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Hiring in Armenia

Armenia, officially known as the Republic of Armenia, is a landlocked country located in Asia. The capital and the largest city of Armenia is Yerevan. Armenia is a developing country, whereby one of the largest sector is Agriculture. It mostly relies on foreign direct investment from overseas Armenians. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Armenia’s legal and tax regulations. Employment regulations are covered by Armenia’s Labor Code. The Labor Code stipulates that the minimum annual paid leave in Armenia is 28 days. As the official employer of record (EOR), Global PEO’s facilitate companies by ensuring compliance with the Labor Code. Residents are liable for tax on their worldwide income. Non-residents are liable for tax only on their Armenian-source income. Global PEO’s further facilitate companies by ensuring compliance with Armenia’s tax regulations.

statutory labor requirements

Probation Period

  • In principle, the duration of the probation period should not exceed three months, although, in certain cases, Armenian legislation may establish a probation period of up to six months.

Annual Leave

  • The minimum annual paid leave in Armenia is 28 days (Article 159 of the LC). 
  • Extended and additional paid annual leave of up to 35 days (or up to 48 days in some exceptional cases) are granted to workers performing work in hazardous conditions, or in conditions of intellectual or emotional stress.

Public Holidays

  1. New Year's Day (1st January)
  2. Eastern Orthodox Christmas Eve (5th January)
  3. Orthodox Christmas Day (6th January)
  4. Army Day (28th January)
  5. International Women's Day (8th March)
  6. Easter Monday (13th April)
  7. Armenian Genocide Remembrance Day (24th April)
  8. Labor Day (1st May)
  9. Victory and Peace Day (9th May)
  10. Republic Day (28th May)
  11. Constitution Day (5th July)
  12. Vardavar (91th July)
  13. Elevation of the Holy Cross (14th September)
  14. Armenia Independence Day (21st September)
  15. New Year's Eve (31st December)

Maternity Leave

  • Female employees are allowed up to 140 days of paid maternity leave. 
  • Leave extends from 70 days before the birth to 70 days after the expected date of childbirth, or 155 days if there are complications and 180 days for multiple births.

Paternity Leave

  • Male employees are entitled to 5 days of paid paternity leave

Sick Leave

  • If the sickness or injury is not work related, the employee is guaranteed his/her job if his/her absence is no more than 120 successive days or 140 total days within the past 12 months. Employees are entitled to receive full benefits while on sick leave.

Work Hours

  • Armenians work an eight-hour day and should not exceed 40 hours per week.

Overtime

  • Overtime is allowed, but at a maximum of four hours per day or eight hours per week.
  • Employees generally receive at least 150% of their regular hourly rate for each overtime hour.

Notice Period

  • Notice is required prior to dismissal for redundancy. 
  • For employees with:
    • One-year service: 5 days are required
    • Up to 5 years’ service: 6 days’ notice
    • Up to 10 years’ service: 7 days’ notice

Severance

  • Workers terminated due to redundancy are also entitled to severance pay of one month.

13th / 14th Month Pay

  • Yes
  • N.B. Some sources say that it is mandatory - see first link. But I did not find evidence of such in the labour code.
  • There is a mandatory requirement to pay the 13th month salary. Although it is not statutory, Art 177 of the Armenian Labour law provides that 'higher pay for annual leave can be stipulated'.
  • Under Art 219 of the Labour law incentives are listed including 'lump sum' and 'supplementary paid vacation'.

income tax

  • Individuals are classified into two categories for personal income tax (PIT) purposes:
    • Residents are liable for tax on their worldwide income.
    • Non-residents are liable for tax only on their Armenian-source income
  • Income from royalties and interest (if not exempt) is subject to 10% tax. 
  • If paid by a tax agent (i.e. legal entity, individual entrepreneur), tax should be withheld at source.
  • Income from lease of property is subject to 10% tax. 
  • Income Starting from 1 January 2020, if the income from lease exceeds AMD 60 million during the tax year, the individual should pay 10% income tax in addition to the tax withheld by the tax agent.
  • The income from the sale of property is taxed at 10% or 20% (depending on the type of property and whether sold to a tax agent or individual). 
  • The sale of non-entrepreneurial property to individuals is exempt from tax. 
  • Starting from 1 January 2020, dividends received by foreigners are subject to 5% income tax (from dividends on the income generated after 1 January 2020), and dividends received by Armenian citizens are subject to 5% income tax (from dividends on the income generated after 1 January 2018).
  • The tax withheld from the dividends is subject to refund if the dividend received from a resident entity is invested in the capital of the same resident entity during the same tax year.
  • Other income paid by a tax agent is subject to final withholding on a monthly basis. 
  • The taxable base is the gross income minus deductible income. 
  • Other income will be withheld at a flat rate of 23% and will be gradually lowered to 20%, as presented below:
    • Starting from 1 January 2020: 23%.
    • Starting from 1 January 2021: 22%.
    • Starting from 1 January 2022: 21%.
    • Starting from 1 January 2023: 20%

