Armenia has adopted amendments to the Tax Code, increasing the threshold for profit tax deductions applicable to donations made to state and community affiliated non-profit organisations licensed to implement educational programmes. While this reform represents an important step by the government towards encouraging charitable giving in Armenia, it contains a significant limitation, as independent CSOs are excluded from benefiting from this advantage, regardless of their area of operation.

Tax reform to encourage philanthropy: implications for CSOs

The Tax Code of Armenia currently provides companies with the possibility to deduct donations made to non-profit organisations from their taxable base, up to 0.25% of their gross annual income. This means that businesses can reduce the amount of profit they pay tax on when they donate, within a certain limit. In November 2025, the parliament adopted amendments to the Tax Code, effective from 1 January 2026. According to the amendments, the deduction threshold is increased from 0.25 to 2.5 percent if donations are made to:

  • state or community non-profit organisations that are licensed to implement educational programmes;
  • state or community established foundations that are licensed to implement educational programmes;
  • the government-established foundation providing financial compensation to the families of servicemen who were fallen or missing in action.

The ten-fold increase of the deduction threshold signals the government’s recognition of the importance of corporate philanthropy in supporting public benefit activities, particularly in the field of education. The reform has a potential to stimulate corporate giving, thereby increasing financial resources for state-affiliated educational institutions. It may also contribute to developing a stronger culture of domestic philanthropy.

However, asthe increased deduction applies exclusively to state and community entities, it creates unequal conditions within the non-profit sector. Donations to independent CSOs remain subject to the previous 0.25 percent threshold. As a result, CSOs are at risk of receiving far less support than state-affiliated organisations, despite often implementing similar educational or social programmes. This selective approach can reinforce disparities between public institutions and independent CSOs.

Financial sustainability of civil society: A long-standing concern

Financial sustainability has consistently been identified as one of the principal weaknesses of Armenian civil society. CSO Meter Armenia country reports and other sectoral assessments highlight limited access to diversified domestic funding as a systemic challenge. The 2025 CSO Meter report explicitly recommends expanding funding options to strengthen the sector. This recommendation has become particularly urgent in light of the crisis triggered by the termination of U.S. foreign assistance programmes, which has had a severe impact on many Armenian CSOs.

While the amendments demonstrate the political will to encourage corporate donations, the reform is incomplete if applied selectively. For many years, CSOs have advocated for stronger incentives to foster domestic philanthropy and create possibilities for civil society to diversify their funding sources.

Together with partner CSOs, NGO Center continues its efforts to improve the financial sustainability of organisations. Building on an earlier policy paper, which analyses the needs and provides recommendations for charity reforms in Armenia, and with the support of CSO Meter, they have been advocating for the expansion of incentives for charitable giving. They also called for the creation of alternative financing opportunities to strengthen CSO resilience and reduce dependence on foreign funding.

If the current gaps are not addressed, there is a risk that this reform will remain partial, with a significant segment of civil society unable to benefit from opportunities that could meaningfully enhance the sector’s long-term sustainability.

How will the reform impact business engagement with civil society?

In practice, the new regulation is likely to encourage closer cooperation between businesses and state-run educational institutions, while simultaneously diverting potential private donations away from independent CSOs. For instance, where two organisations implement comparable educational or social programmes, only the state-founded entity qualifies for the enhanced tax deductions. This creates an uneven competitive environment and may influence corporate donors’ decisions, regardless of programme quality or impact.

Tax policies serve as powerful instruments to strengthen civil society. However, to fulfil this function effectively, they must be designed and applied in an inclusive and equitable manner, recognising the diverse and essential roles that independent CSOs play across different areas of public life.

Looking forward: A need for a more inclusive reform

The amendment represents a promising first step toward incentivising corporate donations and fostering partnerships between the private sector and public benefit initiatives. However, to maximise its impact, further efforts are needed to extend enhanced tax benefits to independent CSOs. Building on ongoing advocacy efforts and policy recommendations by civil society actors, the expansion of tax incentives for all CSOs and ensuring equitable access to such incentives would contribute to a more balanced, resilient and sustainable civil society sector in Armenia.

Details are available in the CSO Meter website.