Value Added Tax (VAT)

Legal person registered as an implementer of business activity or having right for implementation of business activity, registered in Armenia branch office of foreign organization and private entrepreneur shall be considered as VAT payer:

1. From 1st of January of the calendar year till end of this calendar year, if the person cannot be considered as turnover tax payer as of 1st of January of this year, excluding non-commercial organizations (Foundation) and producers of agricultural output (Agro firm). Foundation shall be considered as VAT payer:
   • from 1st of January of the calendar year till end of this calendar year if the sum of sales turnover of the year preceding the calendar one is more than established amount of VAT threshold, or
   • starting from the moment when the sum of sales turnover of the current year is exceeded of the VAT threshold and till end of the calendar year (in case of exceeding of VAT threshold during the calendar year, the VAT shall be paid from the amount exceeded the VAT threshold only), or
   • in case of submitting to Tax Inspectorate the announcement on recognition as VAT payer, from the date mentioned in this announcement and till end of the year mentioned in this announcement, but no sooner than the first calendar day of the accounting period of the submission of such announcement.
   Agro firm shall be considered as VAT payer in case and procedure provided below in the point 2.
2. Starting from the moment when the sum of sales turnover of the current year is exceeded of the VAT threshold and till end of the calendar year. In case of exceeding of VAT threshold during the calendar year, the VAT shall be paid from the amount exceeded the VAT threshold only.
3. From the moment when as per law the person will stop considering as a turnover tax payer and till end of this year.
4. In case of submitting to Tax Inspectorate the announcement on recognition as VAT payer, from the date mentioned in this announcement and till end of the year mentioned in this announcement, but no sooner than the first calendar day of the accounting period of the submission of such announcement.

The amount of VAT threshold is equal to 58.35 mln AMD.

 

In case of performing of VAT taxable transactions the following persons shall be considered as person carrying commitment on VAT payment:

1. Legal persons without right for performing of business activity, organizations which are not legal entities, including establishments and representative offices of foreign organizations,
2. Domestic government and municipal entities, as well as their establishments, in special cases and procedure stipulated by the law,
3. Physical persons in special cases and procedure stipulated by the law.

 

The VAT taxable transactions are:

• Sales of goods and services, including disposal of assets.
• Free of charge (partial compensation) consumption (supply of goods and/or rendering of services by VAT payer free of charge or by the prices significantly lower than prices commonly used in such or similar transactions).
• Import of goods in territory of the Republic of Armenia under “Import for free turnover” customs regime.

 

The object of taxation is, correspondingly:

• In case of sale of goods and other assets - the value of sold goods and products in monetary terms (including other payments added to this value pursuant to the Law) net of VAT, which must be paid by the purchaser to the supplier as an indemnity.
• In case of rendering of services - the value of rendered services in monetary terms (including other payments added to this value pursuant to the Law) net VAT, which must be paid by the purchaser to the supplier as an indemnity.
• In case of agent contract - the agent fee (bonus and other similar types of compensation) net of VAT, if the agent is acting on behalf of principal. In case of the agent is acting on their own behalf, the taxable turnover is total amount of supply goods/provided services.
• In case of free of charge (partial compensation) consumption - 80% of the amount usually considered as object of taxation for such or similar transactions under comparable circumstances (implementing with real prices).
• In case of barter transactions, the object of taxation shall be determined applying commonly used prices.
• In case of import of the goods in the territory of Armenia under “Import for free turnover” customs regime - the total sum of customs value, imposed customs duty (0 or 10% of customs value) and excise tax (if any) of imported goods.
• In case of import of the recycled or repaired (renovated) goods (previously exported in the established by customs legislation procedure for recycling or renovation purposes) – the sum of the amount of difference between the importation customs value of the renovated goods and previously declared for exportation customs value of these goods, customs value and excise tax (if any).