Income Tax

Royalties & Interest

10%

Income from lease of property

10%

Income from sale of property

10% or 20%

Dividends

5%

Other Income

23%

deductible expenses

Employment Expenses

  • Deductions from gross income for employees may include the following:
    • Paid benefits, except benefits defined by the Law of Armenia on Temporary Disability Benefits.
    • All types of paid pension benefits, except pension benefits paid within the framework of participation to voluntary funded pension plans in accordance with the established procedure.
    • Insurance benefits, except benefits (including pensions) to be received in accordance with the established procedure at the expense of voluntary funded pension insurance contributions made by a taxpayer on one’s own behalf and/or by a third person (including employer) for a taxpayer on conditions of voluntary funded pension insurance, in accordance with the procedure defined by the legislation of Armenia.
    • Insurance premiums paid by employers for their hired employees’ health insurance, at a maximum of AMD 10,000 per month.
    • Amounts of single-sum assistance in case of employee’s or family member’s death.
    • The assets, works, and services received free of charge from non-commercial organizations.
    • The monetary prizes and benefits in kind received at competitions, up to AMD 50,000 per prize.

Deductible Expenses

Employment Expenses

  • Paid benefits, except benefits defined by the Law of Armenia on Temporary Disability Benefits.
  • All types of paid pension benefits, except pension benefits paid within the framework of participation to voluntary funded pension plans in accordance with the established procedure.
  • Insurance benefits, except benefits (including pensions) to be received in accordance with the established procedure at the expense of voluntary funded pension insurance contributions made by a taxpayer on one’s own behalf and/or by a third person (including employer) for a taxpayer on conditions of voluntary funded pension insurance, in accordance with the procedure defined by the legislation of Armenia.
  • Insurance premiums paid by employers for their hired employees’ health insurance, at a maximum of AMD 10,000 per month.
  • Amounts of single-sum assistance in case of employee’s or family member’s death.
  • The assets, works, and services received free of charge from non-commercial organizations.
  • The monetary prizes and benefits in kind received at competitions, up to AMD 50,000 per prize.

immigration

  • One of the legal bases for a foreign citizen’s stay in Armenia is the entry visa. 
  • In general, entry visas are issued by the Passport and Visa Department of the Police of the RA at the border crossing control points or on the territory of Armenia or by the Ministry of Foreign Affairs of the RA at the diplomatic missions and consular posts of the RA. 
  • The Ministry of Foreign Affairs of the RA also provides electronic entry visas to foreign citizens. 
  • Citizens of certain countries (principally the countries of the former USSR) are not required to have a visa to enter Armenia and stay in the country for up to 180 days during a calendar year.
  • Armenian entry visas are provided for a period of stay up to 120 days, with the possible extension for a maximum of 60 days, and are issued for single or multiple entries. 
  • The following types of Armenian visas are available: 
    • Visitor visa 
    • Official visa 
    • Diplomatic visa 
    • Transit visa
  • Foreign employees must obtain work permit in Armenia to legally work for an Armenian company unless they are a highly skilled foreign specialist, business owner, or executive. 
  • The Ministry of Labor and Social Affairs (MLSA) will conduct a test of the labor market in Armenia to make sure there aren’t any qualified or available local workers
  • The following documents are necessary for a work permit
    • An application form
    • The employee’s passport
    • A diploma showing education or qualification for the job
    • Two photos
    • Proof of payment of the government’s fees

 

Type of Visa/Permit

Documents

Validity

Eligibility

Visitor Visa

  • Valid passport
  • Passport size photographs
  • Completed application form
  • Proof of travel itinerary

         120 days                                                                                         

  • Foreign nations visiting Armenia for tourism or business purposes must obtain a visitor visa

Diplomatic Visa

  • Valid passport
  • Passport size photographs
  • Completed application form
  • Proof of travel itinerary

120 days

  • Foreign diplomatic official seeking to visit Armenia must obtain a Diplomatic visa

Work Permit

  • An application form
  • The employee’s passport
  • A diploma showing education or qualification for the job
  • Two photos
  • Proof of payment of the government’s fees

1 year

  • Foreigners seeking employment in Armenia must obtain a work permit

value added tax (vat)

  • The standard rate of VAT on domestic sales of goods and services and the importation of goods is 20%.

