Investment in Armenia

Transcription

Introduction for foreign companies
considering doing business in Armenia
KPMG in Armenia
Preface
This publication has been prepared by KPMG Armenia to assist foreign investors
who consider starting a business in Armenia.
The information contained herein is of a general nature and is not intended to
address the circumstances of any particular individual or entity. Although we
endeavor to provide accurate and timely information, there can be no guarantee
that such information is accurate as of the date it is received or that it will
continue to be accurate in the future. No one should act on such information
without appropriate professional advice after a thorough examination of the
particular situation.
KPMG Armenia would be pleased to assist you in evaluating and implementing
your investment plans. For details of the services which we provide, and on how
to contact KPMG Armenia, please refer to Chapter 7.
KPMG Armenia cjsc
Yerevan, August 2009
Note: For your reference, USD equivalent of amounts indicated in AMD may be
calculated using the official exchange rate established by the RA Central Bank. At
the time of issuing this publication the rate established by the RA Central Bank
was: USD 1 = AMD 370.83 (as at 11 August 2009).
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Contents
CHAPTER 1
ARMENIA: A BRIEF SUMMARY
CHAPTER 2
BUSINESS ENVIRONMENT
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CHAPTER 3
BUSINESS ENTITIES
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Geography
Climate
Historical overview
Population and language
Currency and payments
International time
Weights and measures
Government
Entry visas/residency status
Work permit
Office and living accommodation
Business hours
Hotels and accommodation
Transportation and communication
Armenian Diaspora
The Government’s approach towards foreign investment
Foreign investment incentives
Types of foreign investments
Foreign investments in Armenia
Workforce
Economy
Key Macroeconomic Indicators
Government economic policy
Foreign trade and free trade agreements
Import regulations
Export regulations
Membership of international organizations
International finance assistance
Monetary policy and the banking sector
Insurance system
Credit Bureaus
Privatization
Natural resources
Government Securities market
Entrepreneurs/Sole proprietors
Business partnerships
Limited liability companies
Supplementary liability companies
Joint-stock companies
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Cooperatives
Representative offices and branches of legal entities
Establishment (registration) of legal entities, branches and representative
offices
CHAPTER 4
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ACCOUNTING REQUIREMENTS
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CHAPTER 5
LEGAL ENVIRONMENT
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CHAPTER 6
TAXATION OVERVIEW
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CHAPTER 6
LABOUR LEGISLATION
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CHAPTER 8
KPMG'S OFFICE IN ARMENIA
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AN INTERNATIONAL OVERVIEW
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KPMG IN RUSSIA AND CIS
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APPENDIX 1
PROCEDURE FOR REGISTRATION OF A REPRESENTATIVE
OFFICE/BRANCH OF A BUSINESS ENTITY
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APPENDIX 2
LIST OF ABBREVIATIONS AND ACRONYMS USED IN THE TEXT 58
Regulation of accounting and reporting
Recent changes in the RA Law “On Accounting”
Financial statements
Auditors and audit requirements
Auditing standards
Audit companies
Foreign Investment Law
Banking and related legislation
The judicial system of the Republic of Armenia
Law firms
The Law on Taxes
Value Added Tax (VAT)
Profit Tax
Personal Income Tax
Mandatory Social Security Payments
Excise Tax
Customs Duties
Property Tax
Land Tax
Presumptive Fee
Double Taxation Treaties
Other Mandatory Payments
Tax Inspections
Labour relationship
Labour contracts
Documents required for employment
Types of labour contracts
Terms and conditions of labour contracts
Termination of labour contract
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Chapter 1
Armenia - A brief summary
Geography
Modern Armenia is a small, strategically important country located at the
crossroads of Europe and Asia. The Republic of Armenia (the RA) occupies
an area of 29,800sq. km. Armenia borders Turkey to the west, Georgia to the
north, Azerbaijan to the east, with Nakhichevan (part of Azerbaijan) to the
south-west and Iran to the south. Land boundaries total 1,254km. The terrain
is defined by the high Armenian Plateau with mountains (mount Aragats
being the highest peak at 4,090 meters), fast flowing rivers, some forest land
and fertile soil by the Arax river. Armenia is rich in certain natural resources,
among them, deposits of copper, molybdenum, zinc, aluminium and gold.
Substantial deposits of pumice, marble, tuffa, limestone, basalt and salt also
exist. Mineral springs supply bottled-water industry.
The capital of Armenia is Yerevan.
Climate
The climate is highland continental with hot, dry summers and cold winters.
The coldest month is January, with the average daily temperature ranging
between -13°C and 1°C. The hottest months are July and August with the
average daily temperature ranging between 30°C and 35°C. Average annual
rainfall varies between 22 and 90 cm. The wettest months are from May and
June and the driest month is January.
Historical overview
Situated between Asia and Europe, the territory of today’s Armenia has seen
many migrations, political states and conquerors. Armenians are an ancient
race, who has preserved its traditions and spirit through difficult historical
periods, each of which had its own influence and impact on the development
of the Armenian history and culture. Armenia was the first nation to adopt
Christianity as a State religion. In 2001, Armenia celebrated the 1700th
anniversary of the declaration of Christianity as it has been a State religion
since 301 AD. The country is adorned with over one hundred ancient
churches and monasteries of great architectural merit, dating back to the VI
century AD. Some of these monasteries were famous centers of education
and culture.
There is also a large Diaspora of Armenians (about six million people) living
outside the country in various parts of the world, whose ancestors left
Armenia due to regional conflicts which took place in the early part of the
20th century. The Armenian nation soon recovered from these conflicts and
on 28 May 1918 declared itself independent, creating the first Armenian
Republic, with Yerevan as the capital.
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After two years of independence, on 2 December 1920 Armenia joined the
Soviet Union. During the Soviet period of seventy-one years, Armenia
developed dramatically as a country in education, industry and infrastructure.
In 1991, along with other nations of the former USSR, the Armenians voted
overwhelmingly for independence.
Population and language
The population of Armenia numbered 3,236,700 people as at the end of
2008. Only about two percent of the population is non-Armenians. There are
an estimated six million ethnic Armenians living outside the Republic, spread
over Russia, North and South Americas, the Near and Middle East, and
Western Europe (a total of 66 countries).
The population is highly educated and well-trained, particularly in engineering
and technology. Close to one hundred percent of the adult Armenian
population is literate. Of special significance are the teams of qualified
scientists who have conducted research in many areas of science and
technology.
The State language is Armenian, which forms a separate branch of the IndoEuropean language family. Armenian has its own unique alphabet, invented
between 401-406 AD by St. Mesrop Mashtots (361-440 AD).
Despite the homogeneity of the population, many Armenians are fluent in
foreign languages. The majority of them speak Russian and an increasing
number are becoming fluent in English, French and German as a
consequence of Armenia’s deeper integration in the world economy.
Currency and payments
Armenia’s national currency is the Dram (known by ISO standards as AMD)
with each Dram being divided into 100 Lumas. It was introduced on 22
November 1993 by the Central Bank of the Republic of Armenia (the CBA).
The CBA has exclusive right to issue currency; it also organizes and controls
the monetary circulation in the economy.
The CBA runs a liberal monetary policy allowing floating exchange rates and
free transfer of currency. The key objective of the monetary policy is to
ensure stability of prices. However, the Armenian Dram is not an
internationally recognized freely convertible currency.
Both residents and non-residents may import and export currency and
securities to and from Armenia without any restrictions. There is a cash
export limit for individuals, amounting to USD 10,000 (or equivalent in other
currencies). Amounts above this limit should be transferred through bank
accounts.
The most popular foreign currency is the US dollar. A number of banks have
started to encash travelers cheques. Almost all of the Armenian commercial
banks operate automated teller machines, which accept MasterCard, Visa,
ArCa, eDram and other plastic cards.
International time
The time in Armenia is four hours ahead of Greenwich Mean Time (GMT+4).
Weights and measures
The commonly accepted standard for measurement in Armenia is the metric
system.
Government
Armenia is a republic. A new post-Soviet constitution was adopted by public
Referendum on 5 July 1995. The Constitution is based largely on that of the
French, favouring the semi - presidential model. The Armenian authorities
implemented a constitutional reform aiming to strengthen the separation of
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powers and to continue making progress towards compliance with the
commitments to the Council of Europe. On 27 November 2005 the
amendments to the Constitution of Armenia were adopted in the
Constitutional Referendum.
In accordance with the Constitution, the President of Armenia is elected for a
period of five years by popular vote. The President appoints the Prime
Minister and members of Government who are nominated by the Prime
Minister.
The Armenian Parliament (the National Assembly) is unicameral (with one
legislative chamber) and currently has six standing committees, which, along
with the Ministries, are actively involved in the legislative reform process.
Members of the National Assembly are elected through general election
once every five years.
The territory of the Republic of Armenia is divided into ten regions (Marzes).
The capital city of Yerevan has the status of a community since the
constitutional amendments from 27 November 2005.
The regions are divided into communities. The communities are legal entities
with local self-government, which is implemented by the local authorities: by
the Heads of the communities and by the Councils of the Elders of the
communities, both elected directly by the population of the respective
community. The communities have their own budgets and manage their
property independently. In the regions (on Marz level) the State Government
is represented by the Governors (Marzpets), who are appointed by the
Government.
Entry visas/residency status
Foreign citizens (except for those from some countries of the
Commonwealth of Independent States (CIS), traveling to Armenia must
obtain an entry visa.
Entry visas are provided by Armenian embassies abroad, or at the points of
crossing the RA State Border, or on the territory of Armenia – by the
Passport and Visas Department of the RA Police and by the RA Ministry of
Foreign Affairs. Foreign citizens may also apply to the RA Ministry of Foreign
Affairs to obtain electronic visa via Internet.
(www.armeniaforeignministry.am/eVisa).
The entry Visas are provided for the period of stay of up to 120 days, with
the possible extension for the maximum of 60 days.
The currently available types of visas are shown in the table below:
Type of Visa
Diplomatic
Official
Visitor
Transit
Fee
(in AMD 000’)
None
None
3-40
18/10
Number of
entries
multiple/single
multiple/single
multiple/single
multiple/single
Visa validity
period
Up to 3 years
Up to 3 years
Up to 1 year
Up to 1 year
For residing on the territory of Armenia foreign citizens may apply to receive
a Status of Stay in the RA. The authority dealing with provision of the Status
of Stay is the Passport and Visas Department of the RA Police.
The statuses currently available are shown in the table below:
Temporary Stay
Fee
(in AMD 000’)
105
Permanent Stay
140
Special Stay
150
Status
Period of validity
Up to 1 year (may be extended
by 1 year at a time)
5 year (may be extended by 5
years at a time)
10 years (may be provided
multiple times)
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Work permit
The RA employers have the right to sign a labor contract with foreign
employees and use their labor, on the basis of the work permit issued by
the relevant authority to the foreign citizen.
There are exemptions specified by law, where a foreign citizen is allowed to
work in Armenia without having a work permit. In particular, the following
categories of foreign citizens are allowed to work in Armenia without a work
permit:

Foreign citizens having a Permanent Stay or a Special Stay status,

An RA citizen’s or a legally residing in the RA foreign citizen’s
spouse, who has a Temporary Stay status in Armenia,

A close family member (having a Temporary Stay status in
Armenia) of an RA citizen or of a foreign citizen having a
Permanent Stay status in the RA.

The founders, directors or authorized representatives of
commercial organizations with foreign capital,

The employees of foreign commercial organizations who work at
the representative offices of those organizations located in
Armenia.
Office and living accommodation
The approximate office rental rates in the center of Yerevan currently vary
between USD 25 and USD 40 per square meter per month (including 20%
VAT). Outside the city center rental values are considerably lower.
Several real estate agents specialize in finding apartments for rent for
expatriates. As with office rental, prices for apartments vary significantly,
depending on location, living area and level of refurbishment.
Business hours
Most businesses operate five days a week. Usual business hours for
financial institutions, commercial and industrial organizations are from
9.00am to 6.00pm, with a lunch break from 1.00pm. to 2.00pm.
Business hours for retail stores vary depending on their size and location.
Most retail outlets are open from 8.00am. to 9.00pm. There are also 24hour stores.
Hotels and accommodation
During the past three to four years, the hotel industry has been continually
developing and improving. Along with the renovation of old hotels, several
new hotels have been built in Armenia. Below is a list of some of the hotels
which provide services comparable with international standards.
Hotels in Yerevan:
Hotel Ani Plaza, 19 Sayat-Nova Ave, Yerevan 0001,
Tel: (+37410) 589 500, (+37410) 589 700
Hotel Ararat, 71 Grigor Lusavorchi Street, Yerevan 0015,
Tel: (+37410) 510 000, (+37410) 510 001
Hotel Arma, 275 Norki Ayginer, Yerevan 0025,
Tel: (+37410) 581 843,
Armenia Marriott Hotel,1 Amiryan Street, Yerevan 0010,
Tel: (+37410) 599 000
Hotel Avan Villa Yerevan, 16, 13th Street of Nork Marash,
Tel: (+37410) 655 877, (+37410) 652 707
Hotel Aviatrans, 4 Abovian Street, Yerevan 0010,
Tel: (+37410) 567 228,
Hotel Bass, 3/1 Aygedzor Street, Yerevan 0019,
Tel: (+37410) 221 353,
Hotel Best Western Congress, 1 Italian Street, Yerevan 0010,
Tel: (+37410) 580 095, (+37410) 591 199
Hotel Erebuni Plaza, 26/1 V. Sargsyan Street, Yerevan 0010,
Tel: (+37410) 510 453, (+37410) 510 451
Hotel Europe, 38 Hanrapetutian Street , Yerevan 0010,
Tel: (+37410) 546 060,
Hotel Golden Palace, 2/2 Azatutyan Ave, Yerevan 0037,
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Tel: (+37410) 219 999
Hotel Golden Tulip Yerevan, 14 Abovyan Street, Yerevan 0010,
Tel: (+37410) 591 600
Hotel Hrazdan, 72 Dzorapi Street, Yerevan, 0015,
Tel:(+37410) 535 332
Bass Hotel Complex, 3/1 Aygedzor Street, Yerevan, 0019,
Tel: (+37410) 221 353
Hotel Hy Business Suites, 8 Hanrapetutian Street, Yerevan 0010,
Tel: (+37410) 567 567
Hotel Latar, 58, 4th street Silikyan District, Yerevan 0029,
Tel: (+37410) 380 711, (+37410) 380 721
Hotel Metropol, 2/2 Mashtots avenue, Yerevan, 0015
Tel: (+37410) 543 701
Hotel Olympia, 56 Barbusse Street, Yerevan 0028,
Tel: (+37410) 271 850
Hotel Regineh, 235/1 Norki Ayginer, Yerevan 0047,
Tel: (+37410) 654 020, (+37410) 651 619
Hotel Shirak, 13a Movses Khorenatsi Street, Yerevan 0010,
Tel: (+37410) 529 915
Hotel Terjan, 5th Street, Silikyan district, Yerevan 0029,
Tel.: (+37410) 390 388, (+374 10) 399 699
Hotel Tufenkian Hospitality, 16, 13th Street, Nork, Yerevan 0047,
Tel: (+37410) 655 877
Hotel Valencia, 40 Myasnikyan Ave., Yerevan 0025,
Tel: (+37410) 543 572, (+37410) 543 573
Hotels in the Marzes:
Gegharqunik
Avan Marak Tsapatagh Hotel, 21/1 Tumanyan Street, Sevan,
Gegharkunik Marz,
Tel: (+37410) 547 888, (+374 10) 542 707
Bohemyan Resort Hotel Complex, 29 Sayat Nova Ave, Sevan,
Gegharkunik Marz,
Tel: (+37410) 561 776, (+374-261)258 85
Harsnaqar Hotel Complex, Tsamakaberd, Sevan, Gegharkunik Marz,
Tel: (+37410) 286 272
Kotayq
“Arthur’s Aghveran Resort” Holiday Home, Aghveran Recreation
Area, Arzakan Kotayk Marz
Tel: (+374-226) 616 10
“Jupiter” Tsakghkadzor Hotel Complex, Tsaghkadzor, Kotayk Marz,
Tel: (+374-223) 606 16, (+374-223) 606 17
Hotel Kecharis, 15 Orbeli Yeghbayrner Street, Tsaghkadzor, Kotayk
Marz
Tel: (+374-223) 604 09, (+374-223) 605 09
Multi Rest House Hotel Complex, Tsaghkadzor, Kotayk Marz
Tel: (+37410) 287 450
Lori
Hotel Argishti, 1 Batumi Street, Vanadzor, Lori Marz,
Tel: (+374-322) 425 56, (+374-322) 425 57
Avan Dzoraget Hotel, Dzoraget, Lori Region,
Tel: (+37410) 235 076
Hotel Gugarq, 20 Tigran Mets Ave, Vanadzor, Lori Marz,
Tel: (+374-322) 415 19, (+374-322) 415 10
Odzun Holiday Home, Odzun, Lori Marz,
Tel: (+374-253) 235 22
Shirak
Araks Hotel Complex, 25 Gorki Street, Gyumri, Shirak Marz,
Tel: (+374-312) 511 99, (+374-312) 534 93
Hotel Berlin, 25 Haghtanaki Street, Gyumri, Shirak Marz,
Tel: (+374-312) 576 59, (+374-312) 531 48
Hotel Isuz, 1/5 Garegin Nzhdehi Street, Gyumri, Shirak Marz,
Tel: (+374-312) 251 51, (+374-312) 333 99
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Syunik
Hotel Lalaner, 29 Sisakan Street, Sisian, Syunik Marz,
Tel: (+374-2830) 66 00, (+374-2830) 45 00
Hotel Mirhav, 100 Mashtots Street, Goris, Syunik Marz
Tel: (+374 284) 24 612, (+374 284) 24 632 or Mobile: (+374
91) 209 083
Tavush
Haghartsin Hotel Complex, 121 Kamoi Street, Golovino District,
Dilijan, Tavush Marz
Tel: (+374-268) 277 70
Hotel Mosh, 3 Yerevanyan Street, Ijevan, Tavush Marz
Tel: (+374 263) 356 11
Vayots Dzor
Hotel Anush, 5 Vardanyan Street, Jermuk, Vayots Dzor Marz
Tel: (+374 287) 224 41
Hotel EvMary, 3 Shahumyan Street, Jermuk, Vayots Dzor Marz
Tel: (+374 287) 218 14
Nagorno Karabakh
Hotel Armenia, 4 Petrvari Qsani Street, Stepanakert, Nagorno
Kharabakh,
Tel: (+374-47) 948 802
Hotel Lotus, 81 Vagharshyan Street, Stepanakert, Nagorno Karabakh,
Tel: (+374 47) 945 273
Hotel Nairi, 14a Hekimyan Street, Stepanakert, Nagorno Karabakh,
Tel: (+374-47) 971 503, (+374-47) 971 502
Hotel Shushi, 3 Amiyan Street, Shushi, Nagorno Karabakh,
Tel: (+374-477) 313 57
Currently, hotel prices vary from USD 40 to USD 250 per night for a single
room. Business centres, conference rooms and other facilities are available in
most of the hotels.
