Introduction.
Armenia, a small but vibrant country nestled in the South Caucasus, is gradually emerging as a promising hub for financial services. With a rich history, a highly educated workforce, and a strategic location at the crossroads of Europe and Asia, Armenia offers a unique and favorable environment for the development of its financial sector. In this article, we will explore the current state of investment sector in Armenia, the regulatory framework, and the factors contributing to the sector's growth.
Investment services.
The investment services is still a developing branch of financial services in Armenia, aiming to attract foreign investors to provide investment services in Armenia. The investment services sector is regulated by the corresponding laws. In addition, the Central Bank of Armenia regulates by legislative acts the activity of investment companies and realizes supervision over investment services.
The government of Armenia has introduced various incentives to attract foreign investors to the capital market. These include tax benefits, streamlined registration processes, and efforts to harmonize regulations with international standards, making it more appealing for foreign investors to participate in Armenia's capital markets.
The tax benefits include exemption of income tax for the revenue derived from the alienation of participatory interest of the company or other security.
Regulatory Environment.
Currently, the regulatory framework primary aims to protect the investors. This may be concluded from the fact that the investment services shall be provided on the territory of the Republic of Armenia exclusively by the organizations licensed by the Central Bank of Armenia to provide corresponding services. The legal texts imply that the investment services to be provided on the territory of the Republic of Armenia are subject to control by the Central Bank of Armenia.
The investment services include the following:
- Receipt and communication of assignments regarding securities transactions from clients;
- Execution of securities transactions on its behalf or on behalf of the client and at the expense of the client;
- Provision of consultation to clients regarding the investments in securities;
- Execution of securities transactions at its expense and on its behalf;
- Management of the pool of securities;
- Carrying out guaranteed or non-guaranteed placement of securities.
Recent development.
Even though, the regulatory framework for providing of investment services is relatively strict, however the technological progress had an influence on the regulation of the investment services in Armenia.
Nowadays, due to various factors, including the spreading of Internet, the accessibility of various financial markets from different countries, and the interest of ordinary persons in foreign investments has led the Central Bank of Armenia to reconsider the scope of provision of investment services in Armenia, that are subject to licensing.
Having said this, the board of the Central bank of Armenia has provided an official explanation, which stipulates in which cases the services provided by foreign investment organizations to residents of the Republic of Armenia will not be considered as provided on the territory of Armenia. Hence such activity will be exempt from the licensing requirement.
The Central Bank of Armenia has explained that the legislation of the Republic of Armenia is applicable for relations arising on the securities market of the Republic of Armenia. Whenever the operations with securities are not exercised on the securities market of the Republic of Armenia, the legislation of the Republic of Armenia is not applicable.
The purpose adopted by the Central Bank of Armenia is to provide possibilities for resident investors to benefit from foreign financial markets without creating additional obstacles as to the licensing requirement for foreign companies providing investment services. Therefore, the Central Bank has provided certain exemptions in which case the provision of investment services will not be considered as provided in Armenia.
The official explanation adopted by the Central Bank of Armenia enables from now on to provide investment services to the residents of Armenia, subject to follow the conditions stipulated by the mentioned official explanation. The advantage provided consists in the fact that foreign financial organizations will not be subject to licensing in Armenia and even more are not obliged to establish an entity in the Republic of Armenia..
How we can help?
Our experience includes assisting foreign organizations in conducting their activities in Armenia, and providing complex analyses and advisory on the subject of provision of the mentioned services in Armenia. Our dedicated team of experienced lawyers is poised to offer comprehensive assistance, ensuring the success of the undertakings in conducting activity in Armenia..
Author:
Aleksandr Egibyan (Mr.)
Senior Associate, Legelata Legal and Tax
DISCLAIMER:
This material is produced for Legelata LLC. The information contained in this piece is provided for general informational purposes only and does not contain a comprehensive analysis of each item described. Prior to undertaking (or not to undertaking) any actions, the reader is advised to seek professional advice tailored to their specific situation. Legelata or the author accepts and holds no liability for acts or omissions taken in reliance upon the contents of the contained information in this material.
LEGELATA LLC 01/10/2024
