Tax Guide

 

The laws, regulations and taxation/fiscal cases of the Republic of Armenia envisaged by the law are rather sophisticated. The fiscal system is mostly borrowed from the legislation of the European countries, conceived to promote the development of market economy. Armenian fiscal/tax legislation is changed frequently, and all modifications are made publicly available through official bulletins published by the RA Ministry of Justice and sold at bookshops. 

 

The tax year in the Republic of Armenia is a calendar year. Presently, state taxes include profit tax, income tax, excise tax and VAT, as well as other taxes specified by the law applicable as substitute for another state taxes. As regards local taxes, they include property tax, land tax, the application of which is compulsory in each community, as well as tax on hotels. It is worth noting that the respective RA Law on tax on hotels, which has not been adopted yet, will only specify the highest and lowest rates of this tax. The applicable rate of this local tax will be established by the Council of each community with the suggestion of the Mayor of the community.

 

 

 

Profit tax

 

Both, “residents”’ and “non-residents”, in the Republic of Armenia should pay profit tax. Residents are taxed on the profit gained in the RA territory and outside; while non-residents are taxed on profit gained in the RA.

 

The annual profit tax rate is 20%. The profit tax is calculated on the basis of the taxable profit, which corresponds to gross income, deducting the amounts specified by the law (necessary expenses justified by corresponding documents, depreciation allowances, etc.).

 

For non-residents the following rates of profit tax taxable at the source are applied:

 

  • insurance compensation, reinsurance payments and income received from the freight  - 5%;
  • dividends, interests, royalties, income from the lease of property, increase in the value of property and other passive income (with the exception of the income received from the freight) - 10%;
  • incomes for other services provided by the non-residents, as well as incomes received for the services provided outside of the Republic of Armenia to the residents or to the non-resident’s subdivisions registered in the Republic of Armenia - 20%.

 

Depreciation charges 


For the fixed assets acquired before January 1, 2014

 

The calculation of depreciation charges on the fixed assets is made on the original value by applying the various time-frames established by the law:

 

  • 20 years for buildings,
  • 10 years for the hotel complexes,
  • 5 years for any other fixed material,
  • 3 years for the robotized equipment and assembly lines,
  • 1 year for computer equipment.

 

For the fixed assets acquired after January 1, 2014

 

The calculation of the depreciation charges on the fixed assets is made on the remaining value by applying the annual maximum rate established by the law:

 

  • 15% for hotel complexes;
  • 7,5% for other buildings;
  • 50% for robotized equipment and assembly lines;
  • 30% for other fixed assets;
  • 100% for computer equipment.

 

Profit tax calculations and prepayments made by residents and non-residents


The profit tax and the authorized deductions are calculated in accordance with the rates established by the tax legislation. A taxpayer must submit to the tax authorities its profit tax calculations for the respective tax year no later than April 15 of the following year, and the tax must be paid before April 25 of the following year.

 

The residents shall make advance payments quarterly (no later than on the 15th of the last month of the respective quarter), in the amount of 18.75% of the actual amount of the profit tax for the previous year. A taxpayer, whose taxable profit for the preceding year has not exceeded 500,000 AMD, is entitled not to make any advance payments of the profit tax upon the submission of profit tax calculations for the previous year. Concurrently, a newly established taxpayer may avoid advance payments of the profit tax until April 25 of the following year.

 

In case if the amount of the profit tax of a non-resident performing activities through a subdivision exceeds 2 million AMD for the preceding year, the non-resident shall make advance payments of the profit tax in equal parts every six months of a year (July 1st and December 31st), in the amount of 1/4-th of the actual amount of the profit tax for the preceding year.

 

 

 

Income Tax

 

In conformity with the new RA law “On Income Tax”, which has entered into force since January 01, 2013, the income tax and the compulsory social security payments have been replaced with a new unified tax.

 

In the Republic of Armenia both resident and non-resident physical persons are entitled to pay income tax. An individual shall be considered a resident if during any twelve month period starting or ending in a tax year (from January 1 to December 31 inclusive) he/she has been residing in the Republic of Armenia for a total duration of 183 days or more, or whose centre of vital interests is in the Republic of Armenia.

 

For a resident the taxable income received within or outside the territory of the Republic of Armenia is considered to be the object of taxation. For a non-resident the taxable income received only from Armenian sources is considered to be the object of taxation.

 

Amount of Annual Taxable Income 

Tax Amount (in %)

Up to 1,440,000 AMD

24.4% of taxable income

Over 1,440,000 AMD

351,360 AMD plus 26% of the amount exceeding 1,440,000 AMD

Amount of Annual Taxable Income 

Tax Amount (in %)

Up to 1,440,000 AMD

24.4% of taxable income

Over 1,440,000 AMD

351,360 AMD plus 26% of the amount exceeding 1,440,000 AMD

 

  • Income tax on royalties and income gained from property leases (except lease incomes gained by private entrepreneurs) shall be calculated at the rate of 10%.
  • Income tax on interest income shall be calculated at the rate of 10%.
  • Tax agents calculate income tax liability at 10% rate from income paid for acquisition of property from individuals.

 

Foreign citizens receiving income from Armenian sources must pay:

 

Type of income 

Amount (%)

Insurance benefits received from insurance and income received from freight

5%

Royalties, interests, lease payments, increase in the value of property

10%

 

Other passive incomes received by the foreigners shall be taxed in accordance with the tables described above.