 

Notes:

• In case of supply of the goods subject to excise tax – the amount of excise tax shall be added to the taxable turnover.
• In case of disposal of real estate, the object of taxation cannot be less than the value of this real estate calculated for property tax purposes.
• When foreign entities conduct VAT taxable business activities (including import of goods belonging to the mentioned entities) in the Republic of Armenia without being registered as entities conducting business activities in the Republic of Armenia in compliance with the established procedure, the entities of the Republic of Armenia (VAT payer and/or persons carrying commitment on VAT payment) that are parties of contract relations (including contractors) shall carry the tax responsibility on behalf of foreign entities in terms of the mentioned activities in accordance with the procedure and within the terms defined by the Law.
• Customs value of goods transported through the Customs border is the amount actually paid and subject to payment or that should be paid for the purchase of the goods to export to the country of importation and their transportation to the Customs border of the Republic of Armenia. Customs value of goods transported across the RA Customs border is determined by the declarant except for cases specified by Customs Code, when Customs value is determined by Customs Authorities.

VAT rate is 20% (or 16.67% in total sum of indemnity).*

 

 

(*) The 0% rate of VAT shall be applied to the following transactions and operations:

• Export of goods by "Export for free turnover" customs regime outside the customs border of the Republic of Armenia;
• Provision of services, whose place of provision is outside the domestic territory of the Republic of Armenia in accordance with the Law;
• Other specific transactions and operations determined by the Law.

 

VAT payers should issue the standard form tax invoices for VAT taxable transactions in terms and procedure established by the law. Issuing of tax invoices shall be proceeded via special electronic system of Armenian Tax Inspectorate.

 

Reporting period:

• each quarter of current year, with the exception of the case defined in the next sub point,
• in case of revenue from the taxable transactions exceeded 100 mln. Armenian dram in the previous calendar year, each month shall be considered as a reporting period.

 

Terms of payment:

• for imported goods – within 10 days after the importation,
• for other transactions – not later than the 20th day of the month following the reporting period.

 

The Company shall pay to the state budget within the reporting period the amount of VAT calculated on the taxable turnover of taxable transactions (operations) implemented in this period with the deduction of:

• The amounts of VAT indicated in the tax invoices of the suppliers and paid to them by the Company against goods and services acquired for industrial and commercial purposes within the reporting period in the internal territory of the RA,
• The amounts of VAT withheld by customs bodies of the RA for the goods imported into the territory of the RA.

 

The amounts of VAT indicated in tax invoices of suppliers (in case of import - in customs declarations) shall not be deducted:

• by entities who are not VAT payers,
• for transactions (operations) which are exempted from VAT,
• for those transactions for which are not covered by the Law.

In cases specified by this clause, the amounts of VAT indicated in tax invoices of suppliers (in case of import - in customs declarations) shall be added to the purchase value (cost) of goods, products and/or services.

 

Statement submitted to the Tax Inspectorate:

• VAT Calculation Report,
• Info on issued and received tax invoices, the object of taxation of which is more than AMD 100000

Term of submission is not later than the 20th day of the month following the reporting one.

Profit Tax (Corporate Income Tax)

The profit tax payers in Armenia are residents of Armenia (hereinafter - residents) and non-residents.

For the purposes of the profit tax:

1. Organizations established (obtained state registration, registered at tax bodies) in Armenia, except for separate subdivisions of organizations specified in point "b" of this clause, shall be considered as residents;
2. Organizations established in foreign countries, as well as international organizations and organizations established by them outside the territory of Armenia shall be considered as non-residents.

 

The taxable profit received within and outside the territory of Armenia shall be considered as the object of taxation for residents.

The taxable profit received from Armenian sources shall be considered as the object of taxation for non-residents.

 

Taxation of residents

Taxable profit is the positive difference between the gross income of the taxpayer and deductions defined by the Law.

 

Gross income:

• Revenue from the sales of goods, products and other assets,
• Revenue from the sales of services,
• Granted assets*,
• Other income.

 

(*) Assets received gratuitously (with the exception of lands and cash) are considered as income within the reporting period, in which they have been accrued as expenses or losses, irrespective of the deduction of the mentioned expenses or losses from the gross income.