Transportation and communication
Yerevan has a relatively developed public transportation system, which
includes buses, trolley buses, Metro, taxi services and vans or so-called ‘route
taxis’. Similar means of transportation are available in the other major
Armenian towns, except for electrical transport (Metro and trolleybuses).
Road and railroad communication exists between all the major regions of
Armenia. Taxis are available in the capital and in all major towns and are
relatively inexpensive.
Three international airports are in operation: Zvartnots International Airport
and Erebuni (both in Yerevan) and Shirak (in Gyumri). There are also nine local
airports in Armenia. In June 2002, Zvartnots Airport was given under
concession to a foreign operator for 30 years. The renovation and expansion
works of the Airport began in 2004, and a new international terminal (18,000
sq. m.) was opened on 1 June 2007. Yet, another terminal is being built to
house passenger check-in counters and customs control for departing
passengers, which are currently located in the old, Soviet-era built terminal of
the Airport. It is planned to open in 2011-2012. In 2008 the airport handled a
total of 1,360,596 passengers.
Several local and international airlines (such as Armavia (national carrier),
Aeroflot, Air France, BMI, Czech Airlines and Lufthansa) provide a number of
flights to the largest cities in the CIS, Europe, and Asia. Scheduled flights
operate to Amsterdam, Athens, Aleppo, Beirut, Dubai, Istanbul, Frankfurt,
Kiev, London, Moscow, Munich, Paris, Prague, Tehran, Tbilisi, Vienna, and
other major cities in the world.
There are 840 km of railways, excluding industrial lines. Of the three
international railroad connections via Georgia, Azerbaijan and Turkey, only the
connection through Georgia to the Black Sea ports (mainly Poti and Batumi) is
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in use at present. Railroad communication with Russia has been resumed
from April 2005 owing to a bi-weekly train-ferry service between the Georgian
port of Poti and the Russian port of Kavkaz, and has significantly reduced
transport costs between Armenia and Russia.
The recent developments of political relations between Turkey and Armenia
increase the probability of reopening the Armenian-Turkish border. This would
result in lower cargo transportation costs for European and Middle East
destinations, associated with the reopening of the currently non-operating
Kars-Gyumri railroad that connects the two countries.
The Governments of Armenia and Iran plan to construct a railroad connecting
Armenia with Iran. The proposed link would require around 80 kilometers of
new railroad construction in northwestern Iran, from the Armenian border on
the Araks River to the Iranian city of Marand, where the track would be
connected to the Tabriz-Julfa line. It is anticipated to launch construction of
Armenia-Iran railway in late 2009, as soon as the project’s feasibility study is
finalized. Currently, for cargo transportation with Iran the Iranian seaport of
Bandarabas is used.
Highways within Armenia total 11,300 km and there are connections with all
neighboring States.
The Armenian telecommunications network is currently operated by two
mobile operators, ArmenTel (operating under the trade mark Beeline), which
is fully owned by Russia's VimpelCom, and K-Telecom (operating under the
trademark VivaCell MTS), a subsidiary of Russia's MTS.
On 19 November 2008, the RA Public Services Regulatory Commission
issued a 10 year license to the company France Telecom (Orange brand) as a
third mobile operator in Armenia. Orange plans to launch its operations in
Armenia in autumn 2009. It will put the emphasis on the so-called thirdgeneration (3G) services: such as video calls and broadband Internet
connection.
Russian-based Comstar's Armenian subsidiary Cornet-AM has built the first
WiMAX network in Armenia. Another WiMax operator, iCon Communications,
has entered the Armenian telecommunication market. The company plans to
offer high-speed wireless broadband Internet, Virtual Private Network (VPN)
and Voice over IP (VoIP) services. Armenian Data Communication company
(ADC), another significant market player, has developed large optical fiber
network covering almost entire territory of the capital city Yerevan.
Armenian Diaspora
Taking into account that about two-thirds of Armenians live abroad, the
Diaspora has important influence on Armenia’s development and greatly
contributes to Armenia’s socio-economic, educational and cultural processes.
Starting from 2008 the Ministry of Diaspora has been established in the
structure of the Government of Armenia. The main activities of the Ministry
are aimed at widening the context of Armenia-Diaspora partnership and
facilitation a broader Diaspora engagement into Armenia’s development
agenda.
The main strategic directions undertaken by the Ministry can be described as:
Preservation of the Armenian identity in the Diaspora
Identification of the potential of Armenians spread worldwide and their
involvement in the development of Republic of Armenia
Promotion of programs aimed at nation’s unification
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Through setting up pan-Armenian professional associations, creating national
networks, conducting tailored conferences, forums, presentations and
establishing direct ties between the Homeland and the Diaspora, the Ministry
facilitates the development of the institutional and incentive framework to
mobilize and support Diaspora investments and knowledge transfer to
Armenia.
The relations between Armenia and Diaspora are also carried out through
various associations, non-profit organizations, which deal with the issues of
social, economic, cultural and educational nature that help to preserve the
core of the Armenian identity, as well as provide technical assistance and
contribute to the development of respective sectors. Some of the Diaspora
organizations are:
The Armenian General Benevolent Union (AGBU) was founded on April 15,
1906, in Cairo, Egypt. and is aimed to preserve and promote the Armenian
identity and heritage through educational, cultural and humanitarian programs.
The Armenian Assembly of America (United States) is a nationwide nonprofit organization established in 1972, Headquartered in Washington, DC. is
a nationwide non-profit organization established in 1972. The Assembly
promotes public awareness of Armenian issues, encourages greater
Armenian-American participation in the American democratic process, and
assists in humanitarian and development programs in Armenia.
The Association of Armenians of Russia (Russia) is a non-profit organization
founded in 2000. The objective of the organization is to preserve the national
identity of the Armenian Diaspora in Russia, to engage the entrepreneurs
from Russia in business development in Armenia, to initiate and support the
implementation of investment projects in Armenia.
The World Armenian Congress (Russia) was founded in 2004, in Russia, as
an international association of Armenian non-governmental organizations. The
objective of the Congress is to unite, consolidate and gather the strengths,
capabilities and experience of all the Armenians, individuals and organizations,
to contribute to the growth of the Republic of Armenia. Particularly, the
Congress organizes various conferences, business forums, which result in
establishment of direct contacts and business relations between Armenian
businessmen all around the world.
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Chapter 2
Business environment
The Government’s approach towards foreign investment
There is a positive and open attitude towards foreign investments in
Armenia. The objective of the Government policy in this respect is to
provide incentives for the foreign investments aiming to increase the
country’s exports and stimulate employment. The reforms related to
economy and infrastructure, macroeconomic stabilization and economic
growth have contributed to the development and implementation of the
country’s foreign investment policy. This policy is reflected in the RA Law
“On Foreign investments”.
The main principles of the investment policy may be summarized as
follows:
a liberal attitude towards foreign investments
an “Open door” investment principle
protection of investors’ rights
provision of equal conditions for foreign and domestic investors.
According to the assessment made by the American Bar Association, the
current Law of the Republic of Armenia “On Foreign Investments” is
viewed as being one of the most liberal and successful among other
emerging economies.
Armenia’s cumulative rating according to the Heritage Foundation “Index
of Economic Freedom”, is 69.9, “Moderately Free”, making its economy
the 31st freest in the 2009 Index. Its overall score remains unchanged from
last year. Armenia is ranked 18th freest among the 43 countries in the
Europe region, and its score puts it above the world average.
In July 2008 another world known rating agency, Fitch Rating gave
Armenia long-term “BB” , with Stable Outlook, for issuer default ratings
both in foreign and national currency. The Country Ceiling is “BB+”. Taking
into account the global and regional economic shock the Fitch Rating has
reviewed this rating in early 2009 for adjustment purposes; however the
rating of the Armenian economy remained unchanged.
The following organizations in Armenia aim to support foreign investors and
provide all necessary advice:
The Ministry of Economy of the RA. This Ministry is responsible for
implementing foreign investment policy and preparing attractive
investment packages, etc. (http://www.mineconomy.am/)
The Business Support Council of the RA, which consists of a panel
of well-known local business representatives and members of
Government. The Business Support Council is active in organizing
discussions covering the whole range of business issues, and giving
solutions to these issues, where needed.
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The Armenian Development Agency. This Agency was formed in
1998 to act as the adviser and presenter of Armenian economic
opportunities to foreign investors, as well as to assist Armenian
companies in exporting their products and services abroad.
(www.businessarmenia.com)
There are virtually no restrictions concerning the sectors in which a foreign
investor may invest, except in certain national defense-related areas. A
prior approval for making an investment is generally not required, except
for investments made in regulated establishments, such as banks,
investment companies and certain public utilities.
Armenia has signed bilateral treaties on investments and investor
protection with 37 countries, 36 of which have been already ratified.
Armenia is a signatory of the CIS multilateral convention on the protection
of investor rights.
Some Armenian business associations actively seek overseas partners to
invest in Armenian companies. Given the relatively small domestic market
in Armenia, export opportunities and international business connections are
very important to Armenian businesses. These business associations are
generally supportive of the Government’s policy with regard to expanding
business and improving standards.
Some of the business associations, actively involved in enabling a better
business environment in Armenia, are:
UMB(E)A - The Union of Manufacturers and Businessmen (Employers)
of Armenia
The Union of Manufacturers and Businessmen (Employers) of Armenia
(UMB(E)A) was founded in 1996. The main activities of UMB(E)A are
aimed at legal protection of the interests of businessmen and
improvement of economic legislation, development of international
relations and promotion of export, advocacy of the domestic
manufacturers, development of small and medium businesses.
AmCham - The American Chamber of Commerce in Armenia
The American Chamber of Commerce in Armenia (AmCham) has been
operating in Armenia since 2000. Providing active support at such areas as
tax legislation and customs administration, AmCham represents the
business interests of its members' from all business segments in Armenia
to the Armenian government, international organizations, and to the wider
business community.
EIF - Enterprise Incubator Foundation
Enterprise Incubator Foundation (EIF) was founded in 2002 with a joint
effort of the Government of Armenia and the World Bank and mainly
focuses on improving innovation and entrepreneurship policy and
regulation, promoting Armenian enterprises and increasing the
competitiveness of the local Information Technology sector in the global
market place by providing a comprehensive package of business, training,
and facility services.
Foreign investment incentives
Armenia’s investment and trade policy is considered to be one of the most
open in the CIS. With an economy that largely depends on foreign trade,
Armenia’s Government is making significant efforts to attract foreign
investments. Foreign companies are encouraged to invest and are entitled
to the same treatment as local companies.
The following incentives for foreign investors are available in Armenia.
Ownership: 100% ownership permitted.
Admission: No screening and no specific approval/ authorization for
making an investment.
13
Ownership of land: Foreign citizens are not allowed to own land in
Armenia, however they may hold long-term leases. Foreign citizens
are permitted to own the freehold of buildings and apartments, and a
company registered by a foreigner in Armenia has the right to buy
land.
Import duty: No duty on raw materials.
Export duty: None.
VAT on export: Refunds are provided; zero rating in Armenia applies to
goods and services exported under “Free Turnover” and “Reexportation” customs regimes.
Losses: Losses incurred by businesses may be carried forward up to a
maximum of five years.
Exchange control: Free operation of foreign currency accounts.
Remittance: No restrictions on remittances.
Staff recruitment: No restrictions.
Location: No sectoral or geographical restrictions on investments.
Investment guarantees: Five-year Grandfather Clause1, 37 bilateral
treaties, and membership of MIGA.
Dispute resolution: ICSID Signatory.
Full member of WTO since the end of 2002.
In addition to the specific investment incentives described above, the
following factors make Armenia attractive for Foreign Direct Investment
(FDI):
Rapidly growing economy.
Relatively inexpensive, well educated and skilled workforce.
Relatively stable banking system.
Worldwide Diaspora.
Continuous support by the international donor community in
implementing reforms.
Access to the CIS and Middle East markets.
Substantial Government involvement in economic and structural
reforms.
Types of foreign investments
Foreign investors may make the following types of investments:
Establishment of a fully foreign-owned company (including
representations, affiliates and branches), or the purchase of an existing
company.
Establishment of a new joint venture company with the participation of
Armenian companies or citizens, or the purchase of the portion of the
shares in an existing company.
Purchase of different types of securities.
Procurement of permit to use the land, or a concession agreement for
the use of Armenian natural resources with participation of Armenian
companies or citizens.
Procurement of other property rights.
Other forms of investments.
1
See the Chapter on Legal Environment – “Foreign Investment Law”.
14
Foreign investments in Armenia
Over the past ten years the Armenian economy experienced an increasing
amount of investments, with Armenia recording some of the highest FDI
per capita figures amongst non-oil producing CIS States.
According to the National Statistical Service (NSS), gross inward FDI stock
in Armenia during the post-Soviet period as of the end of December 2007
totaled at USD 3,422 million. Gross inflow of FDI as of the end of 2008 was
USD 935.5 million. During the past decade Armenia has attracted foreign
investments mainly in the following sectors (see also Chart 1):
telecommunication and transportation
power and Utilities
mining and metallurgy
light and food industry
trade (wholesale and retail)
transport, etc.