VAT

Standard Rate

20%

withholding tax

Dividends

  • Dividends paid to a resident company are not subject to withholding tax
  • A 5% withholding tax applies to dividends paid to a resident individual
  • Non-Armenian residents are taxable at a rate of 10% on dividends attributable to 2019 and prior reporting periods, unless the rate is reduced under a tax treaty
  • Dividends attributable to 2020 and subsequent reporting periods are taxable at 5%, unless the rate is reduced under a tax treaty

Interest

  • Interest paid to a resident company is not subject to withholding tax
  • A 10% withholding tax applies to interest paid to a resident individual
  • Interest paid to a nonresident is subject to a 10% withholding tax, unless an exemption or a reduced rate applies under a tax treaty

Royalties

  • Royalties paid to a resident company are not subject to withholding tax
  • A 10% withholding tax applies to royalties paid to a resident individual
  • Royalties paid to a nonresident are subject to a 10% withholding tax, unless an exemption or a reduced rate applies under a tax treaty

Fees for Technical Services

  • Fees for technical services paid to a resident company are not subject to withholding tax
  • A 20% withholding tax applies to fees for technical services paid to a nonresident company, unless an exemption or a reduced rate applies under a tax treaty
  • Fees for technical services paid to a resident or nonresident individual are considered as regular income that is subject to withholding tax at the individual income tax rate (23%)

 

Type of Payment

Residents

Nonresidents

 

Company

Individual

Company

Individual

Dividends

0%

5%

5%

5%

Interest

0%

10%

10%

10%

Royalties

0%

10%

10%

10%

Fees for technical services

0%

23%

20%

23%

termination

An employment contract shall be terminated: 

    • upon the consent of the parties; 
    • in case the contract expires; 
    • upon the initiative of the employee; 
    • upon the initiative of the employer; 
    • in other cases, established by this Code.
  • Notice is required prior to dismissal for redundancy.
  • For employees with:
    • One-year service: 5 days are required
    • Up to 5 years’ service: 6 days’ notice
    • Up to 10 years’ service: 7 days’ notice
  • Workers terminated due to redundancy are also entitled to severance pay of one month.

statutory benefits

  • These are mandatory benefits as postulated by law
  • These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, notice period, and severance pay
  • Statutory benefits also include social security benefits

Statutory Benefits

Probationary Period

Annual Leave

Public Holidays

Maternity Leave

Paternity Leave

Sick Leave

Overtime Pay

Notice Period

Severance Pay

Social Security Benefits

payments and invoicing

  • Individuals who receive income that has not been subject to Armenian tax at source are required to file a personal tax return by 20 April of the following year.
  • Any income payment by a tax agent to an individual is subject to withholding unless the payment is to an individual entrepreneur and against appropriate invoices, and (or) the parties have signed a contract that indicates the individual’s tax identification number (TIN), passport data, domicile in Armenia, and the number of the state registration certificate issued when business activity commenced. 
  • If this requirement is not met, payments from commercial organizations and private entrepreneurs are subject to 20% withholding tax (WHT).
  • WHT from payments to individuals must be transferred to the State Budget not later than the 20th day of the following month.
  • The tax corresponding to the personal tax return must be paid by 20 April.

ease of doing business

  • The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
  • Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • According to the World Bank Armenia ranked 47th in the World in 2019 in terms of ease of doing business.

employee accruals

   
Christmas Bonus% 0%
Christmas Bonus Over Vacations % 0%
Severance per Year % Employees are entitled to one months pay based on one year's service (8.33% of annual salary)
Vacations % The minimum annual paid leave in Armenia is 28 days (7.69% of annual salary)
Notice % Employees are entitled to 30 days of notice period for one year of service or more (8.24%)
Christmas Bonus Over Notifications% 0%
Vacations Plus% 0%
Total percentage of Salary (yearly) The total employment accruals as a percentage of salary per anum are equal to 24.35%

 

employer accruals

Additional information (Country Accruals)

 

   
Social Insurance 4.5% if less than AMD500,000 10.0%
Christmas Bonus 8.33%
Vacations 9.86%
Also, from 1 January 2022 to 31 December 2022, the pension contribution payment will be calculated as follows:  
-4.5% of the monthly gross salary if it is less than AMD 500,000.  
-10% of the monthly gross salary (but not more than the maximum threshold) minus AMD 27,500 if the monthly gross salary is
more than AMD 500,000.
 

 

Employer Accruals Additional information

    Employment Accruals
Annual Leave The minimum annual paid leave in Armenia is 28 days This equals 7.67% (28/365 days) of annual income
Maternity Leave  Female employees are allowed up to 140 days of paid maternity leave. This equals 38.35% (140/365 days) of annual income
Paternity Leave Male employees are entitled to 5 days of paid paternity leave This equals 1.36% (5/365 days) of annual income
Sick Leave If the sickness or injury is not work related, the employee is guaranteed his/her job if his/her absence is no more than 120 successive days or 140 total days within the past 12 months. Employees are entitled to receive full benefits while on sick leave. This equals 32.8% (120/365 days) of annual income
Overtime Overtime is allowed, but at a maximum of four hours per day or eight hours per week. Employees generally receive at least 150% of their regular hourly rate for each overtime hour. Normal hourly rate is around 4,843.75 AMD. Overtime is paid at an additional 2,421.8 AMD.
Severance Workers terminated due to redundancy are also entitled to severance pay of one month. This equals 8.33% (1/12 months) of annual income

 

 

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