Tax Regimes for Individual Entrepreneurs in Armenia in 2026: Microbusiness, Turnover Tax, General System

Three Regimes for Individual Entrepreneurs

The tax regime determines what taxes you pay and which reports you submit. The RA Tax Code (HO-165-N) provides three options for IEs:

1. Microbusiness (միկրոձեռնարկատիրություն): exemption from most government taxes for annual turnover up to 24 million drams.
2. Turnover Tax (շրջանառության հարկ): a single tax replacing VAT for turnover up to 115 million drams.
3. General System: VAT and profit tax. This applies by default if no statement is filed.

The thresholds are confirmed on the SRC's public portal: microbusiness, turnover tax, VAT. The threshold is calculated based on turnover (excluding VAT) for the previous calendar year across all types of activities. For more on limits and consequences of exceeding them, see the article Turnover Limits for IEs.

Turnover Tax: Rates as of January 1, 2025

Rates are set by Article 258 of the Code as amended by HO-285-N (adopted 12.06.2024, effective from 01.01.2025). Rates increased: before 2025, trade was taxed at 5%, not 10%. At the same time, an expense deduction was introduced.

How the Deduction Works

The tax at the rate is reduced by a specified percentage of documented expenses. The result cannot be less than the "minimum" from the last column. Unused deductions may be carried forward to future periods (Art. 258(7)).

The law HO-72-N (effective from 08.04.2025) expanded the expense list. Now deductible:

• expenses directly related to production, works and services;
• initial cost of goods for resale;
• administrative and distribution expenses.

Administrative expenses include, for example, management salaries, audit, accounting and consulting services, office and postal services (Art. 121(7)). Distribution expenses include packaging, delivery, advertising, and marketing. Expenses must be documented.

Not deductible: purchase and creation of fixed assets and intangible assets, their depreciation and disposal, travel expenses, representation costs, gratuitously received assets and services. New rules apply to expenses incurred from January 1, 2025.

Example. You provide services. Turnover for the quarter is 10 million drams, documented expenses 6 million drams. The tax at 10% is 1,000,000 drams. The deduction is 6% of 6 million, or 360,000 drams. Tax due: 640,000 drams. The minimum is 4.5% of turnover, or 450,000 drams, so you pay 640,000.

In addition, IEs under the turnover tax pay 5,000 drams per month in profit tax. This is the final profit tax liability (Art. 125(3)).

Who Cannot Use the Turnover Tax

Art. 254(3) of the Code excludes from eligibility:

• banks, insurance companies, currency exchanges, pawnshops, gambling operators, notaries, auditors, and attorneys;
• from July 1, 2025: legal and accounting activities (code 69), head office activities and management consulting (70), personnel recruitment (78.2 and 78.3);
• related parties (Art. 30), and participants of joint activity agreements, commission agreements for supply of goods, and agency agreements where the agent acts in its own name (as formulated in the law).

The last point is important for marketplace sellers. Check how your agreement is structured and named. More details in the article Trading on Wildberries.

IT Rate 1%

For activities from the Government list, the rate is 1%. This row in the table is valid until December 31, 2031 (HO-500-N of 04.12.2024). Requirements and the list of codes are detailed in the article IT Certificate and Benefits.

Microbusiness

• Threshold: turnover for the previous year from all activities not exceeding 24 million drams.
• Application: Form 257, within 20 days after registration and then annually by February 20. Without filing you do not receive benefits.
• Exemption: from government taxes except for taxes on imported goods, personal income tax on payments to individuals, and excise, environmental, and road taxes (Art. 269).
• Legal basis: Tax Code and SRC Chairman's Order No. 558-N of 27.08.2019.

Art. 267(5) excludes from microbusiness, among others:

• trade (purchase and sale), banks, insurance companies, notaries, auditors;
• consulting, legal, accounting, engineering, advertising, design, marketing, and translation services;
• medical, hairdressing, cosmetic services, car repair;
• intermediation services, including real estate transactions;
• software development and data processing;
• construction and design work, real estate appraisal;
• baths and saunas;
• from July 1, 2025: head office activities, personnel recruitment, and organization of interregional and intraregional bus routes.

If your activity is on the list, microbusiness is not permitted. The precise list is in the law. For details, see the article Microbusiness.

General System

If no application is filed or turnover exceeds thresholds, the general system applies. VAT is 20%, export rate 0%. Profit tax is 18% (Art. 125(1)). Apply for VAT payer status with Form 264.

When moving from turnover tax to the general system, unclaimed expenses are deducted from gross income with multipliers: trade 10, manufacturing 20, catering 10, other activities 15 (Art. 264(4)).

Deadlines

The reporting period for turnover tax is a quarter (Art. 259). If you miss the filing deadline, you must remain on the general system until the next year.

Summary Table and Selection

How to choose:

• Activity not listed in exclusions and turnover up to 24 million drams: see microbusiness.
• Services, turnover up to 115 million drams: turnover tax, calculate with deduction.
• Large expenses or clients requiring input VAT: compare with the general system.
• Activities from the IT list: compare the 1% rate to other regimes.

Example Choices

Freelance Designer. Design services are on the Art. 267(5) list, so microbusiness is not allowed. With 8 million drams turnover per year and low expenses, turnover tax at 10% leads to about 800,000 drams before deduction. The 6% deduction on confirmed expenses reduces the amount due, but the tax will not fall below 4.5% turnover, i.e., 360,000 drams.

Goods Seller. Trade is excluded from microbusiness. Turnover tax at 10% minus 9.5% of expenses and a minimum of 1% is usually preferable to the general system, as long as purchases are documented and turnover doesn't approach 115 million drams.

Accountant or Lawyer IE. From July 1, 2025, turnover tax is closed for them (codes 69, 70, 78.2, 78.3). So only the general system with VAT and profit tax remains.

Developer as IE. Microbusiness is unavailable due to software development. If your activity code is on the Government list, the 1% turnover tax applies.

Not Covered

IE social payments, mandatory health insurance, and personal income tax obligations depend on individual circumstances. It's best to consult an accountant for these amounts.