Foreign Direct Investment by Sectors (as of the end of 2008
17.0%
Mining & Metallurgy
11.0%
6.0%
Food processing industry
Power and Utilities
4.2%
Telecommunication
8.5%
Wholesale and retail trade
(including hotels and restaurants)
4.5%
30.8%
Transport
Real estate activities
18.0%
Other
Source: National Statistics Service
Several multinational companies have operations in Armenia including Air
France, British Airways, British American Tobacco, Bulvinos Chemicals,
Caritas, Castel, Coca-Cola, Corporación America, Cronimet, France Telecom,
GlaxoSmithKline, Huntsman, MTS, Marriott International, Pernod Ricard,
Philip Morris, Renco, RusAl, RAO UES, Vimpelcom, Gazprom and Siemens. In
recent years a number of IT companies have set up branches in Armenia and
are progressing successfully, for example HPLA, EPG Labs, Synopsis, Virage
Logic, iCon Communications, etc.
The banking sector is strengthened by the entrance of new foreign banks.
These include several banks with Russian participation (VTB, Troika Dialog,
GazpromBank, etc.), Credit-Agricole, Procredit bank (with German capital),
Lebanese Byblos Bank and Credit Bank, as well as Postbank (with Dutch
capital).
It is worth mentioning, that European Bank of Reconstruction and
Development (EBRD) is actively involved in the shareholding structures of the
Armenian banks. As of the end of February 2009, the bank had shares in 4
commercial banks: Byblos Bank Armenia (25%), ArmEconomBank cjsc (25%),
Ararat Bank cjsc (25%) and ProCredit Bank cjsc (16.67%).
15
Workforce
A significant portion of the Armenian labor force has higher education.
The most well-known institutions with highly educated and experienced
faculties (professors and academics), offering comprehensive studies in their
respective fields are as follows:
Yerevan State University
Armenian State University of Economics
State Engineering University of Armenia
Yerevan State University of Architecture and Construction
Yerevan State Medical University
Armenian State Agrarian University
American University of Armenia
Armenian-Russian (Slavonic) State University
French University in Armenia Foundation.
Many Armenian graduates seek employment abroad and then return with
invaluable work experience which enables them to assume leading positions
in local and international businesses.
Costs in Armenia for both the skilled and unskilled workforce are very
competitive in comparison with the USA and the EU.
Economy
Armenia is in the midst of a transition from a centrally controlled economy to
a free market economy. Under the old system, Armenia developed a highly
sophisticated industrial sector, supplying the USSR and foreign markets with
machinery, construction equipment, defence electronics, textiles, chemicals
and other manufactured goods, in exchange for raw materials and energy
resources.
Between 1989 and 1994 the economy declined owing to such key factors as
the 1988 earthquake and the disintegration of the USSR. Many industrial
enterprises have since either closed down or are operating at significantly
reduced levels of capacity.
Since 1994 the GDP growth in Armenia was and continues to be one of the
highest among CIS countries in recent years. With assistance from
international organizations and through its own efforts, the Government and
the Central Bank have been successful in dealing with inflation and achieving
macroeconomic stability. The Armenian economy is taking significant strides
forward, and as such, the investment climate in the country is promising. The
table below shows that GDP was USD 11,929.4 million in 2008, USD 9,204.5
million in 2007, and USD 6,384.51 million in 2006. The real annual GDP
growth rate (in AMD terms) was 6.8%, 13.8% and 13.2% for 2008, 2007 and
2006 financial years respectively.
16
Key Macroeconomic Indicators
Name of the indicator
2001
2002
2003
2004
2005
2006
2007
2008
2,118.4
2,376.3
2,807.1
3,576.6
4,900.4
6,384.5
9,204.5
11,929.4
9.6
13.2
14
10.1
13.9
13.2
13.8
6.8
Gross Investments/GDP (%)
19.8
21.7
24.3
24.9
30.5
35.9
37.8
40.9
Direct foreign investments (million USD)
69.9
110.7
120.5
245.6
232.7
450.1
701.0
925.2
Export of goods F.O.B. (million USD)
341.8
505.2
685.6
722.9
973.9
985.1
1,152.3
1,069.1
Import of goods F.O.B. (million USD)
877.4
987.2
1,279.5
1,350.7
1,801.7
2,191.6
3,267.8
4,411.6
GDP Deflator in % with respect to the previous year.
104.1
100.7
104.6
106.3
103.2
104.6
104.1
108.5
Volume of Industrial Output (million USD)
557.2
594.9
736.1
1,003.4
1,424.4
1,550.0
2,094.7
2,455.3
Volume of agricultural output (million USD)
632.4
658.6
708.6
945.0
1,077.2
1,336.2
1,853.1
2,082.9
Volume of construction (million USD)
198.9
290.6
411.0
518.1
950.7
1,547.5
1,961.6
2,753.1
338
340.7
437.2
591.1
792.7
1,198.1
1,752.3
2,391.3
890.5
997.9
1,189.6
1,479.0
1,865.6
1,972.9
2,731.5
3,463.0
5,744.8
5,518.8
5,500.9
6,030.0
6,316.5
5,941.3
5,897.6
6,114.3
Current account (million USD)
-199.6
-147.9
-189.4
-19.6
-51.7
-117.1
-589.3
-1.381.8
Armenian Dram/ USD (Nominal exchange rate: Period
average)
555.1
573.4
578.8
533.5
457.7
416.0
342.1
306.0
Gross Domestic Product by production (million USD)
Real annual growth of GDP (%)
Volume of services rendered to population (million USD)
Retail trade turnover (million USD)
Generated electrical power (million KWH)
Source: NSS
Government economic policy
As a main precondition for economic development, the Government of
Armenia aims to achieve a sustained average annual growth in GDP of 8.5%
between 2009 and 2011. To this extent, the Government intends to continue
structural reforms within the economy. In the long term the Government
anticipates that the nominal value of GDP will increase 4.2 times between
2007 and 2021.
The Government places a major emphasis on further improving economic and
political conditions in order to attract a higher level of direct foreign
investments and to enhance the volume of domestic savings.
In order to stabilize Armenia’s negative trade balance, the Government is
committed to further development of the banking sector, liberalizing trade
regulations, upgrading energy and transport infrastructure, finding additional
supplies of fuel and energy and developing business-related legislation in
conformity to international standards.
Armenia’s external debt remains sustainable, given that most of it is owed to
multilateral institutions.
The Government will aim to reduce the current account and budget deficits.
The tightening of the rules on using cash registers in business was another
step towards improvement of tax collection. So was introduction of a Social
Security card system, which was also aimed at improvement of tax collection
and ensuring more efficient distribution of social benefits.
Foreign trade and free trade agreements
The Government of Armenia has adopted a policy of free international trade.
Armenia has entered into a number of international trade agreements that
include:
full membership status in the World Trade Organization since December
2002
free-trade agreements with most of the CIS countries.
17
Bilateral free trade agreements of the Republic of Armenia have been ratified
and are legally binding with the Russian Federation (1993), Tajikistan (1994),
Kyrgyzstan (1995), Moldova (1995), Ukraine (1996), Turkmenistan (1996),
Georgia (1998), Kazakhstan (2002) and Belarus (2003).
Import regulations
Armenia uses the Harmonized system of tariffs classification. Tariffs are in ad
valorem and levied on C.I.F. values. The Customs Duty tariff schedule is rated
either 0 or 10 percent.
For the period 2009-2011 the European Commission has selected Armenia
to be one of the 16 beneficiary countries that have qualified to receive the
additional preferences offered under the GSP+2 incentive arrangement.
While most imports are free of prohibitions, quotas, or licensing
requirements, there are restrictions for health, security or environmental
reasons. These restrictions include requiring authorization for weapons,
components used in the production of weapons, explosives, nuclear
materials, poison, drugs, strong psychotropic substances, devices for use in
opium smoking, and pornographic materials. The import of medicines must
be authorized by the Ministry of Health and import of agricultural chemicalsby the Ministry of Agriculture.
Armenia is a member of the World Customs Organization and uses the
transaction value method of customs valuation, based on the provisions of
the 1994 GATT Agreement on the implementation of Article VII.
A customs declaration form must be presented along with a pro forma of the
goods being imported. Tobacco and spirits require certificates of quality
issued by the national certification body, Armexpertiza.
Export regulations
Armenia has no export licensing; however for some products exporters need
to obtain prior State permission for export operations.
Today, Armenian enterprises are successfully exporting their goods and
services to the international market. Some examples include processed
diamonds, jewelry, molybdenum, gold, copper, silver, synthetic rubber,
cables, electricity, alcohol products, cigarettes, canned food, natural juices,
mineral water and software products.
As of the end of 2008 the major trading partners of Armenia were Russia,
Germany, China, Ukraine, USA, Turkey, Iran, Belgium and Italy. The European
Union is the major origin of Armenian imports and most favored export
destination, followed by the CIS.
Membership of international organizations
Armenia is a member of many international organizations including:
IMF
World Bank, IDA,
EBRD
BSEC
WTO
UN, UNCTAD, UNESCO,
UNIDO
CIS
WIPO
INTERPOL
IAEA
CCC
2
WHO
ECE
ESCAP
WCO
ICAO
IFAD
ILO
INTELSAT
IOC
ITU
ISO
MIGA
The GSP is a scheme of generalized tariff preferences that offers preferential access to imports into the EU market from developing countries. GSP+
provides additional preferences for vulnerable countries which ratify and implement international standards in the fields of human rights, core labor
standards, sustainable development and good governance.
18
In January 2001, Armenia was admitted into the Council of Europe as a full
member.
International finance assistance
During the post-Soviet period foreign official transfers (grants) and
concessions played a remarkable role in the process of restructuring and
revival of the Armenian economy. During 1994-1996, official transfers (grants)
were mainly directed to covering demand towards consumption; however,
thereafter they became mostly linked with reforms implemented in specific
areas: e.g. Health care and education, public utilities and infrastructure,
institutional reforms, etc.
The major multilateral sources of assistance are the World Bank Group (WB),
International Monetary Fund (IMF), the European Bank for Reconstruction and
Development (EBRD), International Fund for Agricultural Development (IFAD)
and MCC (Millennium Challenge Corporation). Among bilateral donors the
USA remains by far the largest provider of aid to Armenia. Other bilateral
donors included the governments of Germany, France, Japan, the
Netherlands, Switzerland, UK, Italy and other countries.
The International financial assistance projects in Armenia may be conditionally
divided into the following three groups:
Foreign official transfers – for the past years main providers were the
USA (USAID), USA (MCA), EU (EU TACIS), Japan (JICA), etc. The US
based charitable Lincy foundation (financed by US billionairephilanthropist of Armenian origin Kirk Kerkorian) also played a significant
role in financing infrastructure development, urban development, cultural
and educational projects.
Concessions loans – main multilateral donors are the WB Group, IMF,
EBRD and IFAD. Main bilateral donors are the USA and Germany.
Public and private investment projects (providing both equity and
loan financing) – major multilateral organizations providing such
financing in Armenia are IFC and EBRD. Bilateral organizations are US
(OPIC), German (KfW), Japanese (JICA), etc.
Monetary policy and the banking sector
The main objective of the monetary policy for 2008 - 2010 will be to keep the
annual rate of inflation at 8% (±1.5%).
Financial sector reforms are set to continue and are in line with the progress
in the establishment of a stable institutional and legal environment.
The banking sector is dominated by few relatively large banks that are actively
improving their operations and services to match international standards. The
number of services provided by these banks has increased significantly over
the past few years.
In addition, the financial sector is developing with the establishment of nonbanking financial institutions such as insurance companies, investment funds
and brokerage companies, which constitute an additional driving force
towards aiding foreign investments.
On 7 January 2008 the Swedish exchange operator OMX AB became the
owner of 100% of the shares of the Armenian Stock Exchange (Armex) and
the Central Depository of Armenia (CDA). Also new Supervisory Boards of
Armex and CDA, each consisting of 5 members, were formed.
As of the end of February 2009, 19 banks applied for the membership of
NASDAQ OMX Armenia. Membership of NASDAQ OMX enables banks to
carry out exchange transactions in all corporate securities listed on NASDAQ
OMX Armenia, as well as in Government bonds, REPO and foreign currency.
19
Another important step was taken by the RA Government toward
improvement of the regulatory environment of the Armenian banking sector
when amendments were made to the banking law for the establishment of
the Financial Ombudsperson’s Institute in Armenia to protect consumers’
rights and overhaul financial services. The Financial Ombudsperson’s Office
launched its activities on 24 January 2009. Its purpose is to protect the rights
of borrowers and improve financial intermediation in Armenia.
The capital of the Armenian commercial banks significantly increased in
recent years. In addition, the CBA set the minimum statutory capital
requirement for banks at AMD 5 billion effective from 1 January 2009.
As of the end of June 2009, the following banks were operating in the
Republic of Armenia:
ACBA-Credit-Agricole Bank cjsc
BTA Investbank cjsc
Ameria Bank cjsc
Byblos Bank cjsc
Anelik Bank cjsc
Cascade Bank cjsc
ArmBusinessBank cjsc
Converse Bank Corporation cjsc
ArmEconomBank ojsc
HSBC Bank Armenia cjsc
ArmSwissBank cjsc
InecoBank cjsc
AreximBank cjsc
Mellat Bank S/B cjsc
ArdshinvestBank cjsc
ProCredit Bank cjsc
Ararat Bank cjsc
Prometey Bank ltd
ArtsakhBank cjsc
UniBank cjsc
Armenian Development Bank ojsc
VTB Armenia cjsc
As listed above, 22 private commercial banks were operating as of the end of
June 2009, amongst which ACBA-Credit-Agricole Bank, which is the largest,
with assets of about USD 398 million (28 percent owned by the CreditAgricole SA Group - one of the largest banking groups in the world). As of the
end of July 2009, no bank out of the 22 was under special supervision
(interim administration).
As of 31 December 2008 the banking system’s total assets to GDP was
28.4% and outstanding loans to GDP – 17.2%. Compared with the year 2007,
banks total assets and loans to GDP increased by 3.5 and 3.9 percentage
points respectively.
The total assets of the 22 banks as at 31 December 2008 amounted to AMD
1,036.3 billion showing 32.4% growth compared to AMD 782.7 billion at 31
December 2007. The total capital of the above banks amounted to
approximately AMD 238.4 billion as at the end December 2008 showing
37.5% growth as compared to approximately AMD 173.4 billion at 31
December 2007.
Significant changes took place in the Armenian commercial banks’
shareholding structures during the past few years. Also, new banks applied to
the CBA for banking licenses.
In April 2004 one of the leading Russian banks, Vneshtorgbank, became the
shareholder of over 70% of former Armsavingbank’s shares. In June 2006
Armsavingsbank was renamed to VTB Bank (Armenia) cjsc. In July 2007 VTB
acquired the remaining 30% of the shares and became the sole shareholder.
In August 2007 the main shareholding (96%) of former ArmImpExBank cjsc
was obtained by TDA Holdings Limited, an investment company affiliated to
the leading Russian investment bank “Troika Dialog”. Following this
acquisition, Armimpexbank launched a new brand - 'AMERIABANK' and
operates under this brand since summer 2008.
20
In September 2007, one of the major Lebanese banks, Byblos Bank S.A.L.,
announced its acquisition of a 100% stake in International Trade Bank. After
this acquisition the bank started to operate as an independent subsidiary of
the Byblos Bank Group under the name Byblos Bank Armenia cjsc.
On 6 December 2007 the CBA issued a banking license to ProCreditBank.
The shareholders of the bank are German “Procredit Holding AG” (with
67.49%), EBRD (16.67%) and German “KfW” (15.84%). ProCredit Bank
Armenia is member of ProCredit Group. ProCredit Group consists of 22 banks
operating in Eastern Europe, Africa and Latin America, which are led and
supervised by ProCredit Holding AG, based in Frankfurt am Main, Germany.
Another major change in Armenia’s banking sector’s shareholding structure
took place in September 2008: Russian Gazprombank became the sole owner
of Areximbank cjsc. Gazprombank OJSC is among Russia’s three largest
banks and ranks the third among the largest banks of the Central and Eastern
Europe.