 

A taxpayer who derives income from a business activity must make advance payments of the income tax during the course of a year.

 

The advance payments must be made quarterly (no later than on the 15th day of the last month of the respective quarter), in the amount of 18,75% of the actual amount of the income tax for the preceding year.

 

 

Turnover tax

 

Turnover tax has been introduced to the Armenian fiscal system since January 01, 2013. The former is an alternative tax for VAT and/or Profit tax and is applicable to private entrepreneurs, notaries and commercial organizations unless their revenue for the previous year exceeds 58,35 million AMD (excluding VAT).

 

The following rates based on the activity of the taxpayer are applied:

 

Activity carried  out by the taxpayer 

Tax rate

Trading activity

3,5%

Production activity

3,5%

Rental income, interest, royalties, assets’ alienation (including real property)

10%

Notary activity

20%

Other activity

5%

 

 

 

Property tax

 

Property tax is a direct tax on the property considered a taxable object and owned by persons by property right being paid to the relevant budgets following the procedure and at a stipulated rate, which does not depend on the outcomes of the taxpayers’ economic activity.

 

The property tax shall be paid by the organizations set up in the Republic of Armenia and other countries, international organizations and those created by them outside the Republic of Armenia, citizens of the Republic of Armenia, foreign citizens, as well as those without citizenship who possess property in the Republic of Armenia that is considered a taxable object.

 

Property tax rates 


Property tax for motor vehicles is calculated at the following annual rates:

 

  • Motor cars with up to 10 passenger seats, if tax base is:

-     from 1 to 120 horsepower - 200 AMD per horsepower;

-     from 121 to 250 horsepower - 300 AMD per horsepower and additional 1000 AMD for each horsepower above 150 horsepower;

-     251 horsepower and more - 500 AMD per horsepower and additional 1000 AMD for each horsepower above 150 horsepower.

  • Motor cars and trucks with 10 and more passenger seats, if tax base is:

-     from 1 to 200 horsepower - 100 AMD per horsepower;

-     201 and more horsepower - 200 AMD per horsepower.

  • The annual amount of property tax on motorcycles is calculated at the rate of 40 AMD for each horsepower of tax base.
  • The annual rate of property tax on watercraft, snowmobiles and four-wheelers is calculated at 150 AMD for each horsepower of tax base.
  • The property tax on motor vehicles used up to three years is calculated at 100%.
  • The amount of property tax on motor vehicles used for more than three years is reduced for each year following the third year by 10% but no more than 50% of tax amount. The time in use is calculated from the date when that motor vehicle was produced.

 

Property tax for constructions is calculated at the following annual rates:

 

  • Constructions for public and production use - 0.3% of tax base.

 

  • Other Constructions stated as taxable objects, except garages:

 

Tax base

Tax rate

Up to 3 million AMD

0% of tax base

From 3 million to 10 million AMD inclusive

100 AMD plus 0.1% of amount above 3 million AMD of tax base

From 10 million to 20 million AMD inclusive

7,100 AMD plus 0.2% of the portion exceeding 10 million AMD of tax base

From 20 million to 30 million AMD inclusive

27,100 AMD plus 0.4% of the portion exceeding 20 million AMD of tax base

From 30 million to 40 million AMD inclusive

67,100 AMD plus 0.6% of the portion exceeding 30 million AMD of tax base

40 million AMD and more

127,100 AMD plus 1.0% of the portion exceeding 40 million AMD of tax base

 

  • Garages – 0.2% of tax base.

 

 

Value added tax (VAT)


The rate of VAT is determined in the amount of 20% of taxable turnover of goods and services. The amount of VAT within the amount of the total indemnity for the goods and services (including 20% rate) shall be determined at the rate of 16.67 %.

 

The invoice amount is deemed as a taxable base, to which the excise duties on the domestic or imported products are possibly levied. The principle of destination prevails and even in this case all imports coming from abroad are subject to VAT.

 

For goods imported into the RA, VAT shall be paid within 10 days after the importation. The exported goods and services are subject to VAT at the rate of 0%.

 

 

Excise tax


The following goods shall be subject to excise tax: beer, grape wines and other wines, spirits (except cognac spirit), cigars, cigarillos and cigarettes with tobacco or its substitutes, gasoline and diesel fuel, raw oil and oil materials, oil gas and other hydro-carbons (except natural gas), as well as light motor vehicles.

 

Excise tax shall be paid by individuals, legal persons importing or producing goods subject to excise tax in the Republic of Armenia.

 

Click here for Excise Tax Rates.

 

Land tax


Landowners, permanent and temporary users of the state-owned land are considered payers of land tax. The calculated net income determined by the cadastral evaluation of the land shall be the object of taxation for agricultural lands. 

 

The value of the land according to the cadastral evaluation shall be the object of taxation of non-agricultural lands.

 

The amount of the land tax shall not depend on the results of the taxpayers’ economic activity and shall be defined as an annually paid fixed payment per unit of the land lot area.

 

The land tax is established as follows:

 

  • The land tax rate for the agricultural lands (including land lots allotted for housing in settlements, and garden-plots) shall be determined in the amount of 15% of the calculated net income determined by their cadastral evaluation.
  • For non-agricultural lands the land tax rates fluctuate from 0.5% to 1% of the cadastral value of land.