General Information
Country Name: Armenia
Currency: Armenian Dram (AMD)
Primary Tax Authority: State Revenue Committee of Armenia
Key Legislation:
- The Constitution of Armenia: Provides the general legal framework for taxation.
- Tax Code of Armenia: Governs taxes, including income tax, VAT, and excise duties.
- Law on Local Self-Government: Governs local taxation authorities.
Tax Authority and Collection Competence
Fiscal Authority Allocation:
Armenia operates under a centralized tax system. Most taxes are collected by the central government, though local authorities have limited powers to levy certain taxes, such as property tax.
Taxes Collected by Federal Authorities:
- Corporate income tax
- Personal income tax
- Value-added tax (VAT)
- Excise tax
Taxes Collected by Local Authorities:
- Property tax
Corporate Income Tax (CIT)
Standard CIT Rate: 18%
Taxable Income Definition: Tax is imposed on worldwide income for resident companies and on Armenian-sourced income for non-residents.
Deductible Expenses: Business-related expenses are deductible, subject to limitations on interest and non-business-related activities.
Loss Carryforwards/Carrybacks: Loss carryforwards are available for 5 years; no loss carryback is permitted.
Tax Incentives: Tax relief is provided for businesses in IT, renewable energy, and free economic zones (FEZ).
Value-Added Tax (VAT)
Standard VAT Rate: 20%
Scope of VAT: VAT is applied to the supply of goods and services within Armenia and on the importation of goods.
Exemptions: Financial services, healthcare, education, and some exports are exempt.
International VAT Treatment: Exports are zero-rated, and imports are subject to VAT.
Personal Income Tax (PIT)
PIT Rate: Armenia has a flat tax rate of 21%, with a planned reduction to 20% in future years.
Taxable Income Thresholds: The flat rate applies to all income levels.
Deductions and Exemptions: Deductions are available for specific expenses, such as pension contributions.
Treatment of Foreign Income: Worldwide income of residents is taxable, though relief may be available through double taxation treaties.
Additional Mandatory Contributions
Social Security Contributions:
Social contributions are required, with employers and employees each contributing to the pension fund. The combined rate is generally 5% of the gross salary, with a state contribution also included.
Withholding Taxes
Dividends: 5% withholding tax.
Interest: 10% withholding tax.
Royalties: 10% withholding tax.
Payments to Non-Residents: Rates may be reduced under double taxation treaties.
Transfer Pricing Rules
Documentation Requirements: Armenia follows the OECD guidelines for transfer pricing.
Arm’s Length Principle: Transactions between related parties must be conducted on an arm’s length basis.
Penalties for Non-Compliance: Significant penalties apply for failing to comply with transfer pricing regulations.
Special Tax Regimes
Free Economic Zones (FEZ): Armenia provides tax incentives to companies operating within designated free economic zones, including exemptions from CIT, VAT, and property tax.
Industry-Specific Tax Incentives: Special tax treatment applies to the IT sector and renewable energy projects.
Other Taxes
- Property Tax: Imposed on the market value of property at rates that vary depending on the location and type of property.
- Excise Tax: Levied on products such as tobacco, alcohol, and fuel.
- Capital Gains Tax: Capital gains are taxed as ordinary income under PIT or CIT.
- Inheritance and Gift Tax: Armenia does not impose inheritance or gift taxes.
Double Taxation Agreements (DTAs)
Key Partner Countries: Armenia has DTAs with more than 40 countries, including Russia, France, and the United States.
Reduced Withholding Tax Rates under DTAs: Generally, DTAs allow reduced rates for dividends, interest, and royalties.
Tax Treaty Benefits Application Process: Taxpayers can apply for treaty benefits by submitting appropriate documentation and a certificate of residency.
Local Taxes
Property Tax: Imposed at the municipal level, based on the value of property.
Compliance and Reporting
Corporate Tax Filing Deadlines: Corporate tax returns are due by April 15 of the following year.
VAT Filing Requirements: VAT returns are filed on a monthly basis.
Penalties for Late Filing/Non-Compliance: Fines and interest charges apply for late filings and underreporting.
Recent Developments
Recent Tax Law Changes: Armenia has implemented reforms aimed at simplifying tax compliance and reducing the burden on small businesses.
Upcoming Reforms: Further reductions in the personal income tax rate are planned, with the flat rate expected to decrease to 20% in the coming years.
Global Tax Initiatives: Armenia is enhancing its participation in international tax cooperation frameworks, including adopting measures under the OECD’s Base Erosion and Profit Shifting (BEPS) initiative.
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