By the end of December 2008 the RA National Assembly has adopted the RA
Law “On All-Armenian Bank” which regulates the procedure of establishment
and operation of the Bank. The All Armenian bank with an authorized capital
of USD 100 million is expected to start functioning in 2009. The main mission
of the bank is to consolidate Armenian communities worldwide and use their
capacity for strengthening national competitiveness on the world market. The
All Armenian bank will be an open joint-stock company. It is expected to be
co-founded by the RA Government (20%) and the world’s leading financial
institutions and private investors.
On 20 February 2009 Anelik Bank cjsc announced about acquisition of 51% of
its shares by Credit Bank, a Lebanese bank.
It is worth mentioning that all Armenian banks are audited every year by an
authorized independent auditing company with international exposure.
Anyone may legally open foreign currency accounts in commercial banks.
Foreign currency deposits may be made in these accounts, without any
restrictions to withdraw.
Companies may convert currency without any limitation. They can open
foreign currency accounts in Armenian or foreign banks. There are no limits
on the transfer of funds through banks. Individuals leaving the country have
the right to export up to the equivalent of USD 10,000 in cash without any
supporting documentation.
Insurance system
The Armenian economy is experiencing rapid growth and development of the
insurance system. The existence of a developed insurance market is an
important factor for making the Armenian economy more attractive to the
foreign investors. They provide investors with protection against various risks
arising from force-majeure circumstances, business interruptions, losses,
third party liabilities etc.
Investors may obtain insurance policies for commercial and household
property, art, business process, professional indemnity, motor vehicles,
cargo, life, death, medical, travel, jewellery, etc.
As of the end of December 2008 there were 11 insurance companies and five
intermediaries (insurance brokerage firms) in Armenia with total equity of
AMD 7.5 billion and total assets of AMD 11.7 billion. They obtain reinsurance
coverage from the world’s largest and well-known reinsurance companies,
such as Lloyds of London, Hanover, Merion, Munich Re, etc.
As of the end of June 2009, the following insurance companies and
intermediaries are operating in the Republic of Armenia:
Insurance companies
21
Intermediaries
Alfa Insurance cjsc
ACBA Brok llc
Cascade Insurance cjsc
Leader Insurance Brokers llc
Garant Limens cjss
Mitra Brokers llc
Griar-Insurance cjsc
Prime Insurance Co. ltd
Ingo Armenia cjsc
Resolution Consultants llc
ISG Insurance llc
London Yerevan Co llc
Nairi Insurance llc
Rasco cjsc
Rosgosstrakh-Armenia cjsc
Sil Insurance cjsc
All insurance companies are regulated by the Central Bank of RA.
Credit Bureaus
Until recently the CBA was the only institution operating in Armenia which
accumulated information about credit history of individuals and private
companies. The system provided by CBA is called “Credit Registry”. Credit
Registry is a system, which contains information on credibility of customers
of banks/credit institutions. Credit Registry accumulates, processes and
provides users with information on, and loans extended to, borrowers.
Information collected by Credit Registry constitutes a loan history for each
borrower. The system operates until now, but the policy of CBA is to pass all
the functions of “Credit Registry” to private credit bureaus.
As at August 2009 there was only one private credit bureau operating in
Armenia - “ACRA Credit Reporting” cjsc which was founded in January
2004. ACRA provides information (credit report/credit history), on commercial
basis, on individuals’ or companies' past borrowing and repaying, including
information about late payments.
Privatization
Following independence in 1992, the Government of Armenia launched an
ambitious program of privatization aiming to promote the creation of a viable
private sector.
The process of State property privatization in Armenia actually started in
1994. This process is currently coordinated by the Department of State
Property Management.
In accordance with Article 5.2 of the RA Law “On the Privatization of State
Property”, both foreign and Armenian individuals and/or legal entities are
entitled to equal opportunities for investment. Enterprises may be offered for
privatization either through auction, open share subscription, direct sale or
tender.
According to the Department of State Property Management report, as of 01
January 2009 about 2,018 medium and large enterprises, 7,306 “small
objects” and 101 unfinished constructions were privatized in Armenia. There
is also a range of unfinished construction objects and attractive properties
around the country in various stages of completion available for sale and final
exploitation.
Currently, the private sector accounts for about 80% of the Armenian GDP.
Examples of major privatizations by international tender are: ArmenTel in
December 1997; the Yerevan Brandy Factory in April 1998; the Armenia and
Ani Hotels in 1999; Armenian Savings Bank in 2001; the Electric Networks of
22
Armenia (Electricity Distribution Company) in 2002; the Zangezour Copper
Molybdenum combine (Armenia’s largest mining asset) in December 2004.
In 2002 the Government of Armenia signed a 30-year concession agreement
for operating Zvartnots International Airport.
Natural resources
Armenia has significant deposits of gold, copper, molybdenum as well as
smaller deposits of zinc, lead, iron and silver. There are deposits of nepheline
for use as raw materials in the refinement of aluminum and manganese
deposits.
Nonferrous and precious metals: Armenia has a strong mineral resource
base of copper molybdenum ores. Deposits of the world renowned Kadjaran
copper molybdenum ores are estimated as a potential source for the next 100
years. Zangezour Copper Molybdenum combine in Kadjaran town is the
largest enterprise in the mining industry. There are a number of smaller mines
currently operating in Armenia.
Iron Ores: There are two deposits of iron ore that are of great industrial
importance in Abovyan and Hrazdan. In addition to being the main constituent
of iron, they contain valuable rare earth elements of germanium, gallium,
tallium, niobium, and tantalum. The Hrazdan deposit also contains zirconium.
Lead and zinc: Lead and zinc ores are the second most common in Armenia,
after copper molybdenum and copper.
Gold and silver: The deposits of nonferrous metal ores are characterized by
their considerable precious metal content, making the deposits industrially
important. There are gold deposits in Zod, Meghradzor and Terterasar.
Armenia has become a significant gold producing region in the CIS.
The Armenian volcanic and sedimentary rocks are useful building materials.
Particularly exceptional is the white, pink, orange, or black tufa, all of which
are light, durable, and easily processed. They serve as the main construction
and decoration materials. The country has abundant deposits of marble,
granite, high quality travertine and limestone, and small deposits of clay
gypsum.
There are also deposits of rich mineral sorbents such as bentonite, perlite,
zeolite and diatomite.
Armenia is rich in semi-precious and ornamental stones such as the
jewelry agates, jasper, amethyst, serdoliks, turquoise, and different types of
marble onyx.
Common salt deposits were found near Yerevan with estimated reserves of
150 to 200 billion tones.
Armenia has an abundant resource of mineral water, distinguished by its
variety of physical and chemical compositions, temperatures and medicinal
characteristics. Among the well-known springs are the springs of Jermuk,
Arzni, Dilijan, Bjni, Hankavan and Sevan.
Government Securities market
The Government securities market has undergone major changes during
recent years. Currently internal public debt of Armenia is comprised of the
following four debt instruments:
Government Treasury Bills (short term);
Government Treasury Notes (coupon notes), (mid-term)
Government Treasury Notes (serial repayment coupon notes), (mid-term)
Government Treasury Bonds (long term)
Government Savings Coupon Bonds (long term).
23
Government treasury securities are issued and allocated in accordance with
the Government Decree “On approval of the procedures of issue, allocation,
circulation and retirement of Government Securities” No.103- N dated 3 June
2004.
Government Treasury Bills are discount securities with a maturity varying
from one to 52 weeks and were first issued in 1995. Volume, maturity and
yield figures of T-bills for the period of 30 December 2001 to 30 December
2008 are as follows:
30.12.2001
Volume in
nominal value
(million AMD)
21,196.01
157
18.70%
30.12.2002
23,300.00
169
14.79%
30.12.2003
22,300.00
183
11.43%
30.12.2004
9,200.00
129
5.64%
30.12.2005
6,500.00
191
3.80%
30.12.2006
7,699.60
74
5.22%
30.12.2007
7,000.00
158
6.01%
30.12.2008
30,133.50
117
8.50%
Issue date
Maturity (years)
Average yield
Government Treasury Notes (serial repayment coupon notes) with a maturity
varying between 1.25 to 5 years were introduced on May 7, 2000,
Government Treasury Notes (coupon notes) were issued in September 2004.
Volume, maturity and yield figures of T-notes for the period of 30 December
2001 to 30 December 2008 are as follows:
Issue date
Volume in
nominal value
(million AMD)
Maturity
(years)
Average yield
30.12.2001
10,830.80
310
22.68%
30.12.2002
16,012.56
410
18.84%
30.12.2003
20,573.34
538
16.16%
30.12.2004
34,506.08
746
9.88%
30.12.2005
36,487.49
722
7.72%
30.12.2006
38.087.80
766
6.96%
30.12.2007
47,421.15
878
6.87%
30.12.2008
36,873.63
799
7.27%
Government Treasury Bonds were first introduced on September 23, 2004
with maturity of seven years. Volume, maturity and yield figures of T-bonds
for the period of 23 September 2004 – 30 December 2008 are as follows:
Maturity
(years)
Average yield
23.09.2004
Volume in
nominal value
(million AMD)
1.500.00
7
9.25%
14.12.2004
1.200.00
10
9.27%
30.12.2005
8,360.00
10
8.29%
30.12.2006
12,175.40
10.9
8.62%
30.12.2007
11,710.62
10
8.34%
30.12.2008
24,985.83
11.9
9.78%
Issue date
24
Government Savings Coupon Bonds were first introduced on January 16,
2007 with maturity of seven years. Volume, maturity and yield figures of Tbonds for the period of 16 January 2007 – 30 December 2008 are as follows:
Issue date
Volume in
nominal value
(million AMD)
Maturity
(years)
Average yield
30.12.2007
171.43
231
7.44%
30.12.2008
311.84
243
8.43%
Treasury bills are offered in weekly auctions. To participate in the weekly
auction, an application should be submitted through an Armenian commercial
bank or directly to the Central Bank of Armenia.
Treasury securities market of Armenia has the following structure:
Issuer - Ministry of Finance and Economy
Underwriter – the Central Bank of Armenia
Dealers and brokers - resident banks
Internal public debt manager - State treasury system
Principal Depositary - Central Bank of Armenia
Clearing and payment system - Central Bank of Armenia
Investors- no restrictions.
There is Profit Tax payable by companies on the interest earned from
Treasury Bonds and other State securities.
Chapter 3
Business entities
25
Chapter 3
Business entities
There are certain options for a person to perform business (commercial)
activities in the Republic of Armenia. In particular, a person can either
register as an entrepreneur or establish a commercial (profit-making)
organization. Another option is for legal entities (including foreign legal
entities) to establish a separated subdivision (a representative office or a
branch). Citizens can exercise entrepreneurial activities without state
registration if they are considered a payer of permission fees (for certain
types of activities established by law) or signed a contract for joint activity
for the purpose of production of agricultural products.
The Civil Code dated 5 May 1998 (and effective as of 1 January 1999),
establishes the following legal forms of business:
entrepreneurs/Sole proprietors
business partnerships (full partnerships and trust partnerships)
limited liability companies
supplementary liability companies
joint-stock companies (open and closed)
cooperatives
representative offices and branches.
Entrepreneurs/Sole proprietors
This form allows individuals to perform commercial activities. Although this
form is distinct from legal entities, the provisions applicable for commercial
organizations also regulate the activities of entrepreneurs in general. An
entrepreneur is allowed to have his/her own seal, a bank account and
employees. However, it should be noted that an entrepreneur has
unlimited liability for all debts incurred.
Business partnerships
Partnerships are a specific type of commercial organizations along with
business companies. Partnerships have certain peculiarities, which allow
distinguishing them from companies. Partnerships can be established in
Armenia in the form of full partnerships or trust (special) partnerships,
whilst business companies may choose other forms, in particular a jointstock company, a limited liability company, a supplementary liability
company or a cooperative.
As an association of partners, a partnership cannot be established by one
person. The partners personally participate in the management of a
partnership. Therefore, it is not permitted to be a partner in more than one
partnership. The partners are personally liable (jointly and severally) for the
debts of the partnership. The trust partnerships also have silent partners
(called “depositors”) who are uninvolved in the activities (management) of
the partnership and have a share in the profits and losses of the business.
26
Limited liability companies
A limited liability company (llc or ltd) is a type of business entity, which can
be established by one or more persons (called “members”), each member
having a share in the capital. The members have limited liability for the
debts of the company and are only liable to the extent of their share in the
charter capital. There is no minimum charter capital requirement
established for the limited liability companies, except for the limited liability
companies acting in specific fields (for example, banks). The members of a
limited liability company also have a preemptive right to purchase the share
of other members. It should be taken into consideration that it is prohibited
by law for companies with only one founder or shareholder to establish
limited liability companies in Armenia.
Additionally, it should be mentioned that the overwhelming majority of
business companies (more than 55%) in the Republic of Armenia are
operating under the legal status of a limited liability company.
Supplementary liability companies
This form of business entities is rather similar to limited liability companies.
The main difference is that the members of a supplementary liability
company bear secondary liability for the debts of the company, which
bears the primary responsibility. The liability of the members is limited to a
multiple of their share in the capital. In the event of the bankruptcy of a
participant, his portion of liability is transferred proportionally to the
remaining participants, unless otherwise prescribed by the charter of the
company.
Joint-stock companies
A joint-stock company is a business company, the charter capital of which
is divided into shares. Joint-stock companies have the exclusive right to
issue special type of securities - shares. Joint-stock companies can be
established as an open joint-stock company (ojsc) or a closed joint-stock
company (cjsc). The shares of open joint-stock companies can be
purchased in the open market and can be listed in stock exchanges. There
are auditing and information publication requirements for open joint-stock
companies. This information is publicly available. The number of
shareholders in closed joint-stock companies is limited by law (not to
exceed 49 shareholders) and a right of preemptive purchase of shares is
provided for the shareholders. There is no minimum charter capital
requirement established for joint stock companies, except for the joint
stock companies operating in specific fields (for example, banks).
Cooperatives
Cooperatives are a specific type of legal entity, being associations of
persons joined together for material and other benefits. Cooperatives are
formed on the basis of contributions of their members. Certain types of
cooperatives (for instance, consumers’ cooperatives, condominiums) are
non-profit organizations and therefore, are not allowed to perform business
activities.
Representative offices and branches of legal entities
Another option available for performance of activities in the Republic of
Armenia is by way of establishing a representative office or a branch.
These establishments do not obtain the status of a legal entity. The scope
of activities of a representative office is limited to representation and
protection of the interests related to the head office. The scope of activities
of a branch is larger since the branch is allowed to perform all the functions
of the head office or part of them, which means that the branch can
perform business activities. Both representative offices and branches
operate on behalf of the head office, which provides property thereto.
Representative offices and branches have a simpler structure and the
management is performed by a director, who is appointed by the head
office and acts on the basis of a power of attorney. Representative offices
27
and branches operate on the basis of their charters, which should be
approved by the head office.
Establishment (registration) of legal entities, branches and
representative offices
Legal entities are subject to State registration in the Republic of Armenia
and they are considered established in the Republic of Armenia as of the
moment of their State registration. Performance of business activities
without State registration can result in administrative or criminal liability.
Representative offices and branches of legal entities are not registered in
the Republic of Armenia but enlisted with the State registration authorities
instead. The State registration of legal entities, enlistment of representative
offices and branches is carried out by the State Register of Legal Entities3.
In order to be registered or enlisted with the State Register, the company
has to submit the required documents. Legal entities, representative office
and branches are normally registered within five working days following
the submission of the required documents.
3
Unless otherwise prescribed by law (for example banks and branches of foreign banks are registered in the Central Bank of Armenia)
28
Chapter 4
Accounting requirements
Regulation of accounting and reporting
In accordance with the RA Law “On Accounting”, all legal entities
registered in Armenia, as well as branches and representative offices of
foreign legal entities must carry out financial accounting and prepare
general purpose financial statements in accordance with the following
accounting regulatory Acts issued by the RA Ministry of Finance:
Accounting Standards of the Republic of Armenia (ASRA), which have
been adopted by the RA Ministry of Finance and are based on
International Accounting Standards effective as of the end of 2000
with minor changes;
Currently effective International Financial Reporting Standards (IFRS)
for banks and other organizations, which voluntarily made transition to
International Standards (The changes made to the RA Law “On
Accounting” see below);
Mandatory Chart of Accounts – currently there are 3 Charts of
Accounts in application: for banks, insurance companies and other
organizations;
Recommended forms of financial statements.
