Nestled in the Caucus region, this landlocked country of three million people has a rich history dating back nearly 3,000 years. Despite having been occupied by different groups such as the Sasanians, Mongols, and Seljuk Turks, Armenia has largely retained its homogenous identity and Christian heritage. Moving into the 20th century, Armenia was part of the Soviet Union until its demise in 1991.

However, during that time it occupied an important niche as a tech hub, a tradition that continues to this day thanks its educational policy based on the Science, Technology, Engineering, and Mathematics (STEM) sectors. It should be no surprise that many European and Russian companies have a physical presence in the country, taking advantage of its talented labor pool. 

Whether you are looking for investment opportunities or a place to live, here’s why Armenia should be on your list of countries to consider.

Banking

Armenia has a stable and well-developed banking system. Foreigners can open a bank account with a visitor visa and many do not have a minimum deposit requirement. Not to mention, they are not part of the Common Reporting Standard. Lastly, investors can take advantage of high interest rates, up to 9 or 10% in some banks and many accept deposits in dollars, rubles, or euros. 

Stability

Unlike many of the Commonwealth of Independent States (CIS) countries, Armenia has largely avoided the economic crisis and violence that has affected its neighbors. That is not say Armenia has not had its share of spats with neighboring Azerbaijan, but prudent and business-friendly policies, low inflation, and economic stability are areas where Armenia is ahead of many countries in the region.

Investment

Armenia fares well on many business and corruption indexes. Foreigners have the right to invest, own property, and are treated equally alongside domestic entities. Property rights are generally respected and there are good opportunities for investment, especially in the STEM sectors.

Cost of Living

An affordable cost of living and a high standard of living have made Armenia a popular destination for digital nomads, retirees, and those seeking a change of scenery. A $1,000 a month is enough to support a modest lifestyle, something that cannot be said in many parts of the world. Yerevan, the capital offers all of the amenities you would expect in any western city at a considerable discount. 

Business

Aside from offering a stable climate for business, Armenia offers many incentives for operating a business. Among them are a skilled and low-cost workforce, no limits on foreign ownership, and few restrictions on repatriating of profits.

At Mundo, we consider Armenia a hidden gem. With a low cost of living, a well-developed banking system, and a stable government this “Switzerland of the Caucuses” should be on your list for investment or retirement opportunities. Not to mention, access to the Russian and European markets. Not being subject to the CRS requirements, opening a bank account is fairly straightforward and simple. However, that does not mean you do not have to report any investments to your home country if required. With that said, welcome to Armenia. 

Doing Business Briefing

Population: 2,957,731

Currency: Dram 

GDP PPP: $10,995 USD 

Gini: 34.4

HDI: .776

Regarded as the gem of the Caucuses, Armenia is one of the most business-friendly CIS countries. Likewise, a lot has changed from when it was part of the Soviet Union. Since the early 1990’s, the Armenian government adopted many pro-market reforms and has been one of the better performing emerging Eurasian countries during this time. While there have been some growing pains during this transition, they have paid dividends. 

Despite being a landlocked and having border disputes with its eastern and western neighbors of Turkey and Azerbaijan, Armenia has posted one of the highest GDP growth rates in the region with the main driver in recent years being the services sector. As the Armenian government looks to capitalize on its highly skilled workforce and attract FDI, efforts to tackle corruption have been paying off. Today, Armenia fares better than the regional average on several key indicators on the World Bank’s Ease of Doing Business Index, most notably in starting and registering a business. However, like most of the world, the economy contracted in 2020 due to the Covid-19 pandemic and slowly has begun the road to recovery. 

Why Invest in Armenia?

A Good Place to Do Business

Since the collapse of the Soviet Union, Armenia has largely adopted a pro-market stance. Suffice to say that has not been without some growing pains but since 2018 the government has made some progress reducing corruption. As noted above, Armenia fares well in many key business indicators, especially starting and registering a business. This process can be done in as little as two days thanks to a “one-stop shop” approach. There are other benefits such as operating in the Free Economic Zones (FEZ) or as micro-entrepreneur and they will be described in detail later. 

