Armenian-resident entities, and non-resident entities doing business in Armenia through a PE, are liable for CIT. Taxable object for tax residents is their worldwide income; for non-residents is their Armenian-source income.
The standard CIT rate is 18%.
The taxable base for CIT is the taxable income. Taxable income is the difference between a taxpayer’s gross income and deductible expenses:
- Gross income encompasses all revenues received by a taxpayer from all economic activities unless the revenues are expressly exempted under the law.
- Deductible expenses encompass all necessary and documented expenses that are directly related to conducting business unless a specific provision in the law restricts the deduction.
Note that resident entities, registered PEs, and individual entrepreneurs are required to withhold income tax at source on payments to non-residents not having a registered PE in Armenia (see the Withholding taxes section).
The tax base for investment funds (excluding pension funds and warranty funds), which are registered in the Republic of Armenia, and for securitisation foundations, which are established based on the Law on Asset Securitisation and Asset-backed Securities, is the sum of net assets.
The dividends paid to the shareholder of investment funds or other similar allocations provided in a different manner shall not be deducted from the net assets of the investment funds.
The CIT rate for investment funds (excluding pension funds and warranty funds) registered in the Republic of Armenia, as well as for securitisation foundations, is 0.01% of the tax base.
The turnover tax generally replaces the CIT and VAT for small and medium enterprises (SMEs). The tax rate is differentiated in accordance with the income type (see Turnover tax in the Other taxes section).
Starting 1 January 2020, the Tax Code substitutes the chapter on the family entrepreneurship system and the system of taxation of self-employed entities with a newly drafted chapter on the microentrepreneurship system.
Within the scope of this preferential tax system the entities will be exempted from all the main taxes and be able to involve a limitless number of physical persons (regardless of whether they are family members or not) in their activities as employees, whose monthly personal income tax will constitute AMD 5,000. Starting from 1 July 2023 the personal income tax will be calculated using the general income tax rate 20%. Further, legal entities, sole entrepreneurs, as well as physical entities not considered sole entrepreneurs, can make use of this system unless their annual turnover exceeds AMD 24 million. Physical persons not registered as sole entrepreneurs can make use of this taxation system if they carry out basic activities prescribed by the Tax Code.
Accordingly, the Chapter defines the conditions for qualifying to participate in the microentrepreneurship system, termination thereof, exemption from several taxes, transition to the general or turnover taxation systems as well as types of entities that cannot be consideredparticipants of the microentrepreneurship system.
Local income taxes
Armenia does not have any provincial or local government taxes on income.