Taxation in Armenia

What taxes apply in Armenia?

The following taxes apply in Armenia:

  • State taxes:

    • Value added tax (VAT)

    • Excise tax

    • Income tax (payable by organizations and sole proprietors)

    • Personal income tax (Revenue tax)

    • Environmental tax

    • Road tax

    • Turnover tax

  • Local taxes:

    • Real estate tax

    • Vehicle property tax

 

What is the VAT rate in Armenia?

VAT is 20%. It is levied on sales turnover exceeding AMD 115 million.

What is the rate of excise tax?

Starting 1 January 2020, Armenia applies specific excise rates based on the quantity of products.

What is the rate of income tax in Armenia?

Income tax includes corporate income tax and income tax payable by sole proprietors and notaries. With a few exceptions, income tax is levied at 18%.

 

Sole proprietors

If sole proprietors operate in one of the special taxation systems (turnover tax or microbusiness taxation) they only pay AMD 5000 per month as income tax for those activities.

For more information on microbusiness taxation, check this link.

Investment and securitization funds

Investment funds and securitization funds are taxed at a 0.01% rate.

The income of non-resident organizations with no permanent establishment in Armenia from Armenian sources is taxed at the following rates:

  • Insurance compensation (indemnity), income from reinsurance fees are taxed at 5%

  • Income from transportation (freight) fees is taxed at 5%

  • Dividends are taxed at 5%

  • Increase in asset value resulting from the sale of securities is taxed at 0%

  • Other passive income is taxed at 10%

  • Other income received from Armenian sources is taxed at 20%

 

Resident organizations do not pay dividend taxes from the dividends they earn as investors (Article 123 clause 2). Dividends earned by these companies is deducted from their tax base (taxable income). This is done to avoid double taxation of dividends since such organizations will deduct dividend taxes before paying dividends to ultimate beneficial owners.

 

Investments in capital stock

Certain classes of income are not considered income for taxation purposes. Investments in capital stock are one such example.

Agriculture

Businesses that produce agricultural products are exempt from income taxes if their non-operating revenue does not exceed 10% of the total revenue. This exemption will be in effect until December 31, 2024.

What is the rate of personal income tax in Armenia?

Payroll

As a general rule, personal income tax (including payroll) is set at a 23% flat rate for the year 2020. It will gradually reduce by 1 percentage point in each consecutive year until 2023 when the rate will become 20% percent.

Rent

Rent is taxed at a 10% rate. If the amount of rent received exceeds AMD 60 million in a given tax year, an additional 10% tax is levied on the additional amount.

Dividends

Dividends are taxed at 5% rate.

Inheritance and gifts

Inheritance and gifts are not taxable:

Sale of personal property

As a general rule, income from the sale of personal property is not taxable.

Income tax applies if:

  • a vehicle is disposed of within 1 year following its acquisition (1% but not less than AMD 150 per horsepower)

  • property is sold by an individual developer (20%)

Further, when a purchaser of a property is a tax agent (legal entity or a sole proprietor), the latter will be required to withhold 10% of the transaction price as a revenue tax before making a payment to the seller.

Royalties

Royalties are taxed at a 10% rate.

Interests

Interests are taxed at a 10% rate, except for interest received from certain securities.

Securities

Income received from the following securities is not taxed:

  • Interest received from government bonds, other government securities, bonds issued by the Pan-Armenian bank, discount received at maturity, and (or) income received from the disposal, exchange or other similar transactions thereof,

  • Income received from the disposal, exchange or other similar transactions of shares or other investment securities,

  • Income received from equity (ownership) securities (including from disposal, exchange or other similar transactions thereof, as well as transactions done at the expense of the assets of contractual investment funds),

  • Income received from stocks, bonds or other investment securities listed on an Armenian stock exchange, except stocks issued by the banks with a less than two-year maturity. 

 

Income from securities is taxable if it is:

  • Income from dividends, except those received from stocks listed on an Armenian stock exchange,

  • Received from the disposal of a bill of exchange, payment slip or other payment security,

  • Received as compensation for goods sold, services delivered or work done, irrespective of the existence of real investment or debt,

  • Income received from the disposal of buildings or investment securities invested in the capital stock of an organization if the disposal happens in the tax year when the investment was made or within 3 years following that year.

 

Agriculture

The income of physical persons received from the sale of agricultural products is exempt from personal income tax.

 

What is a turnover tax and what is its rate?

Turnover tax is an alternative tax regime for VAT and/or corporate income tax. Organizations and sole proprietors can choose this regime if their annual turnover does not exceed AMD 115 million and they meet certain requirements.

Rates of turnover tax

Turnover tax is paid at the following rates:

  • Sales, apart from sales of secondary raw materials and real estate:  5 %

  • Sale of secondary raw materials: 1.5 %

  • Sale of newspapers by editors: 1.5 %

  • Production: 3.5%

  • Rent, interests, royalties, disposal of real estate: 10%

  • Organization of lotteries: 25%

  • Meal sales 6 %

  • Gains from the sale of other assets by businesses engaged in meal sales 20 %

  • Revenue from other activities or sale of other assets: 5%

 

What is the rate of real estate tax?

Real estate tax is levied on the basis of the cadastral value of a property. The cadastral value is approximated market value of a property which is estimated once in 3 years.  Agricultural land is taxed on the basis of estimated net profit.

The annual rates of real estate tax are as follows:

  • Agricultural land: 15% (estimates net profit)

  • Non-agricultural land within residential areas: 1%

  • Non-agricultural outside of residential areas: 0.5%

  • Buildable land within the boundaries of rural communities: 0.6%

  • Other non-agricultural lands: 1 %

 

Residential property

Residential property is taxed at the following progressive rates:

  • Up to AMD 3 million: 0%

  • AMD 3-10 million: AMD 100 plus 0.1% of the amount exceeding AMD 3 million

  • AMD 10-20 million: AMD 7100 plus 0.2% of the amount exceeding AMD 10 million

  • AMD 20-30 million: AMD 27 100 plus 0.4% of the amount exceeding AMD 20 million

  • AMD 30-40 million: AMD 67 100 plus 0.6% of the amount exceeding AMD 30 million

  • Over AMD 40 million: AMD 127 100 plus 1% of the amount exceeding AMD 10 million

 

Business and industrial property are taxed at a 0.3% rate while garages are taxed at 0.2%.

For the purposes of simplicity, the information in the article is presented in general terms. We recommend contacting our professional for more detailed information. 

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