Stability

Despite tensions with neighboring Azerbaijan that have flared up as recently as late 2020, and a closed land border with Turkey, Armenia has largely avoided the conflicts that have affected the region. Thanks to a stable government and prudent macroeconomic policy, inflation has been low. Other benefits are a low crime rate, making Armenia an attractive destination for businesses. As noted above, business-friendly reforms enacted since 2018 have made Armenia a more attractive destination for FDI. 

Skilled Workforce

Regarded as the tech hub of the Soviet Union, many businesses have taken advantage of the country’s skilled and low-cost workforce. Thanks to a high literacy rate and an education policy that focuses on the STEM sectors, it should be no surprise that many Russian and European tech firms have operations here. Not to mention the country is ideally situated with access to the European, Russian, and Asian markets.

Free Economic Zones (FEZ)

Many businesses have been attracted to Armenia’s FEZ’s. There are several benefits, most notably no VAT for services and goods produced in the FEZ along with no property taxes or customs duties for operations in them. Lastly, no taxes on profits for businesses in the FEZ’s and these will be described in more detail below.

There are three main business structures in Armenia, the Limited Liability Company (LLC), Joint Stock Company, and Business Partnership.

LLC

An LLC in Armenia is similar to that in most western countries where investors are liable up to the initial amount they have invested in the company. It should also be noted that an LLC can be owned and managed by a single person and this is the most popular business structure in Armenia and an attractive option for those looking to reduce their tax obligations.

Joint-Stock Company

This structure shares some similarities to an LLC but with the ability to issue shares. A joint-stock company is ideal for larger operations that may involve multiple investors. However, there is always risk involved as the shares may rise or fall in value. However, shareholders are not liable for any obligations beyond their initial amount invested. It should be noted that joint-stock companies can be owned and managed by a single person. 

Partnerships (full and limited)

Like most countries, a partnership involves two or more persons. However, unlike the corporate structures mentioned above, the partners are fully liable for business debts and obligations. It should be noted a limited partner only is only liable for the amount they have invested. 

The Benefits of the FEZ’s

With Armenia being among the easiest countries in the world to start a business, it is no surprise many foreign firms have operations here and below some of the benefits of operating in an FEZ will be highlighted.

-No VAT for goods and services in the FEZ area. 

-Tax free profits.

-No import duties on goods and materials imported into the FEZ.

-Access to the European, Russian, and Asian markets.

Generally speaking, FEZ’s are for larger operations oriented towards manufacturing, services, and export sectors. There are some additional benefits for IT and related industries as the government seeks to attract FDI in these areas. 

However, as of 2020 there is a new option for investors called the micro-entrepreneur. This has several benefits for those who may not be looking to invest in large-scale operations or are looking at relocating Armenia. Likewise, the requirements are fairly straightforward and some of the requirements and benefits will be broken down below. 

-Requirements: Be involved in production or manufacturing, most service sectors, tourism, and private education. In addition, sales cannot exceed 24 million AMD (approximately 46,000 Euro a year).

-Benefits: Exemptions from VAT, sales, profit, and turnover taxes.

Despite the limitations, this is an attractive option for someone with limited capital to invest in and own a business in Armenia. Not to mention, with the ease of starting a business, the micro-entrepreneur option is a good starting point. 

With a stable government and prudent economic policies, Armenia has a lot to offer. Granted it may not have the lowest taxes but there are considerable advantages to operating a business here. As mentioned earlier, Armenia is one of the easiest places to setup a business thanks to the “one-stop” shop. As the government looks to attract FDI we can expect they will continue with a business-friendly policy like they have the last few years. A skilled workforce with competitive labor costs will continue to attractive for business in the IT and services sectors. 

That’s not to say Armenia is not without its problems, it is a developing country and issues with the legal system and corruption exist, albeit to a lesser extent than its neighbors. Exporters will continue to face constraints as Georgia is the only land route to export goods due to border closures with Turkey and Azerbaijan. 

However, with a stable banking system and government, Armenia will continue to be a popular destination for expats and businesses alike.