Currently all organizations, with minor exceptions, are required to submit
their annual financial statements to the State Revenues Committee. Banks,
insurance companies and other financial institutions; listed and natural
monopolies are also required to submit regulatory reports to the
appropriate regulatory bodies.
In addition, banks, insurance companies, other financial institutions, listed
companies, not listed open joint-stock companies, large companies (the
company is considered large if at least one of the following two criteria is
met: 1) the revenue from the activity of the previous year exceeds AMD
500 million; 2) the book value of the assets as at the end of the previous
year exceeds AMD 500 million) and several other organizations (e.g.
lotteries, casinos, etc.) are required to publish their financial statements.
The Chief Accountants of such organizations are obliged to possess a
professional qualification from the Ministry of Finance or the Central Bank
(for banks and other financial institutions).
Recent changes in the RA Law “On Accounting”
On 26 December 2008 the RA Law “On Accounting” was amended mainly
changing the reporting requirements in the RA. In accordance with these
amendments, International Financial Reporting Standards, the principles of
preparation and submission of financial statements, Guidance on
application of the Standards and other documents mandatory for
implementation, published by the International Accounting Standards
Board, shall apply on the territory of the Republic of Armenia.
29
According to the transitional provisions, reporting in compliance with IFRS
is applied:
to banks and other organizations which have voluntarily made
transition to International Standards – starting from 1 January 2009
to financial institutions other than banks (such as credit, settlement
organizations, reporting issuers at the Securities Market, investment
companies, the regulatory market operator, Central Depository,
insurance and reinsurance companies and insurance brokers) – starting
from 1 January 2010
for organizations, whose revenue during the previous calendar year
exceeded AMD 100 million – from 1 January following the year after
the expiry of the six-month period following the publication of the
International Financial Reporting Standards, Guidance to International
Standards, their amendments, starting from 1 January 2011 (the
publication is preliminarily estimated in late 2009 - first half 2010).
The companies with lower revenue (less than AMD 100 million) may apply
a special Regulation of tax accounting different from International
Accounting Standards and Guidance to Standards. The authorized State
body establishes different sample forms of financial statements and
instructions for completion of these statements.
Financial statements
The presentation and preparation of financial statements should be
performed in accordance with the RA Law “On Accounting”. The full
package of financial statements includes:
the statement of financial position
the statement of comprehensive income
the statement of changes in equity
the statement of cash flow; and
notes to the financial statements.
Where the company has a subsidiary, it should prepare consolidated
financial statements for the Group.
The Directors of the companies are responsible for maintaining appropriate
accounting practices in accordance with the accounting regulating Acts
issued by the Ministry of Finance; preparing and submitting the financial
statements. Financial statements have to be signed by the directors and
the chief accountants of the companies.
Auditors and audit requirements
Audit of the annual financial statements carried out by an independent
audit company is mandatory for certain companies, such as open jointstock companies, banks and similar financial institutions, stock exchange
participants, listed and other large companies (as defined above).
Audit companies are licensed by the Ministry of Finance. In order to
receive a license the audit firm should have at least two qualified auditors,
who obtain a professional qualification from the Ministry of Finance.
Auditing standards
Audits are performed in accordance with the auditing standards of the RA,
approved by the Ministry of Finance. These are the normative legal acts
regulating the methods and procedures of carrying out audit, as well as
audit related services in compliance with the International Standards on
Auditing (ISA). The RA Law “On Audit” regulates this field.
Audit companies
Currently4 in Armenia there are 22 audit companies, including KPMG
(established in 1997), (PWC established in 2008) and Ernst&Young
(established in 2008).
4
As at 31 July 2009
30
Chapter 5
Legal environment
Below is a list of laws that may be of importance to potential investors:
The Civil Code is the main Legal Act providing the regulatory basis for the legal
status of business entities in Armenia, commercial and business relations, the
right to property ownership and related rights, conclusion and execution of
transactions, representation in civil law, calculation of time periods, limitation
(prescription) periods, performance of obligations, contractual relations, tort,
intellectual property, inheritance etc.
The Labour Code is the main Legal Act regulating employment relations in the
Republic of Armenia. The Code sets forth the main provisions related to
employment agreements, collective agreements, length of a working day, rest
time, duration of vacations, calculation of salaries and other payments to
employees, termination of employment relations, duration and payment for
special leave, such as maternity leave, study leave, restrictions and notification
for termination etc. Although the current Labour Code has entered into effect
from 21 June 2005 its provisions have retrospective force and apply to existing
employment relations as well.
The Law on State Registration of Legal Entities stipulates the procedure for
registration of legal entities and entrepreneurs, registration of reorganization of
legal entities, registration of amendments in charters and registration of
liquidation of the entities.
The Law “On Privatization” sets the framework for the transfer of Stateowned enterprises to private ownership. The law stipulates the forms of
privatization of State-owned property, to be determined by the Government of
the Republic of Armenia in each case.
The Law “On inventions, utility models and industrial designs” regulates
the property and personal, non-property rights with regard to creation, legal
protection and application of inventions, industrial designs and utility models. It
provides patent protection for inventions (20 years), utility models (10 years)
and industrial designs (5 years with right of prolongation for total up to 25
years). Armenia has also ratified several international conventions in this area,
such as the Patent Cooperation Treaty, Paris Convention for the Protection of
Industrial Property, Strasbourg Agreement Concerning the International Patent
Classification, etc.
The Law “On trademarks, service marks and designation of origin”
establishes the procedure related to the registration and protection of
trademarks, service marks and geographical indications. Pursuant to this law, a
trademark or a service mark is subject to legal protection in the Republic of
Armenia by virtue of international treaties or acknowledgement of its renown or
after its State registration, which is carried out by the Intellectual Property
Agency (at the Ministry of Economy). Designations of origin are also subject to
legal protection by virtue of international treaties or after their State registration.
Armenia is a signatory of such international treaties, as the Madrid Agreement
for the Repression of False or Deceptive Indications of Source on Goods, the
31
Vienna Agreement Establishing an International Classification of the Figurative
Elements of Marks, the Nice Agreement Concerning the International
Classification of Goods and Services for the Purposes of the Registration of
Marks.
The Law “On copyright and related rights” provides for the legal protection
of literary works, musical works, paintings, films, software, and other
intellectual property rights as well as the legal protection of the rights of
performers, producers of sound recordings and broadcasting organizations.
Among the legal instruments for the protection of copyright and related rights
are international conventions, which Armenia has ratified, in particular the Berne
Convention for the Protection of Literary and Artistic Works, the Rome
Convention for the Protection of Performers, Producers of Phonograms and
Broadcasting Organizations, WIPO Copyright Treaty, WIPO Performances and
Phonograms Treaty, etc.
The Law “On bankruptcy” provides the grounds for recognizing the legal
entities insolvent, the procedure for financial rehabilitation or liquidation of
insolvent entities. Pursuant to this law, a liquidator is appointed to administer
the liquidation process. The liquidator analyzes the financial position of the
company, verifies the validity of third party claims, opens a special bank
account, convenes the creditors’ meeting etc. The duties of the liquidator can
be terminated by court in the event of non-performance or improper
performance of the liquidator. Similar issues for banks, credit organizations,
investment companies and insurance companies are regulated by the RA Law
“On Bankruptcy of banks, credit organizations, investment companies and
insurance companies”.
The Law “On auditing” provides the definition of audit activities, establishes
the general framework for the audit activities, including audit documentation,
qualification of auditors, requirements for the licensing of audit companies,
rights and obligations of auditors and audit companies. The Law specifies that
audit in Armenia is carried out in accordance with the Armenian Standards of
Auditing, which correspond to International Standards on Auditing.
The Law “On the protection of economic competition”. The aim of this law
is to protect and promote competition, to prevent unfair competition and abuse
of monopoly, to create an environment for fair competition, to help the
development of entrepreneurship, and to protect consumer rights in the
Republic of Armenia.
Environmental and Natural Resources Laws. Exploitation of natural
resources and environmental protection is regulated by a number of Codes and
Laws in the Republic of Armenia. In particular, the National Assembly has
adopted the Land Code, the Water Code, the Code on Entrails of the Earth, the
Law on Concession of Entrails for extraction and research purposes, the Law
on Waste Products, the Law on Payments for Environmental Protection and
Use of Natural Resources, the Law on the Assessment of Environmental
Impact, etc.
Foreign Investment Law
The Law “On foreign investments” sets forth the rights, guarantees and
privileges for foreign investors, who can make their investment in various
forms, such as a joint venture or the establishment of a wholly-owned
subsidiary.
The Law “On Foreign Investments” contains a grandfather clause, which
allows foreign investors to refer to the investment legislation, effective for a
five-year period from the moment of making the investment.
Investments made by foreigners shall not be nationalised or confiscated.
Seizure of property can be applied as an exclusive measure if authorized by a
court and where a state of emergency has been declared by the Government.
Seizure of property is subject to full compensation. Foreign investors are also
entitled to compensation of damages and losses (including lost profit) resulting
32
from unlawful acts of State authorities or State officials or improper
performance of their duties.
Goods, which are imported by foreign investors with the purpose of paying up
shares or the charter capital, are exempt from customs duties. However, if
these goods are disposed within 3 years after their import, the customs duties
shall be paid.
Foreign citizens are not allowed to own land in the Republic of Armenia - they
can only acquire the right of land use on the basis of a lease or free use
agreement. Activities related to natural resources can be performed on the
basis of concession agreements to be signed with the relevant State authority.
Foreign investors are also obliged to pay taxes in accordance with the tax
legislation of the Republic of Armenia, which provides privileges for investors in
certain cases.
Banking and related legislation
The basic laws regulating banking activity are the Law “On the Central Bank of
the Republic of Armenia”, the Law “on Banks and Banking Activity”, the Law
“On Bankruptcy of Banks and Credit Organizations”, the Law “On Bank
Secrecy”, the Law “On Credit Organizations”, the Law “On insurance and
insurance activities”, The Law “On Securities market”, The Law “On
combating money-laundering and financing of terrorism”, the Law “On
guaranteeing the compensation of bank deposits of individuals”, the Law “On
currency regulation and currency control” and the Law “On payment and
settlement systems and payment and settlement organizations”.
As of August 2009, the authority regulating this area – the Central Bank of
Armenia - has adopted a number of regulations governing the establishment of
banks, their operation and other issues related to banking. In particular, the
following regulations are currently effective:
Regulation 1: Registration and licensing of banks, branches of foreign
banks, registration of branches and representative offices, qualification and
registration of management of banks and branches of foreign banks.
Regulation 2: Regulation of the banking activities, prudential standards for
banking.
Regulation 3: Bank statements; reporting and publication.
Regulation 3/01: Licensing of insurance activities and insurance
intermediary activities; obtaining the preliminary consent to qualifying
holding in statutory capital of insurance company; insurance company's
business plan submission, procedure and date; testing of qualification of
candidates for officials and responsible persons of insurance company and
insurance intermediary; themes of qualification test for officials
of insurance company and responsible persons of insurance intermediary.
Regulation 3/02: Prudential standards for insurance activities, procedure
of formation and calculation of prudential standards
Regulation 3/03: Types of technical reserves and procedure of their
formation.
Regulation 3/04: Forms of statements of insurance companies, the
information included in them, terms and procedure of their submission.
Regulation 3/05: Criteria
authorized and reliable.
for
considering
reinsurance
companies
Regulation 3/06: Information publications on insurance broker
organizations and their authorities, its content, forms and periodicity.
Regulation 3/07: Outsourcing operations under insurance operations
outsourcing agreement, documents and information to be submitted to the
Central Bank of Armenia to obtain prior authorization to outsource
insurance operations, their content, filing procedures and forms, rules and
33
conditions for obtaining prior authorization to outsource insurance
operations
Regulation 3/08: Scoring method of insurance company activities rating
(CARAMELS) operating in the Republic of Armenia.
Regulation 3/09: The procedure of classification of assets and formation
and use of the reserves of possible losses of insurance companies.
Regulation 4/01: Registration and licensing of investment companies,
registration of branches and representative offices of investment
companies and foreign investment companies , procedure of obtaining
preliminary consent for having significant participation in the charter capital
of investment companies, procedure, form and terms of presenting a
business plan by them.
Regulation 4/02: Prudential standards of investment companies, their
limits, the procedure of their calculation, the structure of the elements
involved in the calculation, the extent of violations of the established
prudential standards.
Regulation 4/03: Reports submitted to the Central Bank by persons
providing investment services, procedure, form and periods on their
submission.
Regulation 4/04: Prospectus and statements of reporting issuers.
Regulation 4/05: The qualification of the persons providing investment
services, the operator, the heads of Central Depository and individuals
providing investment services, their professional compliance criteria and
the list of the topics for testing their professional qualification
Regulation 4/06: Criteria for certifying investors as qualified investors and
procedure on registration of qualified investors.
Regulation
4/07:
Requirements
providing investment services.
on
activities
of
persons
Regulation 4/08: Procedure on making available to the public reports,
references, explanatory notes and other such documents submitted to the
Central Bank for off-site supervision and exceptions from the requirement
of making these documents available to the public.
The procedure of publication of information by investment companies
regarding themselves.
The Regulation on the minimal requirements stipulated for the financial
institutions in the field of combating money laundering and terrorism
financing.
Regulation 5/01: Registration and Licensing of Regulated Market
Operator; Procedure for Obtaining Preliminary Consent for Qualifying
Holding in Statutory Capital of Regulated Market Operator ; Procedure,
Mode and Timeframe for Presentation of Business Plan
Regulation 5/02: Registration and licensing of the Central Depository, the
procedure of obtaining preliminary consent for having significant
participation in the Charter capital of the Central depository, the procedure,
form and time limits for submitting a business plan.
Regulation 5/05: Regulated Market Operator's reporting of violations
committed by regulated market participants and reporting issuers to the
Central Bank
Regulation 7: The procedure and time period for the formation of
temporary administration of insolvent banks and credit organizations;
reporting by the head of temporary administration;
Regulation 9: Cash operations in the banks operating on the territory of
Armenia.
Regulation 10: Licensing and regulation of FX purchase and sale
operations.
34
Regulation 11: Licensing, regulation and control of FX public sale in
Armenia.
Regulation 12: Licensing and regulation of FX dealer trading.
Regulation 13: Procedures on registration and licensing of credit
organizations, registration and licensing of credit organizations' branches
and representative offices, approval of acquisition of significant
participation in the statutory fund of credit organizations, procedure on
qualification award and registration of the managers of credit organizations,
business regulations of credit organizations, requirements on credit
organizations' facilities and the availability of equipment.
Regulation 14: Regulation of activities of credit organizations; prudential
standards for activities of credit organizations.
Regulation 15: Statements of credit organizations, reporting and
publications.
Regulation 16: Licensing of money transferring organizations, registration
of their branches and representative offices, regulation of activities,
qualification of managers.
Regulation 17: Licensing of processing and clearing organizations,
registration of their branches and representative offices, qualification of
managers.
Regulation 18: Issuance of permits for the creation and operation of
Armenian payment and settlement system.
Regulation 19: Issuance of permits for the participation in foreign payment
and settlement systems.
Regulation 21: Cash operations in the credit organizations operating on the
territory of Armenia.
Regulation 22: Statements of payment and settlement organizations,
reporting and publication.
Regulation 33: Custodian activities of securities.
Procedure of licensing of pawnshop activity in the Republic of Armenia.
Regulation on selection of independent audit companies by commercial
banks operating in the Republic of Armenia.
Regulation 40: Declaration on registration of securities, and reporting
issuers’ reports
Regulation 01/01: On registration of All Armenian Bank
Regulation 5/06 The scope and procedure of publication of data subject to
publication by the operator of the regulated market on its web page
Regulation on the minimal requirements established for financial
institutions in the sphere of combating money laundering and terrorism
financing
The Law of the Republic of Armenia “On the Central Bank of the Republic
of Armenia”, defines the sphere of activities of the Central Bank, its
authorities, objectives, status, principles of carrying out the monetary policy,
financial transactions and governance of the Central Bank, principles of
relationship between the State authorities and commercial banks and the
principles of currency regulation and supervision.
