Freelancing in Armenia: Opportunities and Legal Considerations
Freelancing in Armenia continues to grow, becoming a flexible and independent way to earn income. Remote work in fields such as IT, design, consulting, and many others allows professionals to collaborate with international clients while staying in the country.
However, many freelancers do not realize that operating without proper registration is considered illegal entrepreneurial activity. This lack of awareness can lead to legal and financial issues.
To operate within the legal framework, freelancers must be aware of their tax obligations, including registration, income declaration, and applicable tax rates. While the tax system may seem complex, understanding it correctly ensures a stable and secure freelancing career.
This article explores the main tax obligations for freelancers in Armenia, helping you operate legally and confidently develop your career.
Freelancing in Armenia: The Importance of Legality and Tax Obligations
Freelancing in Armenia is becoming increasingly popular as a convenient and flexible way to earn income. Professionals in IT, design, consulting, teaching, and other fields can work with international clients without leaving the country. However, it is crucial to understand that freelancing is considered entrepreneurial activity, and without official registration, it can lead to legal and financial problems.
What Does Armenian Legislation Define?
According to Armenia’s Civil Code, any activity carried out for profit and not as salaried employment is considered entrepreneurial activity. This means that if a person provides services, sells products, or earns income in any other way, they are required to register and fulfill their tax obligations.
There are two main ways to legally freelance in Armenia:
- Registering as an Individual Entrepreneur (IE) – This allows freelancers to operate legally, issue invoices, open bank accounts, and deduct certain expenses from taxable income.
- Operating without registration – In this case, the freelancer is acting illegally by not declaring income and not paying taxes. Unregistered activity can result in fines ranging from 200,000 AMD to 500,000 AMD.
Freelancer Taxation System
Freelancers in Armenia can choose between the turnover tax system or the general taxation system.
Turnover Tax System
- For IT freelancers: 1% of turnover
- For other service providers: 10% of turnover
General Taxation System
- Value-Added Tax (VAT): 20%
- Profit Tax: 18% (based on net profit)
If a freelancer’s annual income exceeds 115 million AMD, they must switch to the VAT and profit tax system.
How to Register as an Individual Entrepreneur (IE)
Registering as an IE in Armenia is a relatively simple process that can be done at the State Register Office or HayPost branches. To register, you need to:
- Present an ID (passport)
- Fill out an application form
- Pay a 3,000 AMD state fee
After registration, freelancers must submit a tax declaration within 20 days to the tax authorities regarding their chosen taxation system.
Common Freelancer Mistakes and Their Consequences
- Failing to submit a turnover tax application – If the freelancer does not submit this form within 20 days of registration, they will be subject to the general taxation system, leading to higher taxes.
- Underreporting income or failing to declare earnings from PayPal, Wise, or bank accounts – All income, regardless of how it is received, must be declared.
- Not deducting expenses from taxable income – Freelancers can reduce their taxable income by deducting work-related expenses, such as software purchases, equipment, and internet fees.
Conclusion
Freelancing in Armenia offers great opportunities for professional growth and stable income. However, failing to meet tax obligations can lead to serious problems. By registering as an IE and complying with tax regulations, freelancers not only avoid legal issues but also ensure their financial security and long-term stability.
Understanding and managing the tax system is essential for a successful freelancing career. If the process seems complicated, consulting a tax advisor can help avoid unnecessary risks and ensure efficient tax management.