ArmInfo. Before 2025, when the turnover tax for small businesses was 5%, many companies reached the 120 million AMD ceiling and chose to stop growing. Businesses often intentionally "marked time," or underreported their actual turnover to avoid transitioning into a higher tax bracket, as stated by Aghasi Tavadyan, an economist and Associate Professor at the Armenian State University of Economics, in an interview with ArmInfo, shareing his concerns regarding the economic proposal by Samvel Karapetyan to exempt small businesses from the tax burden.
According to Tavadyan, if a zero rate is introduced, there is a risk of a repeat of a similar behavioral effect: businesses may refuse to expand to stay within the tax-free zone and the absence of a tax obligation can lead to a decrease in transparency of financial reporting.
Instead of a total exemption, the expert suggests a gradual taxation mechanism to help businesses adapt as they scale. For instance, 2% tax for turnover up to 60 million AMD, incremental increases to 5%, 10%, etc. as turnover grows and so on.
A major concern highlighted by Tavadyan is the potential for medium and large enterprises to exploit the exemption. Large entities might split their operations into multiple small "shell" companies to evade taxes. However, the expert noted that this is a manageable risk, as Armenia has established the Register of Beneficial Ownership, which helps identify the real owners of businesses. With such tax breaks, Tavadyan urged special attention to so-called "phoenix companies," that can generate high turnover quickly, liquidate to avoid future obligations, and then restart under a new name to qualify for the tax-free regime. Furthermore, these companies can transfer their funds to "gray" or offshore zones.