The Law of the Republic of Armenia “On banks and banking activity”
defines the basic principles of banking activities, including the procedures and
provisions for regulation, licensing and supervision of banking activity, the
structure of the banking system, the specifications of organizational-legal
structure of banks, bank liquidation and reorganization.
The Law of the Republic of Armenia “On the bankruptcy of banks and
credit organizations” establishes the procedure for the bankruptcy of banks
and credit organization, which may lead either to the financial rehabilitation or
35
the liquidation of the bank or credit organization. This Law also specifies the
criteria of insolvency.
The Law of the Republic of Armenia “On bank secrecy” defines the rules
and regulatory basis for the publication and provision of information related to
bank secrecy, as well as responsibility for illegal disclosure of confidential
information.
The Law of the Republic of Armenia “On credit organizations” regulates
the procedure and terms for licensing, regulation and supervision of the
activities of those organizations, including credit unions, savings unions, leasing
and factoring organizations and other credit organizations.
The relationship between banks and their clients is basically regulated by the
Civil Code. The Civil Code provides the main legal framework for loans,
collateral security, deposits, bank accounts, leasing, factoring, cash collateral,
guarantees, etc.. The Civil Code also covers internationally accepted practice for
transactions covering the signing of agreements, norms in business relations
and freedom of agreement. The Civil Code also provides for compensation of
losses and set-off procedures, the basic rights, liabilities and responsibilities of
parties to an agreement and the concept of force majeure, etc.
The Law of the Republic of Armenia “On insurance and insurance
activities” regulates the relations arising out of undertaking and implementing
of insurance, reinsurance and insurance intermediation activities;
establishment, licensing, operation and termination of operation of insurance
companies, reinsurance companies and insurance intermediaries; public
oversight of insurance, reinsurance, insurance intermediation activities; and
other relations associated with insurance in the Republic of Armenia.
The Law of the Republic of Armenia “On combating money laundering
and terrorism financing” regulates the relationships pertaining to combating
money laundering and terrorism financing, define the system of bodies
engaged in combating money laundering and terrorism financing, the
procedures and conditions for cooperation between these bodies, as well as
the issues related to the supervision and to the imposition of sanctions in the
field of combat against money laundering and terrorism financing.
The Law of the Republic of Armenia “On guaranteeing the compensation
of bank deposits of individuals” regulates the relationship with regard to the
guaranteeing the compensation of bank deposits of individuals. Particularly, the
Law provides the definition of the bank deposit, establishes the amount of the
bank deposits compensation of which is guaranteed as well as establishes
exceptional cases when the compensation of the bank deposit is not
guaranteed.
The guarantor of the deposits is a Fund of guaranteeing compensation of
deposits
The Law of the Republic of Armenia “On currency regulation and currency
control” determines procedure and terms of currency transactions; cases of
ownership, holding and use of currency values, procedure and terms, and
regulates other relations linked to currency regulation and currency control in
the Republic of Armenia. Particularly it establishes that money pricing for sale of
goods (property), rendering of services, salary and salary equivalent payments,
assessment, execution of work and use of property shall be made in the drams
of the Republic of Armenia
The Law of the Republic of Armenia “On payment and settlement systems
and payment and settlement organizations” regulates and administers:
activities of payment and settlement systems and payment and settlement
organizations, licensing of payment and settlement systems and payment and
settlement organizations, procedure and terms of oversight of payment and
settlement systems and payment and settlement organizations, determines
infringement of laws and other normative regulations by payment and
settlement systems and payment and settlement organizations, sanction
36
applied to payment and settlement systems and payment and settlement
organizations and rules for settlement finality.
The Law of the Republic of Armenia “On Securities Market” regulates the
relations that occur in connection with the activities of the securities market of
the Republic of Armenia and defines:
the procedure for public offering and public trading of securities,
the procedure for providing investment services in the securities market
and organizing public trading of securities,
the procedure for custody, clearing and settlement systems of securities,
as well as activities of the Central Depository;
the authorities and obligations of the Central Bank of Armenia with regard
to regulation and supervision of the securities market,
the responsibility for violation of requirements of the Law, the regulations
adopted on its basis and other legal acts.
The securities market of the Republic of Armenia includes persons who issue
securities and invest in securities within the territory of the Republic of
Armenia, the regulated markets of securities and the field of non-regulated
trade, the Central Depository, and persons engaged in activities that are subject
to licensing as stipulated by the Law.
According to the Law, the Central Depository is a joint stock company, which
performs the functions of a centralized custodian, centralized registry and
settlement system operator of securities.
Currently the shareholder of the Central Depository is NASDAQ OMX.
The judicial system of the Republic of Armenia
A three-tier judicial system currently exists in the Republic of Armenia:
The First Instance Courts;
a) courts of general jurisdiction;
b) specialized court – Administrative Court
The Courts of Appeal;
a) Civil Court of Appeal;
b) Criminal Court of Appeal
The Cassation Court.
The relations regarding organization and functioning of the judicial power in
Armenia are regulated by the Judicial Code of RA.
In the field of constitutional justice the highest judicial power is Constitutional
Court of the Republic of Armenia. The relations regarding its organization and
functioning are regulated by the Law “On Constitutional Court”
Courts of general jurisdiction hear all civil and criminal cases as a first instance
court. Sixteen Courts of general jurisdiction operate in the Republic of Armenia:
nine courts in the regions (marzes) of Armenia and seven courts in Yerevan. As
a general rule (with some exceptions in criminal procedure) in the courts of
general jurisdiction cases are heard by one judge.
The civil procedure in Armenia is regulated by the Civil Procedure Code and the
criminal procedure - by the Criminal Procedure Code.
Administrative court hears administrative cases provided in the Administrative
Procedure Code. The decisions of the Administrative court can be appealed to
Cassation Court of RA. The Central seat of the Administrative court is in
Yerevan. It has other seats in the regions of Armenia.
37
The Courts of Appeal revise the judicial acts of the courts of general jurisdiction.
Both Courts are located in Yerevan and their decision may be appealed in the
Cassation Court. In the Courts of Appeal appeals against judicial acts solving the
case in essence are heard by a panel of three judges, other appeals (on interim
judicial acts) – by one judge.
The Cassation Court is the highest judicial instance, its main function is to
ensure uniformity in the implementation of the law Cassation Court within
the limits of its authorities revises the judicial acts of the subordinate courts
solving the cases in essence and the decisions of the Court of Appeal made in
the result of revising the interim judicial acts. It has two chambers: one
chamber hears civil and administrative cases and the other one - criminal cases.
The Cassation Court is located in Yerevan.
In Armenia the judicial precedence institute is partially established. In
accordance with the current legislation the substantiations of the judicial act of
the Cassation Court or the European Court of Human Rights (including the
interpretations of the law) with respect to a case with certain factual
circumstances are mandatory for the court in the course of considering a case
with similar factual circumstances, with the exception of the case when the
court substantiates with solid arguments that they are not applicable towards
those factual circumstances.
Law firms
Below is a partial list of law firms operating in Armenia, and assistance in
restoration of Legal Entities and individuals’ infringed rights as well as provide
legal consulting and litigation services.
Arlex International, Inc. , Armenia, 0010, 9 Tpagrichneri Street, Yerevan
Tel/Fax: (374 10) 58-02-13
"HARUTIUNIAN & ASSOCIATES LAW OFFICE" Limited Liability
Company, Armenia, 0025, Yerevan, Khanjyan St., Building 50, 4th Floor (in
Tekeyan Center building)
Tel: (37410) 559 501, 559502
Fax: (37410) 559 503
INTERNATIONAL LEGAL CONSULTING" ("ILC") Limited Liability
Company, Armenia, 0009, Yerevan, Abovyan St., Building 34, Apt. 7
Tel: (37410) 569 698
Fax:(37410) 566 735
"KARAKHANYAN & PARTNERS LAW OFFICE" Limited Liability
Company, Armenia, 0010, Yerevan, Vardanants St., Bld. 18/1, 2nd Floor
Tel: (37410) 500 354, 500 355
Fax: (37410) 500 354
LEV GROUP LAW-ECONOMIC UNION" Closed Joint-Stock Company
Armenia, 0015, Yerevan, Argishtii St., Building 7, Room 203 (in the building
of Moscow House)
Tel: (37410) 568 080, 510295
Fax: (37410) 568 080
LISAM Legal Services Armenia, 89/3 Teryan street, 2nd floor
Tel: (37410) 541064
Fax: (37410) 541 064
TER-TACHATYAN Legal Consulting
13 Mashtots Ave., 0002, Yerevan, Armenia
Tel: (37410) 534 399, 534 591
Fax: (37410) 534 591
38
Chapter 6
Taxation overview5
The Law on Taxes
This Law defines the concept and types of taxes, the procedures for solving
tax disputes in the Republic of Armenia, liability for breaches in the tax law
of the Republic of Armenia, other legal Acts regulating tax relations, as well
as the principles on which the tax legislation of the Republic of Armenia and
other Acts regulating tax relations are based.
Specifically, the Law states that contradictory or ambiguous provisions
contained in the tax legislation are to be interpreted and applied in favor of
the taxpayer.
Also, the Law specifies the penalties and fines for breach of requirements
of tax legislation. In particular, penalties are imposed for non-disclosure of
tax amounts or their wrong declaration in the range of 50-100 percent of the
undisclosed and/or wrong declared amount. A fine at the daily rate of 0.15
percent is calculated on the amount of tax not paid by the due date, limited
to a maximum of 365 days.
Value Added Tax (VAT)
In Armenia taxable turnover subject to VAT includes the following:
revenue received from the sale of goods and services
value of goods and services provided free-of-charge to third parties
value of goods imported to Armenia by “Import for Free Turnover”
customs regime, with the exception of cases defined by law.
The basis for VAT is the price stated in the invoice. For goods imported to
Armenia VAT is calculated on the sum of the customs value of the goods,
any customs duty and/or Excise Tax.
VAT on goods imported to Armenia is collected by the Customs
Administration, except for the goods included in the list established by the
law with respect to imports of organizations and individual entrepreneurs,
for which the 0 percent of customs duty is established, and which are not
subject to Excise Tax.
The current VAT rate is 20 percent on the taxable turnover of goods and
services. The amount of VAT payable to the State Budget is calculated by
subtracting (offsetting) VAT paid to suppliers and to Customs Administration
from VAT receivable from sale of goods and services.
5
Based on legislation effective on 1 August 2009.
39
The offset is possible if the following conditions are fulfilled:
Acquisition of goods and receipt of services (performed for production
and commercial purposes) are authenticated by a tax invoice (in some
cases – by a cash register receipt or a brief invoice) issued by the
supplier, which includes all requisites specified by the legislation;
Payment for goods and services received is made through a bank or
post on the bank account of the supplier – in case a tax invoice was
received; or if the payment is made in cash – in case the amount in
documents (including VAT) has not exceeded AMD 300,000 for each
separate transaction, and AMD 3 million for all these types of
transactions carried out during the month.
Information on major tax invoices (those with the taxable turnover of
over AMD 100,000) received from the suppliers of goods acquired
and/or services received was submitted to the tax authority for the
reporting period.
The time period specified for payment of VAT and for submission of VAT
statements is before the 20th day (inclusively) of the month following the
reporting period (quarter or month). There is generally no requirement to
make advance payments of VAT.
Privileges: The law defines cases where the entity is not considered as
VAT payer, as well as the cases when zero rate of VAT applies and
transactions which are VAT exempt. The difference between zero rating and
exemption is that in the case of exemption the VAT paid to the supplier is
not compensated.
If during the previous calendar year the taxable turnover of transactions on
supply of goods, provision of services and realization without compensation
(or with partial compensation) have not exceeded AMD 58.35 million the
person will not be considered as a VAT payer6.
The above provision does not apply to the following:
persons producing or importing goods subject to Excise Tax, or
persons implementing activity subject to licensing or possessing a
license, for whose activity the annual state duty for the license is
established in the amount of AMD 100 thousand or more, or
”related parties” – if a share of 20 percent or more exists, as well as in
the cases when 80 percent of the amount of purchases (except
importation) or sales (except the transactions of rent and free-of-charge
use of property, disposal of intangible assets and receipt of interest)
relates to a single person.
Irrespective of the mentioned threshold, persons may become considered
as VAT payers on the “voluntary” basis.
The following transactions are VAT exempt.
Insurance, most banking and financial activities, which are carried out by
banks, credit organizations, the specialized persons who are operating in
stock market, or settlement organizations.
Foreign currency and securities trading.
Research activities, irrespective of the source of financing.
The sale of assets inherited by the Government, treasures, goods with
no owners and leasing transactions of leasehold enterprises established
on the basis of State enterprises.
6
During a particular calendar year they will be considered as VAT payers from the moment when their taxable turnover exceeds AMD 58.35 million - for the part exceeding the mentioned
amount.
40
Procurement and supply of goods and the provision of services arising
from loans and grants made by international financial organizations (the
World Bank, USAID, etc.) for the realization of programs in Armenia.
Sales of newspapers and magazines.
Sales of precious and semiprecious stones indicated in the list
established by the RA Government.
Sales of semi-manufactured products produced from precious metals
and for jewelry purpose.
Tourist services rendered to foreign entities/persons, as well as the
agency services rendered by tourism agencies, are exempted from VAT,
if the trips, tours and excursions take place on the territory of RA.
A few other types of transactions.
VAT zero rating in Armenia applies to goods exported under “Free
Turnover” customs regime and services, including official purchases by
foreign embassies and consulates. Internationally traded goods in transit
through Armenia are zero rated.
VAT zero rating also applies in the case of exportation of goods under the
“Re-exportation” customs regime if those goods were imported under the
“Temporary importation for processing” customs regime, as well as on the
taxable turnover of services provided with respect to processing or
assembling of products, repairing, modernizing of moveable assets on the
territory of Armenia and other similar services exported in conformity and
within the terms established by the customs legislation of the RA.
Besides the above privileges, the VAT Law prescribes deferral of VAT
payment on importation of certain categories of goods to Armenia for up to
three years, as well as deferral for three years in the cases where any
categories of goods are imported to Armenia within the scope of
investment projects, and the customs value of those goods exceeds AMD
300 million.
Profit Tax
Profit Tax in Armenia is payable both by residents (organizations established
in the Republic of Armenia) and non-residents (organizations created outside
the Republic of Armenia). Profit Tax is calculated on the basis of the taxable
profit representing the positive difference between the total income from
the sale of goods, services, assets and other property, less deductions
allowed by law.
The rate of Profit Tax for residents and registered non-residents is 20
percent of the taxable profit.
For taxpayers not considered as VAT payers during all the year 2009 – the
profit tax payable for 2009, calculated in accordance with the procedure
established by law, shall be no less than 2 percent or no more than 10
percent of the gross income calculated for the year. The amounts paid in
accordance with the above shall be considered as the final amounts of
Profit Tax for that year.
Taxpayers have to submit their Profit Tax return as well as the Balance
Sheet and the Income Statement to their local tax authority by 15 April of
7
the year following the reporting year . The amount of Profit Tax should be
transferred to the State Budget no later than 25 April of the year following
the reporting year. The reporting year end is 31 December for all
companies.
In order to determine the taxable profit, gross income is reduced by
expenses supported with documents and necessary for generating the
7
Organizations not considered as VAT payers submit only simplified profit tax calculation in a format approved by the Tax Authorities.
41
income. The accounting for income and expenses for tax purposes is
performed on an accruals basis, with some specifics provided by the Law.
In determining the taxable profit, the current year’s profit may be reduced
by the amount of any losses carried forward from previous years (not
applicable to non-residents). The loss may be carried forward for the
following five years.
The types of deductible expenses include fixed assets depreciation, for
which the following minimum periods are established.
For industrial and commercial buildings, constructions and transmission
devices, except for those listed below - 20 years.
For hotels, resorts, rest houses, educational institutions - 10 years.
For assembly lines, robot equipment - 3 years.