 

Deductions of the gross income:

• Necessary and documentary supported expenses related to gross income in procedure established by the Law, in particular:
  • material expenses;
  • labor costs and other payments deemed equal thereto;
  • insurance premiums;
  • interest on loans and other borrowings;
  • bank charges;
  • advertisement & marketing expenses (for such expenses expended outside of Armenia in the amount of not exceeding the rates determined by the Government of Armenia);
  • representative expenses (in the amount of not exceeding the rates determined by the Government of Armenia);
  • business trip expenses (in the amount of not exceeding the rates determined by the Government of Armenia);
  • expenses on special nutrition, uniforms and other equipment for the employees, as well as other types of compensation defined by the legislation (in the amount of not exceeding the rates determined by the Government of Armenia);
  • expenses on staff recruitment;
  • expenses on staff trainings (for such expenses expended outside of Armenia in the amount of not exceeding the rates determined by the Government of Armenia);
  • expenses on audit, legal and other consulting, information and administrative services;
  • fixed assets current repair and maintenance expenses.
• Non-current assets’ depreciation allowances in the established by the law norms and procedure;
• Incidental, natural or other losses – in amounts and in procedure established by the Law;
• The amount of losses (overstated deductions from the gross income, established by the Law) incurred by the taxpayer in the course of the previous years (in case of incurring a loss from the taxpayer’s activity within the reporting year and the preceding one, the loss can be transferred to five years following the year of incurring the loss);
  For the application of the mentioned deduction in case of incurring a loss from the taxpayer’s activity within the reporting year and the preceding one, the loss shall be transferred to five years following the year of incurring the loss

 

Notes:

1. The amount of dividends received by the resident taxpayer shall be deducted from the gross income of the latter.
2. The positive and/or negative results of the revaluation of foreign currency and other assets and liabilities expressed in foreign currency, as well as the positive and/or negative result of revaluation of fixed assets carried out according to the procedure established by the Law shall be not treated as income and/or expenses correspondingly.

 

Accounting of income and expenses will be performed on the basis of accrual method.

 

Profit Tax Rate is 20%.

 

Reporting period is calendar year.

 

Term of payment of profit tax is till 25th April of the year following reporting one.

Final amount of the Profit Tax to be paid to the state budget – calculated Profit Tax for accounting year minus performed during accounting year advance payments.

 

Advance payments – it is maid by a taxpayer during the year on quarterly bases, amounting to 18.75% of the actual amount of the profit tax for the previous year. The perm of payment is not later than on the 15th day of the last month of the reporting quarter.

 

Statements submitted to the Tax Inspectorate:

• Profit Tax Calculation Report.

Term of submission is till 15th April of the year following reporting one.

 

Taxation of non-residents

The following income of non-residents shall be considered as income received from Armenian sources:

• Income derived from the business activity implemented by a non-resident in the territory of Armenia, in particular including:
  • income derived from the sales of goods and products, and provision of services in Armenia, irrespective of where they are paid for,
  • income derived from mediatory activities in Armenia,
  • income derived from management, financial and insurance services, provided that this income is considered as expense for the paying subdivision or place;
• Passive income of a non-resident received from a resident or a non-resident, in particular including:
  • dividends,
  • interest,
  • royalties,
  • income from the lease of property located in Armenia,
  • increase in the value of property or other assets, resulting from the alienation of the property or other assets located in Armenia;
• Other income derived by a non-resident in Armenia, including:
  • management services;
  • provision of necessary assistance for the effective use of property or rights;
  • provision of necessary assistance in installation and exploitation of equipment, assembly lines of mechanisms and devices;
  • insurance payments received as a result of insurance, unless provided otherwise by the legislation of the Republic of Armenia, as well as insurance benefits;
  • consultation, assistance, or other services related to the management of any scientific, industrial or commercial project, plan, process or a joint enterprise;
  • consultations and services rendered by foreign companies to their subsidiaries in connection with the business activity of the latter in the Republic of Armenia, as well as consultations and services rendered by the head office of a non-resident in favor of its subdivision;
  • freight of loads;
  • import of goods from foreign countries on terms of the trade mediation with enterprises and the sales in the Republic of Armenia. Whereas, in this case the difference paid to a non-resident between the price established by the latter and the more profitable price of sales (at which the mediator enterprise actually implemented the sales of goods imported for realization) or the part of difference belonging to a non-resident, shall be considered income from Armenian sources;

