CosySoft: about opening a business in Armenia one year later

Spoiler immediately: did we regret opening a company in Armenia? No. A year later, this decision seems even more correct than even at the time of opening. When everything was done, the refrain was only one question: “Why didn’t we do this earlier?”

After a long bureaucratic journey, we at CosySoft have mastered many new areas. We learned about the taxation of different countries, benefits and other legal subtleties. We tell how a year later this decision affected the company, what plans we have ahead and whether Armenia really — this is the silicon valley of the Caucasus.

Hարմարավետ [harmaravet] this is how “cozy” is in Armenian. But we decided on such a radical renaming only in the founding documents, so in Yerevan we are still known as CosySoft.

Why

Already in 2022, we wanted to open in Samara, a city adjacent to our native Togliatti. In the regional capital, there are specialized IT universities that train good developers. But the desire of part of the team to relocate made its own adjustments to this strategy, and we definitely didn’t want to lose part of a very skillful team.

Another, but no less important factor — among the customers were companies from abroad, which have grown and become sustainable start-ups. They needed development on Flutter, which began to develop on the foreign market earlier and is more in demand than in Russia. Throw clients, leave yourself without projects, and a growing team without interesting tasks — it's a shot in the foot for reputation and a tangible hole in the budget, which seemed to be a difficult task to close in a volatile market.

Why Armenia

When the decision to open a company had already been made, we began to think in what jurisdiction it would be located. The choice was rather big: Kazakhstan, Turkey, Serbia, Dubai, European countries. As a result, according to our criteria, Armenia won, and here is what we learned about this country over the past year.

Geographic availability

In terms of accessibility from the territory of Russia, Armenia occupies one of the top places. From Togliatti and Samara to Yerevan is only 3 hours by plane. This allows you not to worry about flights both there and back.

Business Benefits

In terms of state support for the IT sector — Armenia is one of the most attractive countries. The government of the republic contributes to the development of the IT sector by providing tax incentives. For example, IT startups with less than 30 employees pay a 10% reduced income tax instead of 20% and pay no income tax.

Also, companies operating in the ICT sector can take advantage of the benefits and tax incentives of the ECOS Free Economic Zone.

Incentives for the IT sector existed until 2022, but in 2022 a very important change was made — Russians no longer need to have a work permit. According to this amendment, citizens of the member states of the Eurasian Economic Union and their family members were exempted from the requirement to obtain a work permit to carry out labor activities in the RA throughout the entire term of the employment contract.

In our case, we quickly opened a legal entity, but the queue after the application for inclusion in the list of preferential IT companies was long. This was clearly due to the increased burden on state structures. At the same time, the interview itself and the approval of the application took about 5 minutes.

Before that, Russian business also entered the register of accredited IT companies in Russia and received all the required benefits and preferences, and it was faster.

Low bureaucracy

In Armenia, the procedure for starting a business is quite simple. You can open a legal entity in just a couple of hours, arriving at the Business Entry universal center. There are also consultants who will help you fill out the questionnaire and answer your questions. In addition, they can even provide you with a ready-made company charter if you have not already made your own.

You can also contact a local law firm that will accompany you every step of the way. This is exactly what we did and did not regret: the company with which we started working a year ago still helps us with business.

We did not encounter any particular bureaucratic atrocities when dealing with the state, but banks are another thing.

Banks

It was at the stage of opening an account that we encountered the first difficulties. In addition to the fact that banks demanded a bunch of documents to approve the application and went silent for a long time, so often their requirements were absurd.

For example, in one of the banks we were asked to provide contracts with local companies. But the fact is that in order to maintain preferential taxation, we cannot work with Armenian contractors.

Currently, Armenia does not legally regulate operations with cryptocurrency. That is, they are not prohibited, but not allowed either. The Central Bank of Armenia limits itself to recommendations and is in no hurry to specify its opinion. Such a position of comfort for entrepreneurs. This allows you to flexibly build financial relationships and cooperate with foreign partners.

From time to time we had problems with payments and transfers. You also need to take into account that banks, for various reasons, may change their policy and stop serving you as a client. This must be taken into account and be ready to provide additional documents upon request or even change banks.

Most banks in Armenia have their own Internet banking system and mobile applications. Online services are quite functional and allow you to solve many issues without going to the bank, but they are inferior to Russian banks in design and functionality.

Taxes

Armenia's taxation system has much in common with Russia's. The total tax is about 17% with all additional fees. Which is less than in Russia, even with all the benefits.

Now there is no reason to think that the preferential program will be adjusted for the worse. The stable political climate and the adequacy of local government allow for positive forecasts. However, based on the experience of other countries with similar initiatives, tax increases are possible over time.

It is important for businesses to have time to adapt. High taxes — this is bad for business, but even worse — their sharp increase. An adequate solution can be called a model when taxes are increased gradually, distributed over a long period of time. Such a consensus allows both businesses to get on their feet and the government to smoothly achieve tax collection targets.

Mild climate and close mentality

This is one of the most pleasant advantages of Armenia. The climate here is mild and familiar to the middle lane. In Yerevan, summers are hot, dry and clear, and winters are frosty. During the year, temperatures typically range from -7°C to 34°C and are rarely below -14°C or above 37°C. In the highlands it is cooler in summer, but also in winter.

Features of interaction in Armenia can be described in one word "spiritual". The people here are friendly and pleasant to talk to. For example, when we entered into a lease agreement for our CozyHouse, we got into a whole feast. And only after checking with barbecue and strong drinks, the owner and I shook hands.

It may seem unusual, but people around here tend to get to know you better before doing business. Even business communications — it is not just commodity-money relations, but something more.

New Perspectives

Armenia has already taken its place on the IT map of the world, and this sector is one of the priorities in the country's economy. PicsArt, Teamable, Krisp, Codesignal, Shadowmatic — this is just a short list of Armenian companies that have already entered the international market and compete successfully on it.

In a country like Armenia with a compact domestic market, only he can be counted on — to put it mildly, a very optimistic decision.

This is both a plus and a minus at the same time. The absence of domestic customers automatically pushes to the international market. In our case — this coincided with the ambitions of the company and became only a plus.

Profit!?

With the opening of a company in Armenia, we have the opportunity to work with international clients, and in terms of HR — we have learned to find cool people in new locations for us. Now the company employs guys from Armenia, Georgia and Serbia.

The emergence of a new business in Armenia also affected communications. If earlier the vision of work was built 100% in an office format even after the pandemic, now the teams have become distributed. By the way, this still requires optimization of processes and adaptation of all the guys to them. But after a whole year of working in this format, we can say that everyone is already used to it.

CosyHouse in Yerevan

Since we went on an experiment with a foreign company, we thought, why not experiment with the workspace. This is how the Armenian CozyHouse appeared in the format of co-working and co-living.

Have you watched Silicon Valley? Here's how it is. Only with the amendment that we have been working for more than 10 years and have long ceased to be a startup. By the way, because of the special conditions for IT companies, Armenia is called the "silicon valley of the Caucasus".

What's next?

Armenia is changing a lot. Already now it is a modern country with good infrastructure, convenient services and a growing business. Simplified opening of a company, tax preferences, proximity to Russia, a comfortable climate and a similar mentality — all this makes Armenia an attractive jurisdiction for starting a business.

Over the past year, we managed to resolve most of the legal issues, received all the necessary documents and are ready to make further plans. We are already actively participating in local events, our guys perform at meetups, where they share their expertise.

We are unlikely to be able to make two identical companies, but we do not strive for this. Our Armenian office will always be special, even as it gets bigger. Just as we brought a piece of Togliatti to Yerevan, so Yerevan left a little of its soul in us.