Value-added tax (VAT)
Armenia’s current VAT law is based loosely on the principles of the European Union (EU) VAT Directive. Armenia operates the input-output model of VAT. VAT-registered persons may deduct the VAT on their inputs from the VAT charged on their sales and account for the difference to the tax authorities.
The VAT recoverable amount is the negative difference between the output and input VAT. The taxpayer may receive the VAT recoverable amount from the State Budget on a semi-annual basis, after it is substantiated by examination by the tax authorities.
The standard rate of VAT on domestic sales of goods and services and the importation of goods is 20%. Exported goods and related services are zero-rated. Advertising, consulting, marketing, design, engineering, legal, accounting, audit, data processing, and other related services provided to non-residents are zero-rated if the non-resident’s place of business is outside Armenia. Various supplies, including most financial and education services, are VAT-exempt.
Import of goods from EEU non-member states by a taxpayer with the status of authorised economic operator according to Armenian tax legislation, or by a group of resident CIT payers implementing a project approved by the Armenian government, is exempt from VAT under certain condition (namely, if imported goods or goods produced as a result of processing of the imported goods are exported [including to EEU member states] within 180 days from their importation).
Services supplied in Armenia to VAT payers by non-residents that do not have a registered PE in Armenia are subject to application of a VAT reverse charge.
Non-residents that do not have a registered PE in Armenia bear the responsibility to account and pay the VAT for the transactions that result in Armenian VAT if the party to contractual relations is not a VAT payer.
The turnover tax (see below) generally replaces VAT obligations for SMEs. To be allowed to register for turnover tax, the taxpayer should meet the revenue threshold of the previous year.
The VAT registration threshold was reduced to AMD 58.3 million starting from 1 January 2019.
However, for the year 2019, those resident taxpayers whose sales turnover exceeded AMD 115 million (instead of AMD 58.35 million) are to be considered VAT payers. Meanwhile, taxpayers who exceeded the threshold of AMD 58.35 million sales turnover in terms of all types of activities before 29 June (inclusive) of the ongoing tax year continue to be treated as VAT payers throughout 2019.
The VAT registration threshold will be AMD 115 million for the succeeding years.
Certain ownership and inter-relation thresholds and restrictions on types of business activities are also applicable for entities to be considered as turnover taxpayers.
VAT payers should file unified return of VAT and excise tax on a monthly basis before the 20th day of the month following the reporting period (inclusive).
Armenia is a member of the Eurasian Economic Union (EEU) along with Russia, Kazakhstan, Kyrgyzstan, and Belarus. The EEU’s aim is to create a common market for the member states to raise the competitiveness of the national economies and to cooperate for sustainable growth. The EEU introduces the free movement of goods, services, capital, and people, creating a platform for common transport and reduced economic isolation.
The customs relations in EEU member states are regulated by The Customs Code of EEU that entered into force on 1 January 2018.
Customs levies are payable by persons whose goods cross the customs border of Armenia. Customs levies consist of customs duties, taxes, duties, and other mandatory charges. Customs duty is collected on the customs value of the imported goods. Importers must take into account specific EEU rules to determine the customs value on which the import tax will be applied. The general rule is that the customs value will be the price actually paid or payable for the goods when sold for export to Armenia.
Under the EEU regulations, goods imported from member countries are free of custom duties. The unified custom tariffs are applicable for the goods imported from non-member states.
VAT for the goods imported from the EEU member countries is not calculated by the customs authorities. Instead, taxpayers should calculate and pay VAT by the 20th day of the month following the month of the importation. In the meantime, within this timeframe, the taxpayer should submit the tax declaration and the statement on imported goods to tax authorities.
Starting 29 June 2019, tax bases and initial values during the import or export of goods from/to EAEU member states are determined based on the CBA rate on the date the good is imported into RA territory (crosses the RA border) or is exported from RA territory (crosses the RA border). No tax offence occurs when the tax base and initial value of goods imported/exported from/to EAEU member states after 1 January 2018 are calculated using the CBA rate on the date the RA border is crossed.
Excise tax is payable on alcoholic beverages, tobacco products, and petroleum products, whether imported or produced domestically.