For calculating devices and computers, as well as for fixed assets with
the value up to AMD 50,000 - 1 year.
For other fixed assets, including perennial plants and investments made
for improvement of land - 5 years.
Deduction of the following types of expenditure is restricted (limited):
Advertisement outside Armenia (maximum of 3 percent of gross income
of the reporting year or 20 percent of the value of services/goods
exported from Armenia).
Training of staff outside Armenia (not more than 4 percent of the gross
income of the reporting year, but limited to a maximum of AMD 3
million per employee).
Expenses for foreign trips, including per diems, lodging, transportation
(no more than 5 percent of the gross income of the reported year).
Client entertainment (no more than 0.5 percent of the gross income of
the reporting year, but limited to a maximum of AMD 5 million).
Marketing expenses incurred outside Armenia ( limited to 2 percent of
the gross income of the reporting year, or 15 percent of the value of
goods and services exported by the taxpayer during the reporting year,
or 5 percent of the value of goods and services imported by the
taxpayer during the reporting year, whichever is higher).
The portion of interest payable on credits and borrowings, in excess of
twice the bank interest rate specified by the RA Central Bank.
The above mentioned restrictions do not apply to organizations not
considered as VAT payers, and the above mentioned expenses are
deducted by those taxpayers in full, with the exception of per diems, which
are deducted in accordance with the generally established procedure.
Tax Holidays, other privileges
All taxpayers involved in agricultural production are exempted from Profit
Tax on profit received from selling their products, as well as on revenue
derived from other activities, so long as the revenue received from other
activities does not exceed 10 percent of gross revenue.
The amount of the Profit Tax for a resident entity - the organizer of a free
commercial zone (as defined by the Custom legislation) is reduced by 100
percent for the reporting year.
The amount of Profit Tax of a resident entity – user of a free commercial
zone (as defined by the Custom legislation) for the reporting year is reduced
by 100 percent when, in the reporting year, at least 90 percent of the gross
income of the user of the free commercial zone, consists of the income for
goods exported or services provided out of the RA from the territory of the
zone.
42
Advance payments
Resident taxpayers are obliged to make “Profit Tax Advance Payments” on
a monthly basis throughout the year, in the amount of 1/16 of the previous
year’s Profit Tax, no later than the 25th day of each month. The taxpayers
whose previous year Profit Tax amount did not exceed AMD 500,000,
newly established organizations, as well as the taxpayers, that were not
considered as VAT payers in the previous year, may make no Profit Tax
Advance Payments.
The Law also makes provision for “Minimum Profit Tax”, which is applied in
parallel with “Profit Tax Advance Payments”.
The “Minimum Profit Tax” is 1 percent of the difference between the
preceding month’s income received from sale of goods and services, and
the depreciation allowances calculated on fixed assets, providing that
depreciation allowances do not exceed 50 percent of the income received
for the same period8 .
Each month the amount of “Minimum Profit Tax” is compared to the
calculated amount of “Profit Tax Advance Payment” and the higher of the
two amounts is paid.
The “Minimum Profit Tax” for taxpayers using Profit Tax privileges9 shall be
reduced proportionally to the size of the privilege, during the periods when
the privilege is applicable.
Non-resident taxpayers are obliged to make “Profit Tax Advance Payments”
if the actual Profit Tax for the previous year exceeded AMD 2 million. The
payments are made every six months of the current reporting year in the
amount of one quarter of the previous year’s Profit Tax. The concept of
“Minimum Profit Tax” does not apply to non-residents.
Withholding Tax
Taxation of income derived from Armenian sources by non-resident entities
not registered in Armenia, should be carried out at the source by a tax
agent. Profit Tax should be withheld (imposed) by the tax agent from the
total income received by the non-resident, at the following rates:
Type of income
Insurance compensation, reinsurance payments and
income received from freight
Dividends10, interest, royalties, income from leases,
capital gains on property, as well as other income
received from Armenian sources
Rate
5 percent
10 percent
In case it is not possible to withhold (collect) the tax at the source of the
income payment (i.e. in the absence of a tax agent) the non-resident
receiving income from Armenian sources bears the liability of payment of
Profit Tax, based on the above rates.
8
The taxpayers not considered as VAT payers calculate “Minimum Profit Tax” without deducting the depreciation allowance.
Taxpayers producing agricultural products, residents which are organizers or users of free commercial zones according to the RA customs legislation.
Dividends received from Armenian sources are subject to tax at 0 percent rate if the following conditions are met at the simultaneously:
If dividends received by the non-resident are not subject to tax in his country of residence;
If the participation (share) of the non-resident in the Share capital of a resident company paying the dividends comprise no less than 25 percent of the share capital for the
period of no shorter than two calendar years;
Participation (share) from which dividends are paid, belonged to the non-resident for no less than two calendar years;
Non-resident who was paid dividends is the actual owner
The organization distributing dividends is presented a certificate issued by tax authority stating that the non-resident gaining incomes meets the first and the fourth
requirements specified above.
The 0 percent rate mentioned above is not applicable in the instances when dividends are paid to the residents of offshore zones (countries with privileged regimes or territories
forming a part thereof).
Dividends received from the All-Armenian Bank are subject to the 0 percent rate irrespective of the above mentioned conditions.
9
10
43
Personal Income Tax
The Law “On Income Tax provides for tax on worldwide income, which
applies to residents of the Republic of Armenia, whereas non-residents are
subject to taxation only on income derived from Armenian sources.
Persons who have spent 183 days or more in a tax year in Armenia, or
whose main interests (home, family, property and business) are located in
the Republic of Armenia, are considered to be residents irrespective of the
citizenship. Income earned by residents from overseas activities may be
adjusted to reflect taxes already incurred in overseas countries.
Types of income which are subject to Income Tax include: wages and
salaries, interest, income from donations and assistance (unless specifically
exempt), royalties, income from any business or profession, income from
leasing and benefits in kind, etc.
The current personal allowance deductible from the taxable income is AMD
30,000 per month (this is not applicable to income received by foreign
citizens and persons without citizenship).
Income Tax on wages and salaries of Armenian citizens, foreign citizens
and persons without citizenship are shown in Table A.
Table A
Monthly taxable income
Tax rate
Up to AMD 80,000
10 percent of taxable income
AMD 80,000 or over
AMD 8,000 plus 20 percent on the
taxable income exceeding AMD
80,000
Employers are required to withhold Income Tax at source on a monthly
basis from their employees’ salaries and transfer these amounts to the
State Budget, no later than 20th day of the month, following the month
when income was calculated.
Royalties, income from leasing and interest received by Armenian citizens
are subject to Income Tax at 10 percent, without the AMD 30,000
allowance. The tax on that incomes are payable to the State Budget no
later that 20th day of the month following the month of payment of the
income.
Individuals, who are not registered as individual entrepreneurs, are obliged
to pay Income Tax at 10 percent of gross income in cases when no
Income Tax is withheld at source of payment of such income.
Exemptions: Several types of income are exempted from Income Tax as
follows:
Income from securities such as:
dividends
interest or discount received from Government bonds, and other
Government securities as well as bonds issued by the AllArmenian Bank.
Income from trading in Government securities and bonds issued by
the All-Armenian Bank.
Property and financial means which have been inherited or received
as a gift from individuals.
Money and food aid provided to individuals by non-profit organizations
in the process of their ordinary activities.
Property and financial means provided by foreign as well as
intergovernmental organizations, without compensation.
Insurance compensation, etc.
44
Annual Income Calculation and Income Tax Payments
Republic of Armenia residents, have an obligation to submitting the Annual
Income Calculation which is an appendix of the Annual Declaration of
Property and Income of individuals.
Exemptions: In the following cases the individual is not obliged to submit
the Annual Income Calculation:
when income received is taxed by tax agents
when the gross income from which the tax agent has not withheld
the Income Tax, did not exceed AMD 300,000
when income received by the individual, consisted exclusively of the
non-taxable types of income (deductible income).
The individuals who have property or income subject to declaration
according to the respective Law should file also the Annual Declaration of
Property and Income.
Individuals have to file the Annual Declaration of Property and Income and
Annual Income Calculation by 15 April of the year, following the reporting
year.
Individuals who receive income from entrepreneurial activities are required
to make quarterly advance payments in the amount of 1/6th of the previous
year Income Tax by 15 March, 15 June, 15 September and 15 December.
Any remaining balance must be paid by 1 May of the following year.
The Individual entrepreneur, who had a loss in the previous year, or whose
Income Tax for the previous year did not exceed AMD 500 thousand, or
who was not considered as a VAT payer in the previous year, may make no
Advance Payments after submitting the Annual Income Calculation.
The Law also makes provision for “Minimum Income Tax”, which is
applied in parallel with “Income Tax Advance Payments”.
The “Minimum Income Tax” is 1 percent of the difference between the
preceding quarter income received from sale of goods and services, and
the depreciation allowances calculated on fixed assets, providing that
depreciation allowances do not exceed 50 percent of the income received
for the same period (taxpayers not considered as VAT payer do not deduct
the depreciation allowance).
Each quarter the amount of “Minimum Income Tax” is compared to the
calculated amount of “Income Tax Advance Payment” and the higher of
the two amounts is paid.
Taxation of foreign citizens
The following types of income of foreign citizens or persons without
citizenship are subject to tax, which should be withheld at source through a
tax agent, the rates for which are shown in Table B:
45
Table B
Type of Income
Rate
Insurance compensation and income from transportation
(freight)
Royalties, interests, lease payments, increase in the value
of property and other passive income, as well as other
income received from Armenian sources
5 percent
10 percent
Employers, employees and individual entrepreneurs are liable to mandatory
social security payments, at the following rates, on income for work
performed:
Paid by employer:
Gross Salary
(AMD per month)
Up to 20,000
AMD 7,000 flat
20,000 - 100, 000
Over 100,000
AMD 7,000 + 15 percent of the amount
exceeding AMD 20,000
exceeding AMD 100,000
Paid by employee:
Gross salary
(AMD per month)
Any amount
3 percent
Paid by individual entrepreneurs:
Basis for calculation
(AMD per year)
Up to 1,200,000
Over 1,200,000
15 percent but not less than AMD 60,000
exceeding AMD 1,200,000
Individual entrepreneurs have the obligation to pay a minimum social
payment each month, in the amount of AMD 5,000, by the 15th of the
following month.
Foreign citizens and persons without citizenship conducting entrepreneurial
and other activities (employment) in Armenia, as well as their employers
are not subject to any social security payments.
Excise Tax
Excise Taxes are payable on both domestically produced and imported
goods. The basis for Excise Tax is the quantity of goods subject to Excise
Tax, applying the following excise rates:
Article
Beer
Tax base unit
For domestic production - 1 litre
For imported goods - 1 litre
Realization price (without VAT and Excise Tax)
Grape and other wines
For imported goods- the custom price
Vermouth and other grape wines that
contains vegetarian and aromatic
extracts
Fermented drinks
Spirits /ethyl alcohol/
Alcoholic drinks
Excise Tax Rate
AMD 70
AMD 105
10 percent but no less than
AMD 100 for one litre
AMD 500
AMD 600
For domestic production - 1 litre (equivalent
to 100 percent alcohol)
For imported goods -1 litre (equivalent to 100
percent alcohol)
Realization price (without VAT and Excise
Tax)
AMD 180
AMD 200
For imported goods - the custom price
46
AMD 600
AMD 700
Tobacco substitutes
1 kg
AMD 1,500
Crude oil
1 ton
AMD 27,000
Gases/types of gas derived from oils
and other hydrocarbons (with the
exception of natural gas)
1 ton
AMD 1,000
The control over the payments on local excisable production is performed
by the Tax Authorities. However, Excise Taxes on imports are collected by
the Customs Administration.
A special flat fee is applied to tobacco, diesel fuel and petrol by separate
laws and governmental decrees. That fee substitutes Profit Tax, Excise Tax
and VAT for diesel fuel and petrol imported and sold in Armenia. Another
flat fee substitutes Excise Tax, VAT and Customs Duty for imported
tobacco products, as well as Excise Tax and VAT for domestically
manufactured tobacco products.
Irrespective of the type of business activity, taxpayers should calculate and
pay the fee for tobacco products, using the following rates:
The code of
product per the
list of external
economic
activity
2402 10 000 11
2402 90 000 11
2402 10 000 12
2402 90 000 12
2402 20 900 11
2402 20 100 11
2402 90 000 13
2402 20 900 12
2402 20 100 12
2402 90 000 14
Name of product
Cigars containing tobacco
Cigars other
Cigarellas containing
tobacco
Cigarellas other
Filtered cigarettes
containing tobacco
Filtered cigarettes
containing clove
Filtered cigarettes, other
Unfiltered cigarettes
containing tobacco
Unfiltered cigarettes
containing clove
Unfiltered cigarettes,
other
47
Size of Presumptive Tax
(in AMD per 1,000 units)
For
For imported
domestic
goods
production
500,000
300,000
15,000
11,000
6,500
4,750
3,250
1,950
Irrespective of the type of the taxpayers’ business activities and the
customs value of the imported fuel, AMD 112,000 fee is payable per ton of
imported petrol and AMD 32,500 per ton of diesel fuel.
The monthly amount of Presumptive Tax on petrol and diesel fuel sold in
Armenia is established as follows:
For diesel fuel
For petrol
In the amount of 1 percent of revenue derived from
sales of diesel fuel during the given month, but no
less than AMD 1,500 for each sold ton.
In the amount of 1 percent of revenue derived from
sales of petrol during the given month, but no less
than AMD 2,500 for each sold ton.
The Excise Tax is not applicable to:
Sale of goods exported from Armenia and subject to Excise Tax, if the
document specified by the Law is available.
Goods subject to the Excise Tax imported into and exported from the
customs territory of the RA under customs regimes established by the
customs legislation that differ from "Import for free turnover" regime.
in case of importation and realization of goods which are subject to
Excise Tax but were confiscated in accordance with legislation,
recognized as having no owners and transferred to the State.
Goods imported to the RA by individuals which are subject to Excise
Tax and do not exceed the customs value or the quantity established
by the customs legislation.
Customs Duties
Import Duty
Import duties are established either at zero or at 10 percent rate ad
valorem (invoice value excluding VAT). The basis for the duty comprises of
the value of goods, transportation, commissions and related expenses.
Exemptions from import duties apply to goods in transit and imports for
humanitarian aid purposes. Imports from free trade zones may either be
tax exempt, or subject to reduced tax rates. It is prohibited to import items
that could pose a threat to health, the environment or national security.
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Export Duty
In accordance with the Customs Code, zero rate applies to all types of
exports.
Property Tax
Property tax is payable by both individuals and legal entities on privately
owned property as follows:
dwellings, public and industrial buildings;
motor transport;
water transport;
motor cycles.
The tax basis is the value of the property and/or physical characteristics of
the taxable object, based on which the relevant rate of property tax is
applied.
The tax base for buildings is determined by the original valuation and by
subsequent revaluation, carried out every three years by the relevant State
authority. The tax rate on public and industrial buildings is 0.3 percent per
annum on the property value.
For vehicles, water transport and motor cycles flat rates apply, depending
on horsepower.
From the fourth year after the production of a vehicle and onwards, a
discount between the rates of 10 percent and 50 percent is provided.
No Property Tax is calculated and paid for trucks after the 20th year after
production.
Property Tax reports are to be submitted on a quarterly basis for legal
entities and on a yearly basis for individuals.
Exemptions: Tax exemptions apply to the following property types:
linear engineer-transport construction, if there is no fee for utilization;
reservoirs;
taxable property treated as historical or/and cultural value.
The exemptions are also established for the following taxpayers:
the national operator of mail service
For some taxpayers, property tax exemptions shall be established by
the municipal authorities (not exceeding 10 percent of income
reflected in the community budget).
Land Tax
Land Tax is payable by private landowners and permanent or temporary
users of State-owned land. The tax on land under lease is payable by the
lessor. A flat fee payable annually is set by the Government per unit of
surface.
Land Tax on agricultural land is payable annually at the rate of 15 percent of
the net revenue estimated on the basis of cadastral valuation, which is
established by the government. The government may grant special
exemptions from payment of Land Taxes during periods of unusually harsh
agricultural conditions.