 

Note:

In terms of the profit tax the activity related to the import of goods belonging to a non-resident into the Republic of Armenia (on the availability of customs documents for the goods and absence of mediator - agents in the operation) performed exclusively on behalf of the non-resident, in case of which the resident becomes the owner of the goods prior to their crossing the state border of Armenia, shall be considered as external economic activity.
Income received from the external economic activity of a non-resident shall not be subject to taxation.

 

In case of conducting of business activities in Armenia by non-resident without state registration

Taxation of the income derived by a non-resident in Armenia from Armenian sources shall be performed by a tax agent at the source of paying income.

The profit tax shall be withheld (imposed) by tax agents from the total amount of the income paid to a non-resident at the following rates:

Type of income	Profit Tax Rate
Insurance compensation, reinsurance payments and income received from the freight	5%
Dividends, interest, royalty, rental fee and other passive income	10%
Other income received from Armenian sources, as well as income derived from provision of services to Armenian residents or to registered in Armenia separate subdivision of other non-resident	20%

 

The amounts withheld (imposed) by a tax agent at the mentioned rates shall be considered as the final amount of the profit tax paid by the non-resident in Armenia, with the exception of the cases when non-resident performs activities in Armenia through a subdivision and this income is the result of the activity of the subdivision.

 

On the basis of the application of a non-resident, the Tax Inspectorate shall issue a respective reference on taxes paid by the non-resident in Armenia in accordance with the Law.

 

In case it is impossible to withhold (levy) the tax at the source of income payment (that is the tax agent is absent), the non-resident who receives income from Armenian sources shall be liable for the payment of profit tax to the state budget of Armenia - in compliance with the procedure and terms defined by the Law.

 

In case of conducting of business activities in Armenia by non-resident through separate subdivision registered in Armenia

 

Taxable profit is the positive difference between the gross income received by the non-resident from Armenian sources and deductions defined by the Law.

 

Deductions:

• Expenses incurred in the Republic of Armenia for the purposes of his/her subdivision;
• The amount of losses incurred in connection with the activity implemented in Armenia;
• The distributed between the non-resident and his/her subdivision expenses (in particular, management and general administrative expenses incurred both in Armenia and outside it);
• Other deductions specified by the Law.

 

Accounting of income and expenses will be performed on the basis of accrual method.

 

In case a non-resident performs the activity not only in Armenia but also outside it without keeping separate accounting, thereby preventing the determination of the taxable profit derived from the activity implemented through the subdivision the taxable profit may be determined on the calculation basis - according to the method agreed by the Tax Inspectorate and the taxpayer. The method agreed shall serve as a basis for determination of taxable profit, until there is a weighty reason for changing it.

Taxable profit derived from the activity implemented through the subdivision in Armenia may be determined based on:

• The share of the total revenue from the sales of goods (services) derived from the activity in Armenia in the gross revenue of a non-resident, or
• The share of expenses related to the activity implemented in Armenia in the total expenses of a non-resident, or
• The share of employees of a non-resident working in Armenia in the total staff of the non-resident.

 

Profit Tax Rate is 20%.

 

Reporting period is calendar year.

 

Term of payment of profit tax is till 25th April of the year following reporting one.

 

The amount of the profit tax subject to payment in the reporting year shall be defined as the difference between the amount of the annual profit tax received from the activity and the amount of half-year advance payments (in the specified cases - also in the amounts of the profit tax withheld in Armenia).

