Knowledge base / Taxes
What taxes does a sole proprietor pay in Armenia in 2026?
The three regimes
- Micro-business
Annual turnover up to AMD 24 million. No VAT, no profit tax, no turnover tax. The catch is the activity list: consulting, accounting, legal, marketing and design services and several other activities are not allowed. - Turnover tax
Previous-year turnover up to AMD 115 million. The tax is a share of revenue: 10% for services and trade, 7% for manufacturing, 12% for catering. It is paid instead of VAT. You file and pay quarterly, by the 20th of the month after the quarter. - General regime
18% profit tax on income minus documented expenses. If annual turnover exceeds AMD 115 million, you must also charge 20% VAT and file a VAT return every month by the 20th.
Rates, deductions and the turnover limit are covered in detail in Turnover tax in Armenia. For the zero-tax option and its limits, see Micro-business regime in Armenia.
Worked example: a service business
Quarterly revenue is AMD 6 million. Documented costs such as rent, contractors and advertising come to AMD 2 million.
Tax for one quarter
- Turnover tax: 6M × 10% = 600,000. Deduction: 2M × 6% = 120,000. You pay AMD 480,000, or 8% of revenue.
- General regime, no VAT: profit of 4M × 18% = AMD 720,000.
- Bottom line: with modest costs, turnover tax wins. The general regime only catches up when costs reach roughly two thirds of revenue.
If your activity qualifies for micro-business and you stay under AMD 24 million, that is usually the cheapest route.
Contributions you pay for yourself
Sole proprietors born after 1 January 1974 pay a funded pension contribution on their income. Up to AMD 6 million a year it is 5%. Above that, it is 10% of income minus AMD 300,000. This applies whatever tax regime you choose.
Armenia introduced mandatory health insurance in 2026. For proprietors earning over AMD 2.4 million a year, the contribution is AMD 129,600 a year. Whether it applies to a foreigner depends on tax residency, so check your status well before the April payment date.
If you hire staff
In any regime, you act as a tax agent. You withhold 20% income tax and the pension contribution from salaries and pay them monthly, by the 20th.
When you pay another Armenian sole proprietor, ask for an e-invoice. Without one, you may have to withhold income tax from the payment yourself.
How to choose
- Turnover under AMD 24 million and an allowed activity: micro-business.
- Turnover under AMD 115 million and low costs: usually turnover tax.
- High documented costs, or clients who need input VAT: the general regime.
- IT activities on the government list: 1% turnover tax until the end of 2031, if your activity qualifies.
A new sole proprietor picks a regime within 20 days of registration (see how to register a sole proprietor). An existing one can switch by applying before 20 February, and the new regime applies from 1 January.
Common mistakes
- Missing 20 February and staying a full year in the wrong regime.
- Not tracking cumulative turnover and crossing AMD 24 or 115 million without noticing.
- Not keeping paperwork for costs. Without it, you lose the turnover tax deduction and your expenses under the general regime.
- Assuming turnover tax covers everything and forgetting your own pension contribution.
The government plans to raise the micro-business limit to AMD 50 million from 2027. For now this is a plan, not law.
Frequently asked questions
What tax regimes can a sole proprietor choose in Armenia?
There are three: micro-business for turnover up to AMD 24 million a year, turnover tax for previous-year turnover up to AMD 115 million, and the general regime with 18% profit tax plus 20% VAT above AMD 115 million.
Is turnover tax or the general regime cheaper for a service IE in Armenia?
With modest costs, turnover tax usually wins. In the article's example, AMD 6 million quarterly revenue with AMD 2 million costs gives AMD 480,000 turnover tax versus AMD 720,000 under the general regime.
Do sole proprietors in Armenia pay pension contributions for themselves?
Yes, if born after 1 January 1974, in any tax regime. It is 5% of income up to AMD 6 million a year, and above that 10% of income minus AMD 300,000.
When can a sole proprietor in Armenia switch tax regimes?
A new IE picks a regime within 20 days of registration. An existing one can switch by applying before 20 February, and the new regime applies from 1 January.
We will run the numbers for your business
We compare the regimes, file your application on time and keep track of your deadlines. We work in English and Russian.
Sources: Tax Code of Armenia — arlis.am; State Revenue Committee on turnover tax deductions — src.am; PwC — turnover tax and VAT, contributions for entrepreneurs, micro-business and profit tax; Ministry of Finance — regime exclusions from 2025; EY — 1% rate for IT; hartak.am — health insurance; ARKA — micro-business threshold plans.