For non-agricultural land, the Land Tax rate is specified as follows:
49
1 percent of the cadastre value on land in urban area and 0.5 percent
on land outside urban areas used for purposes of industry,
transportation, communications, defense, gas pipelines;
1 percent of the average cadastral value on forests and 1 percent of
the cadastral value on other non-agricultural lands.
The Government maintains a list of agricultural and forestry research
organizations which are granted 50 percent reduction on Land Taxes.
Presumptive Fee
Presumptive Fee replaces Profit Tax and VAT for taxpayers implementing
some types of activities.
Presumptive Fee is obligatory for taxpayers performing the following
activities: shops with small turnover, catering facilities, hairdressing salons,
car repair service, public baths and showers, activities on gas refilling
stations of motor vehicles, industrial fishing, organizing computer games,
billiards games, etc. Casinos are also subject to Presumptive Fee.
Starting from 1 January 2010, those who implement the following types of
activity shall cease to be treated as payers of Presumptive Fees:
trade activity through shops, kiosks (pavilions);
trade activity in commercial sites;
activity of organizing a commercial site.
Starting from 1 May 2010, persons carrying out the activity of gas-filling
shall cease to be treated as payers of Presumptive Fees.
The activity of some hospitality service units will be considered to be a
type of activity taxable by Presumptive Fees starting from 1 July 2009 (per
the criteria established by the RA Government).
Presumptive Fee is calculated on a number of different bases, depending
on the type of activity. The bases include size of trading space occupied,
the number of employees, the actual number of working days in a month,
number of gambling tables and/or machines, etc. The rates are flat and the
Fees payable monthly.
Double Taxation Treaties
The countries with which Armenia currently has signed, ratified and
officially effective Treaties for the avoidance of double taxation are:
Austria
Belarus
Belgium
Bulgaria
Canada
China
Estonia
France
Finland
Georgia
Greece
India
Iran
Italy
Latvia
Lebanon
Lithuania
Netherlands
Moldova
Poland
Qatar
Romania
Russia
Switzerland
Syria
Thailand
Turkmenistan
Ukraine
United Arab Emirates
Other Mandatory Payments
Nature Protection and Nature Utilization Fees
The Nature Protection Fee is paid with the purpose to accumulate funds
required for nature protection activities. The Nature Utilization Fee is paid
with respect to the utilization of the resources with purpose of creating
conditions for effective, comprehensive usage of the State-owned natural
resources, as well as for creating equal conditions for users of nature
resources.
50
Road Fee
The Road Fee is the mandatory payment collected with the purpose of
generating necessary financial resources for construction, repair and
maintenance of State automobile routes of general use.
Owners of transportation means are considered to be Road Fee payers.
Road Fee is paid:
When automobile roads are used by vehicles registered in other
countries,
When automobile roads are used by freight transportation means
registered in other countries,
When automobile roads are used by vehicles of large dimensions,
For placing advertisement on automobile roads,
When automobile roads are used by freight transportation means
registered in Armenia.
Tax Inspections
Taxes are subject to review and investigation by tax authorities, which
have the authority to impose fines and penalties. In some cases specified
by the legislation the tax liabilities of taxpayers shall be calculated by tax
Authorities (so called “indirect method” of tax calculations).
No tax liability (taxes, fines and penalties) may be imposed by tax
authorities if three years have elapsed from the date of a violation being
committed.
One and the same State body has the right to perform an inspection in the
economic entity no more than once per calendar year, except for certain
cases for which repeated tax audits are authorized by Law. According to
the tax administration strategy for 2008-2011 adopted by the Government,
the tax inspections should be based on risk criteria, which assumes that,
in average, the frequency of tax inspections in economic entities should
reduce.
51
Chapter 7
Labour legislation
Labour relationship
Labour relations in the Republic of Armenia, the grounds for their
origination, modification and termination, the rights and obligations of
parties to labour relationship, as well as conditions of employees’ security
and health are regulated by the RA Labour Code.
Labour contracts
In the Republic of Armenia labour contracts are signed in writing by means
of executing a single document bearing the signature of the parties, in two
copies, one copy for each party. A copy is provided to the employee,
another copy is retained by the employer. On the same day the labour
contract is registered in Labour Contracts Register of the employer. The
form, procedure of keeping and maintaining this register is stipulated by
the RA Government.
Documents required for employment
Employers will require the following documents in order to sign a labour
contract.
personal identification document
employment record book (with the exception of the first-time
employment, or combined employment) and a Social card
a certificate of education or relevant qualification
a statement evidencing the health condition, if the labour contract is
signed for work requiring initial and regular medical inspections, as
well as with employees of up to 18 years old
a written consent of one of the parents, or adopters in case of hiring
an under-age citizen, of 14 – 16 years old
when hiring an RA citizen (male) of military age, who have not passed
the term military service - a relevant statement authorizing the
person’s relief from the term military service.
Types of labour contracts
A labour contract is signed:
for an indefinite period, if the period of the contract is not specified in
the labour contract, and
for a definite period if the period of the contract is specified in the
labour contract.
52
Terms and conditions of labour contracts
In the labour contract the sequential number of the contract, name,
surname of the employee should be indicated, and it should contain the
following terms and conditions:
place of work, the structural subdivision
the year, month, date of commencing the work
the job title, profession, with description of job functions
rights and obligations of the employee
rights and obligations of the employer
terms of employee remuneration and the amount of salary
description of the labour conditions, privileges and compensation,
including privileges for employees working under hazardous or
difficult work conditions
period of validity of the labour contract
the year, month and date of signing the labour contract.
Termination of labour contract
By the employer’s initiative
For the reason of expiry of the period of validity of the labour contract
signed for a specific period, the employer may terminate the labour
contract, having notified the employee of it ten days in advance.
If, after the expiry of the period of validity of the labour contract signed for
a specific period, the contract is not terminated per the procedure
described above and the labour relationship continue, the contract is
considered to be signed for an indefinite period.
The employer has the right to terminate the labour contract in the following
cases in particular:
when the organization is liquidated
when the employer has been declared bankrupt
in case of decrease of the number of employees resulting from
changes in volumes of production, in economic conditions or
conditions of work organization.
In the above cases a two-month prior written notice is required. When
terminating the contract the employee is paid a severance pay in the
amount of one-month average salary.
when the employee does not match the position occupied or the
work performed. In this case a 14-day prior written notice is required.
When terminating the contract the employee is paid a severance pay
in the amount of two week’s average salary.
when the employee fails to successfully pass the probation period.
in case of non-performance by the employee of his duties – in case
when at least twice within one year disciplinary liability has been
imposed on the employee.
in case of employee’s long-term incapacity to work (for over 120
consecutive days).The employee is paid a severance pay in the
amount of two week’s average salary.
when the employee reaches a retirement age. In this case a 14-day
prior written notice is required.
other cases envisaged by law.
In the notification of termination of the labour contract the grounds and
reasons for dismissal from work, as well as the year, month and date of
dismissal are indicated. During the notice period the employer should
provide a free time to the employee which cannot be less than 10 percent
of work time. The employee’s average salary is preserved for that period.
53
Normally, the labour contract may not be terminated with pregnant women
during the entire period of the pregnancy, the maternity leave and the
month following the latter.
By the employer’s initiative
The labour contract may be terminated by the employee’s initiative by
notifying the employer at least 14 days in advance.
54
Chapter 8
KPMG’s office in Armenia
KPMG has been working in Armenia for more than 11 years, and our essential
principle has always been to use the firm’s global intellectual potential, combined
with the practical experience of our professionals, to help leading companies to
achieve their goals.
We provide Audit, Tax and Advisory services to major Armenian, regional and global
companies and to a broad range of non-governmental organizations and financial
institutions.
KPMG's reputation is based on our values and our code of conduct, which have
taken shape over more than 150 years, during which time KPMG has become a
major international company.
KPMG has operated a full service office in Armenia since 1997. It was the first of
the “Big Four” international auditing and accounting firms licensed by the
Government of Armenia. Our staff in Armenia is now in excess of 90, with the
majority of them represented by Armenian professionals who are assisted by
foreign specialists, including 11 ACCA/ACA qualified staff.
Our goal is to offer a wide range of services, which meet the specific needs of each
client. By listening to our clients and analyzing challenges they face, we continue
the enhancement of our existing offerings and develop new types of services - both
on the international level and for Armenia.
Our services include:
AUDIT
TAX
ADVISORY
Financial
Statement Audit
Advisory support
Internal audit, Risk and Compliance
Services
Statutory Audit
Audit
Services
Related
Ongoing accounting and
tax outsourcing
Business Performance Services
Operational reviews
Accounting Advisory Services
Tax optimization
Corporate Finance
International Executive
Services
Financial Risk Management
Forensic
Restructuring
Transaction Services
IT Advisory Services
55
An international
overview
KPMG provides Audit, Tax and Advisory services through its worldwide
network of professional services firms with over 137,000 people in 144
countries.
Our purpose and aspiration is to turn knowledge into value for the benefit
of our clients, our people, and the capital markets.
KPMG member firm combined revenues increased to US$22.69 billion for
the fiscal year ending 30 September 2008, versus US$19.81 billion for the
prior fiscal year, reflecting double-digit growth across all of KPMG’s service
lines.
KPMG’s combined revenues for fiscal year 2008 represent growth of 14.5
percent in U.S. dollars and growth of 8.4 percent in local currency terms.
The last few years have seen rapid change, with an intense focus by the
business community and the regulatory authorities on auditor
independence, a new rigor in corporate accounting, and a renewed
commitment to business integrity and accountability. KPMG is at the
forefront of these changes, taking an active role in reshaping our
profession to help ensure a vibrant future and contribute to the integrity of
the capital markets.
KPMG is committed to three key imperatives: quality of services, insight
into the problems of our clients, and integrity in our business. It is these
principles that drive our firms' professionals to provide Audit, Tax, and
Advisory services that reflect global consistency and unwavering integrity.
56
KPMG in Russia and CIS
For the last few years KPMG in Russia and the CIS has been one of the
fastest growing KPMG practice worldwide with growth in 2008 of 62
percent.
It numbers amongst its Audit, Tax and Advisory clients most major Russian
businesses.
KPMG has had a permanent representation in Moscow since 1990 and has
operated through a Russian legal entity, ZAO KPMG, since 1992.
In the CIS, KPMG now has offices in Moscow, Saint Petersburg,
Ekaterinburg, Nizhny Novgorod, Novosibirsk, Rostov-on-Don, Almaty,
Astana, Bishkek, Donetsk, Kiev, Tbilisi and Yerevan, employing together
about 3,100 people.
For the EMA (Europe, Middle East and Africa) region, combined KPMG
member firm revenues increased 16.3 percent to US$ 12.41 billion.
57
Appendix 1
Procedure for registration of a representative
office/branch of a business entity
In order to establish a Representative Office/Branch of a business entity,
the founder should first of all adopt a decision on establishment of a
Representative Office/Branch and approve its Charter.
An organization is established in the Republic of Armenia from the moment
of its State registration which is performed by the State Register of Legal
Entities (hereinafter – the State Register).
The following documents are submitted to the State Register.
An application signed by the authorized representative of the
founder.
State duty payment receipt. The State duty for the registration of a
subdivision is AMD 12,000.
Passport copy of the director of the subdivision.
Copy of the founder’s charter. If the founder is a foreign entity, this
document should be certified by a notary and apostiled.
Registration certificate of the founder (or an excerpt from the trade
register or similar document) If the founder is a foreign entity, this
document should be certified by notary and apostiled.
Resolution of the founder on the establishment of a
Representative Office/Branch and approval of its Charter. Also, the
director of the subdivision is appointed at this stage.
Charter of the Representative Office/Branch.
The registration certificate should be issued within 5 working days after
submission of the documents and making a relevant note in the registry of
receipt. Alternatively, the application for enlistment shall be rejected within
the same time period. The rejection of registration may be appealed in
court.
Within one month after State registration the Representative Office/Branch
should apply for enlistment with the Tax authorities. An application signed
by the authorized representative and a copy of the registration certificate
should be submitted for enlistment with the Tax authorities. There are no
charges for registration with the tax authorities. Normally, the
organizations are enlisted within 1 working day and a Taxpayers
Identification Number (TIN) is assigned.
After the above steps are completed, the Representative Office/Branch
applies for obtaining a seal. The following documents are submitted to
obtain a seal:
application signed by the authorized representative
copy of the registration certificate
TIN
copy of the charter of the Representative Office/Branch
design of the seal (it is made by a specialized company which
prepares a seal)
passport of the director/authorized representative.
A seal will be prepared by specialized company on the same day or within
1 day and the fee is accordingly AMD 15,000 or 12,000.
Appendix 2
List of abbreviations and acronyms used in the text
Abbreviation
AAAA
AD
ADC
AMD
ASRA
BSEC
C.I.F.
CBA
CCC
CDA
CIS
EBRD
ECE
ESCAP
EU
F.O.B.
FDI
FX
GATT
GDP
GMT
GSM
GSP
IAEA
ICAO
ICSID
IDA
IFAD
IFRS
ILO
IMF
INTELSAT
INTERPOL
IOC
ISA
ISO
ITU
JICA
KWH
MCC
MIGA
NSS
OPIC
OTE
RA
REPO
UN
UNCTAD
UNESCO
UNIDO
Full text
Association of Accountants and Auditors of
Armenia
Anno Domini
Armenian Data Communication company
Armenian Dram
Accounting Standards of the Republic of Armenia
Black Sea Economic Cooperation
Cost, insurance, freight
The Central Bank of Armenia
Customs Cooperation Council
Central Depository of Armenia
Commonwealth of Independent States
European Bank for Reconstruction and
Development
Economic Commission for Europe
Economic and Social Commission for Asia and the
Pacific
European Union
Free on Board
Foreign Direct Investment
Foreign Exchange
General Agreement on Tariffs and Trade
Gross Domestic Product
Greenwich Mean Time
Global System for Mobile communications
Generalized System of Preferences
International Atomic Energy Agency
International Civil Aviation Organization
International Centre for Settlement of
Investments Disputes
International Development Association
International Fund for Agricultural Development
International Financial Reporting Standards
International Labour Organization
International Monetary Fund
International Telecommunications Satellite
Organization
International Criminal Police Organization
International Olympic Committee
International Standards on Auditing
International Organization for Standardization
International Telecommunications Union
Japan International Cooperation Agency
Kilowatt/hour
Millennium Challenge Corporation
Multilateral Investments Guarantee Agency
RA National Statistics Service
Overseas Private Investment Corporation
Hellenic Telecommunications Organization
Republic of Armenia
Repurchase agreement
United Nations
United Nations Conference on Trade and
Development
United Nations Educational, Scientific and Cultural
Organization
United Nations Industrial Development
Organization
58
Abbreviation
USA
USD
USSR
VAT
VPN
WCO
WHO
WIPO
WTO
Full text
United States of America
United States Dollar
Union of Soviet Socialist Republics
Value Added Tax
Virtual Private Network
World Customs Organization
World Health Organization
World Intellectual Property Organization
World Trade Organization
59
60
KPMG Armenia can be contacted
through:
Andrew Coxshall, Managing Partner for Southern Caucasus
8th floor, Erebuni Plaza Business Center,
26/1 V. Sargsyan Street, Yerevan, 0010
Republic of Armenia
Tel/fax:
(+374 10) 566 762
general@kpmg.co.am
E-mail:
Also through:
Andrew Cranston, Senior Partner
KPMG
18, C, Krasnopresnenskaya nab.,
Moscow, 123317, Russia
tel.: + 7 495937 4477 ext. 15541
fax: + 7 495 937 4400/99
kpmgmoscow@kpmg.ru
For more information on our services, please visit our Website at:
www.kpmg.am (KPMG Armenia) or www.kpmg.ru (KPMG in
Russia)
For information about KPMG International, please visit the following
Website:
http://www.kpmg.com
The information contained herein is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on
such information without appropriate professional advice after a thorough examination of the particular situation.
© 2009 KPMG Armenia cjsc, a company incorporated under the Laws of the Republic of Armenia and a member firm of the
KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
Printed in Armenia
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.