 

In case the amount of the profit tax of a non-resident operating through a subdivision exceeds 2 million drams for the preceding year, the non-resident shall make advance payments of the profit tax in equal parts every six months of a year, in the amount of ¼-th of the actual amount of the profit tax for the preceding year, up to July 1 and December 31 of the reporting year.

 

Statements submitted to the Tax Inspectorate:

• Annual Tax Return (standard form),

Term of submission is till 15th April of the year following reporting one.

Income Tax (Payroll Tax)

The physical person (citizens of Armenia, foreign citizens and stateless persons) are income tax payers.

 

The Company as a Tax Agent should withhold (impose) income tax from the income paid to individuals (employee and non-employee), with the exception of the following case. The tax shall not be withheld (collect) by the Tax Agent, if the income to be paid to non-employee individual is derived from business activity (delivery of goods, performance of work and rendering of services), and a written civil-legal contract is concluded with the Tax Agent with the indication of the taxpayer's identification number (TIN), passport data, domicile in the RA, as well as the number of state registration certificate on the implementation of business activity.

 

The object of taxation is the positive difference between the gross income of a taxpayer and the deductions made pursuant to provisions of the Law.

 

Gross income:

• Income received in the framework of the concluded employment contracts (salary, bonuses, vacation payments, stoppage payment and so on),
• Income received in the framework of the concluded civil-legal contracts,
• Passive and other income received by the physical person.

 

Deductions:

• Compensations paid in compliance with the norms specified by Armenian legislation (excluding sickness benefits),
• other deductions.

Tax Rates:

1. For interest, royalty and rental payments, as well as for purchased property from individuals – 10%,
2. In case of written contracts with non-employee individuals are not made in the established form, or in case the civil -legal written contract with individuals is not made (with indication of passport data and address (registration place) in the RA) - 11%
3. For other cases:

Taxable income for month (AMD)	Tax Amount in % (AMD)
0-120 000 AMD	24.4% of taxable income
120 000 and more	29 280 drams plus 26% of the amount above 120 000
2 000 000 and more	518 080 drams plus 36% of the sum above 2 000 000

 

Terms of payment:

• for salaries and wages and other payments deemed equal there to - not later than on the 20th day of the month following the month of calculation of this income to individuals;
• for other income - not later than on the 20th day of the month following the month of payment of this income to individuals.

 

Reporting period is each month.

 

Statements submitted to the Tax Inspectorate are:

• Income Tax Calculation (standard form),
• Registration application for the new employee (standard form).

Term of submission is not later than 20th day of the month following the reporting period.

Turnover Tax

Turnover tax is a payable by commercial organizations and private entrepreneurs tax, which replace VAT and profit tax.

 

The turnover tax payers are Armenian resident commercial organizations and private entrepreneurs the net revenue from sales of goods and services for the previous calendar year of which was less than 58.35 mln AMD.

 

The following persons cannot be considered as turnover tax payer:

1. The payers of fixed and/or patent compulsory payments in the part of such activities,
2. Producers and/or importers of goods subject to excise tax.
3. Banks, credit organizations, insurance companies, investment companies and foundations, participants of securities market, pawnshops, foreign exchange dealers and brokers, casinos, lottery implementers, producers of agricultural output, audit and accounting companies.
4. Commercial organizations and private entrepreneurs if:
   • In case of 20% or more of commercial organization share capital belongs to other Armenian resident commercial organization or private entrepreneur;
   • In case of 20% or more of commercial organization share capital belongs to the person having, at the same time, 20% or more share in other Armenian resident commercial organization.
   • In case of 20% or more of other Armenian resident commercial organization share capital belongs to commercial organization or private entrepreneur.
5. Recognized in the established procedure related parties if their total sales turnover exceed 58.35 mln AMD.
6. Persons being side of the agency or joint activity contracts.

 

The object of taxation is revenue from sales of goods, products and services and other income received within the reporting period.

 

Turnover tax rates:

Type of income	Rate
Income from trade (sale) and production activity	3.5%
Income from rent, interest, royalty, income from disposal of assets	10%
Income from activity of notary public	20%
Income from other type of activity	5%

 

Accounting of income shall be done using accrual method.

