Feb 24, 2020

Incorporate your business in Armenia – TOP 5 sectors for investments

Today will discuss in which areas it is recommended to register a company in Armenia, and which sectors of the Armenian economy are most attractive to foreign investors in terms of fast return on investment, maximum profitability and taxation optimization capacities.

After the Velvet Revolution, Armenia experienced overwhelming and sharp growth in almost all economic, political and social spheres of life.  Citizenship and investment programs went up to a new level, improvement of the tax system backed up by new tax legislative framework.

It is also worth noting that the registration of a company in Armenia is attractive in terms of preserving and increasing your own assets. One may argue even that Armenia is the last resort for non-residents who plan to protect their own savings from the adverse developments as a consequence of economic and political persecution. At the same time, the owners of Armenian companies get the opportunity to apply for a special residence status, residence permit and citizenship by investments (the program is currently under development).

Incorporating a company in Armenia – the main privileges of the jurisdiction in terms of doing business on an international scale

The Republic of Armenia has made a huge leap towards world recognition as an economically stable state. For 2019 alone, gross international reserves increased by 25.7% and amounted to 2.84 billion USD. At the same time, Armenia became the first country among European countries in terms of GDP; according to World Bank forecasts for 2020, its growth will exceed the 5.1% record high. For comparison, in this forecast Georgia demonstrated 4.3%, Turkey 3%, Azerbaijan 2.3% growth in GDP.

The foreign economic activity of the tiny South Caucasian state is also impressive in terms of scope and achievements. Considering the development of the country domestically and in relations with other countries, we should highlight the following key positive aspects:

  • the government plans to host the Armenia-European Union forum, which is aimed at increasing investor awareness of Armenia, form viable business ties;
  • aiming to eliminate existing barriers in the EAEU economic area, a system of digital transport corridors is being developed;
  • At a meeting with the EBRD President, the Armenian President discussed the possibility of cooperation in the field of high technologies;
  • The country is currently exploring possibilities to establish economic ties with the Qatar Investment Fund (it manages 335 billion USD worth of assets);
  • Beeline Armenia telecommunications company is preparing for a deal with Ucom, which will lead to an improved voice communications infrastructure and higher quality of services for customers;
  • In the year 2019 alone, 57 companies were granted customs privileges in Armenia, as they pledged to invest a total of 212 billion Armenian drams in the country’s economy (3,500 jobs are planned to be created). 

Registration of a company in Armenia is more than merely doing business in a developing Caucasian country with access to the multi-million consumer market of the EAEU states. In Armenia, foreign investments are protected at the legislative level, with a possibility of obtaining a special status of residence or citizenship by a simplified procedure. In both cases, non-residents get the opportunity to acquire agricultural land without creating a legal entity.   

Incorporating a company in Armenia – which industries call for foreign investment?

Let us be fair in relation to the Armenian economy – indeed, it is developing rapidly, but still not strong enough to compete with the developed EU countries. However, given ambitious plans for the coming years, the reforms in legislative framework and strengthened bilateral agreements evidence the potential for exponential development to be expected in the next 5-7 years.

In Armenia at this stage there are still areas for development where the inflow of foreign investment is vital. Moreover, optimal conditions have been established for doing business in these sectors, including tax incentives and customs privileges, government support and partnership programs.

Thus, TOP5 key sectors of Armenian economy calling for investment are:

  • construction of commercial and residential real estate;
  • food industry (including the production of alcoholic beverages, confectionery, winemaking);
  • agriculture (in particular livestock);
  • tourism industry, which is often combined with enterprises operating in various industries in the Armenian territory;
  • renewable energy sources.

If we talk about incentives and the logistics base, the most attractive area for investment continues to be the IT industry: given the country’s rich technological and scientific heritage, it most likely has the potential to become the next Silicon Valley.

The sports remains a rather interesting and underexplored area: well-known businessmen of Armenian descent are now buying football clubs in Armenia, aiming to drive the development of sports in the country. The telecommunications sector is not far behind, where at the moment only one provider has the right to provide services as a package. In fact, competition is very small, and the needs of local businesses and private clients are increasing.

Next, we will discuss each area in more detail. 

Incorporating a company in Armenia in the food industry sector

If we look at the achievements of Yerevan Chocolate Factory, which in 2019 increased the export volume by 141% and the sales volume by 37%, we can conclude that the production of confectionery and all kinds of sweets is a direction with high development potential. The company works closely with Ukraine, the EAEU, France, the USA, Israel, China and Estonia in terms of chocolate exports. 

Winemaking is another industry that has always been more than just an economic sector. In fact, grape cultivation and wine production have been historically valuable national treasures for Armenia. 

