According to the international standards and best practice, businesses and CSOs shall be treated equitably by regulations related to registration procedures, administrative and operational requirements and access to funding. However, CSO Meter Armenia report states that CSOs face discriminatory treatment in the registration process as well as when engaging in entrepreneurial activity in comparison to business entities.
Most of the discriminatory provisions are within the area of registration. Although the law “On State Registration of Legal Entities, Separate Subdivisions of Legal Entities, Institutions and Private Entrepreneurs” provides for the possibility of submitting documents online. It is necessary to submit hard copy documents to register a CSO as online registration is not accessible yet, in contrast to business entities, which can register electronically. The state fee for CSO registration is 10,000 AMD (about 19 EUR), while LLCs do not pay registration fees, and individual entrepreneurs pay 3,000 AMD (about 5.7EUR). The maximal period for registration is also different: individual entrepreneurs are registered immediately on the day of application, business entities within two days, and CSOs within 10 or 15 days, depending on the legal form. This is due to the fact that the charter of CSOs is thoroughly studied by the State Register, whereas the compliance of the business entity’s charter with the requirements of the law is not reviewed. The State Register examines only the integrity of the submitted charter and availability of information prescribed by law. At the same time, in case if CSO founders use a template of the charter that is provided by the government, they can get the registration within two days.
Provision of economic activities
Another area where CSOs experience discrimination is provision of economic activities. In February 2017, the new law on public organisations entered into force, according to which public organisations are now allowed to conduct entrepreneurial activities. However, CSOs should pay profit tax if they carry out direct entrepreneurial activities in the same rate as business entities: the profit tax rate for most of CSO-relevant economic activities is 20%. CSOs should also charge value-added tax (VAT) on the goods and services they sell in case the annual turnover exceeds 115 million AMD (about 219,300 EUR). At the same time, the Tax Code provides for the possibility of a turnover tax for business entities (the rate depends on type of activities, but in most cases it is 5 percent) in which case profit tax and VAT are not envisaged.
Although CSOs can participate in public procurement tenders equally with business entities, public organisations appear to be in an unfavourable position compared to business entities when providing bids for public procurement tenders. Public organisations are subject to mandatory audit in case they have received over 5 million AMD (9,460 EUR) annually from public funds, though the threshold doubled to 10 million AMD (18,920 EUR) with the recent legislative amendments. Thus, when participating in public procurement tenders, these organisations should include the cost of the audit in the budget, which leads to an increase in the service cost and, consequently, to the lower competitiveness of the bidding. CSOs claim that they should have advantages or at least equal opportunities when conducting entrepreneurial activities.
Discussions on enabling environment
In the thematic report of the UN Special Rapporteur on the rights to freedom of peaceful assembly and of association, the Special Rapporteur calls upon states to ensure that businesses and associations are treated equitably by laws and practices regulating registration, dissolution, taxes, auditing and reporting, access to resources and other areas. In 2019, Transparency International Anticorruption Center (TIAC) has launched discussions on issues and challenges regarding CSO enabling environment, and currently is in the process of drafting a Roadmap towards more enabling environment for CSOs in Armenia, which will include provisions on equitable treatment of CSOs and business entities.