 

Reporting period is each quarter.

 

Term of payment of turnover tax is not later than the 20th day of the month following the reporting period.

Statement submitted to the Tax Inspectorate in the reporting period:

• Turnover Tax Calculation Report,

Term of submission is not later than the 20th day of the month following the reporting one.

Property Tax

Property taxpayers are organizations established in Armenia and in foreign countries, international organizations and organizations established by them outside the territory of Armenia, as well as physical persons, who owned a property in Armenia considered as object of taxation by the Law are property tax payers.

 

The object of taxation:

• Real Estate (buildings, structures),
• Motor vehicles.

 

The base of taxation:

• for Real Estate – cadastral value
• for Motor vehicles – engine power (horsepower or kW)

 

Tax Rates:

• for Real Estate (industrial, public) – 0.3%
• for Real Estate (residential) –

Base of taxation	Tax rate
Up to 3,000,000 AMD	0%
from 3,000,001 AMD to 10,000,000 AMD	100 AMD plus 0.1% of the sum exceeded 3 mln AMD
From 10,000,001 AMD to 20,000,000AMD	7,100 AMD plus 0.2% of the sum exceeded 10 mln AMD
From 20,000,001 AMD to 30,000,000AMD	27,100 AMD plus 0.4% of the sum exceeded 20 mln AMD
From 30,000,001 AMD to 40,000,000AMD	67,100 AMD plus 0.6% of the sum exceeded 30 mln AMD
More than 40,000,000 AMD	127,100 AMD plus 1.0% of the sum exceeded 40 mln AMD

 

• for Motor vehicles
  • for automobiles having up to 10 passenger seats:
    • - up to 120 horsepower – 200 drams per horsepower,
    • from 121 up to 250 horsepower – 300 drams per horsepower, and additional 1000 drams for each horsepower in excess of 150 horsepower,
    • from 251 horsepower and more – 500 drams per horsepower, and additional 1000 drams for each horsepower in excess of 150 horsepower.
  • for passenger automobiles having 10 or more seats, and for trucks:
    • from 1 up to 200 horsepower – 100 drams per horsepower,
    • from 201 horsepower and more – 200 drams per horsepower.

Notes:

• The Property Tax for motor vehicles produced no more than 3 years ago shall be calculated at 100%. The Property Tax amount for motor vehicles produced more than 3 years ago shall be reduced for each following the third year – by 10% of the tax amount, but not exceeds 50% of the tax amount.
• The Property Tax for trucks produced more than 20 years ago shall not be calculated and paid.
• The Property Tax annual amount for motor vehicles, taxable base of which states in kW shall be calculated applying the correction factor 1.36 to corresponding tax rate.

 

Reporting period is each half-year of current year.

 

Term of payment to the municipal budget is not later than 20th day of the month following the reporting period.

 

Statements submitted to the local Municipality:

• Property Tax for Real Estate Calculation Report (standard form),
• Property Tax for Motor Vehicles Calculation Report (standard form).

Term of submission is not later than 20th day of the month following reporting period.

Land Tax (for the lands used for industrial purposes)

Land tax payers are landowners, permanent users of the state property land.

 

Object of taxation is the value of the land according to the cadastral evaluation.

 

Land Tax Rates are:

• inside the inhabited locality - 1.0%
• outside the inhabited locality - 0.5%

 

Note:

1. Taxable areas shall include lands occupied by buildings, and structures, territories necessary for their maintenance, as well as sanitary, technical and other zones of the objects.
2. The land tax shall be calculated beginning from the month following the acquisition of the ownership right permanent or temporary use of the land.

 

Reporting period is each half-year of current year.

 

The amounts of calculated land tax shall be paid to the municipal budget half a year till pthe 20th day of the month following the reporting period.

 

Statements submitted to the local Municipality:

• Land Tax Calculation Report (standard form).

Term of submission is not later than 20th day of the month following the reporting period.