Corporate - Income determination

Last reviewed - 14 December 2023

Taxable profits are defined as a positive 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 exempt from inclusion under the law. Deductible expenses encompass activities that result in a decrease in assets or increase in liabilities attributable to the activities carried out by an organisation, an individual entrepreneur, or a notary, which, in turn, results in a reduction in the equity of the organisation or the net assets of the sole proprietor or notary.

Inventory valuation

Inventories are stated at their cost. First in first out (FIFO) or average cost methods of valuation are generally used for tax purposes.

The assets’ revaluation is not considered for CIT purposes, unless the revaluation of certain assets is prescribed under the law.

Capital gains

Capital gains are included in taxable income. Non-residents are taxable on the realised capital gains from the increase of the value of the assets located in Armenia. Capital gains received by non-residents on sale of securities are taxed at 0% withholding tax (WHT).

Dividend income

Dividends derived by an Armenian entity from another Armenian entity are exempt from tax. Dividends derived by non-residents from Armenian entities are subject to 5% WHT unless relief is available under a relevant tax treaty (see the Withholding taxes section). This rate applies to dividends received from net profits attributable to 2020 and reporting periods succeeding it.

The dividend income should be considered received on the day of the decision by the shareholders to distribute dividends.

Interest income

Interest income attracts normal CIT treatment.

Royalty income

Royalty income attracts normal CIT treatment.

Foreign income

Resident entities are liable to Armenian tax on their worldwide income. Foreign taxes should be available for credit against Armenian tax liabilities, up to the amount of Armenian tax payable on the foreign income.

There are no provisions in the Tax Code allowing any tax deferral on income earned abroad.