It is worth noting that the FAO is implementing a project in Armenia aiming to provide assistance to local companies and private farmers to combat agricultural pests. Currently, collection vineyards and orchards are completely open for researchers, which will contribute to active development of the viticulture sector of Armenia. Regarding viticulture, launching the production of organic wine from Trinity grapes is another remarkable achievement, even a startup.  

Incorporating a company in Armenia in the construction sector

Taking a closer scrutiny to construction industry, we note the increased interest in residential real estate in Armenia over the period 2018-2020. Moreover, the number of transactions is steadily increasing both domestically by local residents and by foreign investors. In the coming years, a steady increase in prices for residential real estated, including apartments in new buildings, is forecasted.

The government has concerns that the housing stock may fall short of supply against the continuously increasing demand. Hence, the industry is in search for new developers, including those engaged in commercial real estate.

Another interesting opportunity for investors and businessmen is to become the operator of one of the Armenian Free Economic Zones (FEZs), which require investment and are already at the preparation stage. Read more about FEZs in Armenia in this article.

Incorporating a company in Armenia in the in the livestock breeding sector

The agricultural potential of Armenia may not be as remarkable as other sectors, due to limited territories suitable for cultivation, however it has immense potential for innovations and introduction of modern technologies. A vivid example of this is the “smart farm” of lightweight constructions, which opened at the end of October 2019 in the Shirak region.

The program introduces a new culture in the livestock industry of Armenia:

  • the transition from traditional animal breeding to intensive breeding with loose-box farming for animals;
  • increase in productivity;
  • production of high-quality dairy products;
  • Introduction of automated contact-free milking systems.

The investors in the “smart farm” project are CARD of Armenia, the Austrian Development Agency, and the Food and Agriculture Organization of the United Nations (FAO). The farm uses smart technologies to control air supply, ventilation, lighting, temperature control. All conditions comply with international standards for year-round animal welfare.

Incorporating a company in Armenia in the tourism industry 

 The most popular resort in Armenia is Tsaghkadzor. This is a ski resort with a large number of visits in summer as well as in winter by those who prefer active winter holidays. However, in recent years, the popular resort has faced a fairly strong competitor – Ashotsk region. It is necessary to establish a modern sports complex here, which, at the same time will help open new jobs in the community.  

Those who are looking to invest in Armenia with a focus towards tourism industry should take into consideration the following aspects:

  • Tsaghkadzor and Ashotsk are the most popular resort areas;
  • Aiming to boost interest of foreign tourists, you can combine tours to existing wineries with holidays in the best resort hotels;
  • Recent developments in the field of extreme tourism: a new rope park and mountain biking on the slopes of the mountains;
  • taking into account that guests of Armenia highly admire local landscapes, familiarization tours around the country from a helicopter, balloon or cable cars will be in demand;
  • The Armenians take pride in their authentic cuisine, which is recognizable on any continent of the world. So you may need to provide tourists opportunities to familiarize with local cuisine at all varieties.

For wealthy tourists, businesspeople who especially value their own time, a charter helicopter service will be in demand (currently only two companies provide it).

Incorporating a company in Armenia in the country’s energy sector and production

Many foreign investors already take advantage of the prospects offered by Armenian jurisdiction and transfer their own business to the territory of Armenia. This happened with the company “AFA”, which was previously located in the UAE. In August 2019, the company initiated the transfer of its facilities to Armenia, having calculated the benefits of customs duties on raw materials for the production of brake pads for cars.

The project carried out by the company involves investments in the amount of approximately 630 thousand USD, 20 jobs in the first year of activity, 35 in the following years.   

A second interesting example is the WABA anti-hail net manufacturing company. The plant is equipped with the state-of-the art Italian equipment, the manufactured products can fully protect plants from birds and pests, as well as from sudden temperature fluctuations.

Registration of a company in Armenia in the energy sector is another investment opportunity with high returns. In Armenia, at this stage, construction and maintenance of alternative sources of electric energy is still an area for extensive development; in general, the niche is open for vast opportunities.

To sum up – registration of a company in Armenia takes a minimum of time, does not require the personal presence in the Armenian territory, is transparent and understandable. However, it should be taken into account that in some cases special permissions and licenses will be required (depending on the chosen type of activity). If you are planning to set up a business in Armenia or transfer your company from another jurisdiction, open a bank account in your own name or looking for company operation services, contact us by e-mail info@offshore-pro.info. We will help you through the entire process of company formation and registration with involvement of our skillful lawyers. Additionally, we will promptly prepare your documents for submission to the passport and visa department to obtain a residence permit, citizenship, special residence status. If necessary, we will select commercial / residential real estate in accordance with your needs.