability, strengthening Armenia’s business climate.

Key Trade Sectors

Armenia’s economy thrives on a diverse mix of industries, with agriculture, mining, renewable energy, telecommunications, IT, jewellery, finance and tourism playing central roles.

Legal System

Armenia is a parliamentary, unitary republic with a civil law system. However, Armenian legal practice also has some common law elements. Since 2007, the decisions of the Armenian Court of Cassation (including interpretations of law), the Constitutional Court and the European Court of Human Rights (ECtHR) have been binding on all courts.

Armenia's judicial system operates on three levels:

• first-instance courts, including both general jurisdiction and specialised courts;
• courts of appeal, which review lower court decisions; and
• the Court of Cassation, serving as the highest judicial authority.

Additionally, the Constitutional Court oversees the constitutionality of laws, settles disputes between state institutions regarding their constitutional authority and adjudicates election-related cases.

Armenia is a party to several international treaties governing the recognition of foreign judicial decisions. Since 2018, in the absence of a relevant treaty, Armenia has also been acknowledging foreign court rulings based on the principle of reciprocity, covering both final judgments and interim measures.

Alternative Dispute Resolution and Arbitration

Armenia has adopted modern arbitration and mediation laws aligned with the UNCITRAL Model Law and has ratified key international agreements, including:

• the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards; and
• the 2018 Singapore Convention on International Settlement Agreements Resulting from Mediation.

Arbitration is becoming increasingly common in Armenia, with disputes being referred to both ad hoc and institutional arbitration. The country has a supportive legal framework for arbitration, and in certain cases, arbitral awards can be submitted directly for enforcement without requiring court enforcement.

Key Considerations for Foreign Investors

Key considerations for foreign investors looking to set up a business in Armenia include:

• Armenia imposes no local ownership requirements, allowing foreign investors to own 100% of companies across most sectors, with only limited exceptions in specific sectors (eg, media-related sectors);
• foreign nationals can serve as directors, board members and employees without the need to reside in Armenia, although employment and residence permit requirements may apply;
• limited liability companies can be registered quickly – within an hour – if the founders and director are present in Armenia;
• the standard registration process for limited liability companies (LLCs) and closed joint stock companies (CJSCs) typically takes 1–2 days, with a few exceptions for CJSCs; and
• there is no minimum charter capital requirement for most companies, with a few sector-specific exceptions (primarily in the financial sector).

Armenian law ensures national treatment and non-discrimination for foreign investors, guaranteeing that foreign investment laws are no less favourable than those for local entities. No pre-approval or state body authorisation is required to make foreign investments. The primary restriction concerns land ownership; foreign citizens are prohibited from owning agricultural land or forests, though they can lease land over the long term or obtain rights for development. Foreign-owned companies incorporated in Armenia, however, can own land through SPVs without these limitations.

Tax System

The following are the general types of taxes that are paid in Armenia:

• value-added tax (20%);
• profit tax (18%);
• income tax for dividends (5% – applicable only to individuals);
• property tax (0.05–1.5% of the market value price of the property);
• income tax (20% – certain exceptions are applicable depending on the nature of income);
• excise taxes; and
• turnover tax (1.5–10% of turnover for businesses that are not VAT payers – a beneficial tax regime for small businesses).

Armenia has treaties excluding double taxation and preventing fiscal evasion with 51 countries. Further, Armenia is a member of the Eurasian Economic Union (EAEU), which leads to the regulation of custom-related matters as per the EAEU Customs Code through the implementation of similar rules into local legal acts.

Recent Developments

The legal landscape in Armenia is evolving rapidly, with several significant reforms underway. The key changes include:

• the introduction of the simple agreement for future equity (SAFE) – joint stock companies (JSCs) now officially recognise SAFEs, providing greater legal clarity and reducing enforcement risks for investors;
• amendments to the law on LLCs – proposed changes aim to resolve technical legal issues, regulate agreements between LLC participants and introduce other refinements to enhance corporate operations;
• the regulation of option agreements – new provisions seek to address practical challenges and improve the enforceability of option agreements in Armenia;
• the development of the new Corporate Governance Code incorporating ESG and sustainability measures, along with enhanced governance regulations to improve corporate oversight;
• reform of the law on enforcement – set to take effect in late 2025, the updated law introduces modernised enforcement processes while increasing enforcement-related costs, which may impact investment expenses.
• arbitral awards for cases up to AMD5 million – these cases can now be submitted directly for enforcement without requiring court approval, thus streamlining the process, and in certain sectors – primarily public services – debt claims of up to AMD2 million must first be resolved through a notary public, further reducing the burden on courts and expediting debt recovery procedures; and
• active promotion of mediation as an alternative dispute resolution mechanism – recent legal reforms have introduced mandatory mediation for certain types of disputes, aiming to reduce court congestion and encourage amicable settlements.

Material changes are also occurring in the employment legislation such that more processes are being implemented electronically. Additionally, changes to shorten the working day are also under discussion, though have not yet been adopted.