The main goal of the Free Economic Zone (FEZ) is to contribute to the export volume growth and creation of new workplaces, as well as ensure sustainable economic development through integrating foreign direct investments and introducing advanced technologies.
An appropriate legal framework has been established to ensure the operation of free economic zones.
With this regard, the Law of the Republic of Armenia (RA) “On Free Economic Zones” adopted on May 25, 2011 by National Assembly of Armenia is a basic regulatory document. Aimed at providing tax and customs preferences prescribed by this Law, relevant amendments have also been introduced to:
- Law of the Republic of Armenia “On Value Added Tax”(VAT);
- Law of the Republic of Armenia “On Income Tax”;
- Law of the Republic of Armenia “On Profit Tax”;
- Law of the Republic of Armenia “On Property Tax”;
- Law of the Republic of Armenia “On Currency Regulation and Currency Control”;
- Law of the Republic of Armenia “On Licensing”;
- Law of the Republic of Armenia “On State Due”;
- Law of the Republic of Armenia “On Types of Activities Subject to Licensing in the Territory of Yerevan ‘Zvartnots’ Airport and ‘Yerevan’ Free Economic Zone”;
- Customs Code of the Republic of Armenia.
FEZ operators are granted the following preferences:
- FEZ organizer and operator (hereinafter resident) are exempted from VAT when delivering services and supplying goods in FEZ territory;
- Legal entities are exempted from profit tax and individual entrepreneurs from income tax when being a resident and performing activities in FEZ;
- Public and industrial buildings and structures that belong to or are used by FEZ residents in FEZ territory are exempted from property tax;
- Goods released through “Import to Free Economic Zone” regime as well as other goods produced on these goods in the territory of the free economic zone can be exported from the Republic of Armenia to foreign countries through “export for free circulation” or “re-exportation” regimes without applying customs charges and non-tariff regulation measures;
- Services delivered in the free economic zone on behalf of the state bodies are realized on “one stop shop” basis.
- The following parties are involved in FEZ legal relations:
- Government of the Republic of Armenia;
- Organizer of the free economic zone;
- Resident of the free economic zone.
- The Government of the Republic of Armenia:
- Issues a decree on establishing a free economic zone;
- Implements state policy in free economic zones;
- Carries out the selection process of FEZ Organizer pursuant to Law of the Republic of Armenia “On Procurement” applying competitive dialogue method;
- Accepts bids for establishing free economic zone on private initiative and creates permanent interagency committee to evaluate the bids for becoming a FEZ organizer or resident;
- The Ministry of Economy on behalf of the Government signs an agreement on organizing a free economic zone with the selected organization;
- Controls the execution of the contractual obligations referring to the organization of free economic zone;
- Defines the process of granting permissions to FEZ residents and provides permission certificates;
- Carries out compliance survey of the established requirements specified by the permission granted to FEZ resident;
- FEZ organizer selection and criteria definition procedure;
- permission granting and terminating process, as well as requirements and assessment procedures for the business project submitted by FEZ operator (resident);
- FEZ borderline technical requirements;
- procedure of delivering services in the free economic zone on behalf of the Government on a simplified (one stop shop) basis;
- procedure of submitting reports by the Organizer on the free economic zone activities.
The organizer (operator) of the free economic zone:
- upgrades and operates engineering structures and infrastructures of the free economic zone in accordance with the legislation of the Republic of Armenia, as well as meets FEZ requirements;
- provides information on the operating terms in free economic zone;
- signs contracts with the residents that were granted permission and controls the execution of the contracts;
- defines FEZ internal security rules;
- takes actions directed to the international recognition of the free economic zone and the integration of the residents in it;
- defines and publishes rules on the operation of the free economic zone.
The Procedure of Becoming FEZ organizer
To become FEZ organizer it is necessary:
- to submit the required bidding documents pursuant to Law of the Republic of Armenia “On Procurement” aimed at establishing a free economic zone on Government initiative;
- to submit a complete bid form including the below listed documents aimed at establishing a free economic zone on private initiative:
2) List of services and tariffs provided by the organizer,
3) Free economic zone outline, establishment goal, main activities,
4) Location, site plan, and building design as well in case of buildings,
5) Business plan.
The operator (resident) of the free economic zone
The free economic zone resident may be the commercial legal entities, individual entrepreneurs or branch offices registered in Armenia, as well as the representatives of foreign organizations running business only in the free economic zone based on the relevant permission granted by the Government of Armenia as a result of business plan evaluation and on the contract signed with the organizer.
The Procedure of Becoming a Free Economic Zone
Resident For getting FEZ resident permission it is necessary to submit an bid to the permanent interagency committee. The application form should include the following documents:
2) Business plan,
3) Reference provided by the organizer on terms of activities performed in the free economic zone.