Starting 1 January 2020, the taxation of activities under the excise tax with rates expressed in percentages will be eliminated. Accordingly, new fixed rates based on the quantitative tax bases have been approved. Further, a new system of annual adjustment of excise tax rates for certain types of goods has been introduced, as follows:
|Goods||Unit of measure||Tax rate AMD|
|Beer||1 litre||AMD 130|
|Grape wines||1 litre||AMD 150|
|Vermouth and other grape wines||1 litre||AMD 1000|
|Vodka made of fruits and/or berries||1 litre||AMD 800|
|Cognac, brandy, and other spirits||1 litre (by recalculation of 100% spirit)||
|Other brewed drinks (apple cider, pear cider, honey-drinks)||1 litre||AMD 270|
|Ethyl spirit||1 litre (by recalculation of 100% spirit)||· From 1 January 2020, AMD 2,600
· From 1 January 2021, AMD 3,380
· From 1 January 2022, AMD 4,400
From 1 January 2023, AMD 5,700
|Spirituous liquors||1 litre||
|Whisky and rum and other spirits||1 litre||
|Tobacco products||1,000 units||
|Cigars||1,000 units||AMD 605,000|
|Cigarillos||1,000 units||AMD 16,500|
|Lubricating oil||1 kilogram||AMD 500|
|Tobacco substitutes||1 kilogram||AMD 1,500|
|Raw oil and oil materials||1 ton||AMD 27,000|
|Gases produced from oil and other hydro-carbons (except compressed natural gas)||1 ton||AMD 1,000|
|Compressed natural gas||1,000 m³||AMD 34,000|
|Petrol *||1 ton||AMD 40,000|
|Diesel fuel||1 ton||AMD 13,000|
The following excise tax calculation coefficients shall be used in the cases specified above:
|From 1 January 2020||From 1 January 2021||From 1 January 2022||From 1 January 2023|
|Excise tax calculation coefficient||1.0||1.03||1.06||1.09|
* If the sum of excise tax and VAT calculated for 1 ton of petrol is less than the product of AMD 135,000 and the excise tax calculation coefficient for each year, the amount of excise tax should be increased to reach the sum of excise tax and VAT equal to the product of AMD 135,000 and the excise tax calculation coefficient for each year. Taxpayers producing excisable goods in Armenia should submit monthly VAT and excise tax unified returns and make excise tax payments by the 20th day of each month following the reporting period.
Land tax is assessed and collected at the municipal level and is paid biannually by landowners and the permanent users of state-owned land. Tax on rented land is levied on the lessor. The land cadaster (valuation system) is used to determine the value of the land. Land tax for agricultural land is calculated at 15% of the net income determined by the cadastral evaluation. For non-agricultural land, the rate is 0.5% to 1.0% of the cadastral value of the land.
Property tax is assessed and collected at the municipal level on buildings, motor vehicles, and means of water transport. The tax rate on buildings is 0.3%, which is paid on the cadastral value.
Property tax for motor vehicles with up to ten seats is calculated as follows:
|Capacity (horsepower)||Tax rate (per horsepower)|
|Up to 120||AMD 200|
|121 to 150||AMD 300|
|151 to 250||AMD 300 + AMD 1,000 per horsepower in excess of 150|
|251 and over||AMD 500 + AMD 1,000 per horsepower in excess of 150|
Property tax for motor vehicles with more than ten seats is calculated as follows:
|Capacity (horsepower)||Tax rate (per horsepower)|
|Up to 200||AMD 100|
|201 and over||AMD 200|
The annual property tax on motorcycles is calculated at the rate of AMD 40 for each horsepower of tax base. The annual rate of property tax on watercraft is calculated at AMD 150 for each horsepower of tax base.
Beginning from the fourth year after the year of production, the tax base for motor vehicles and means of water transport is reduced by 10% per year, up to a maximum reduction of 50%.
Legal entities should calculate property tax and pay this to the municipal budget on a semi-annual basis. The semi-annual property tax calculations should be submitted to the state bodies where the property is registered not later than the 20th day following the reporting half-year.
The Law on property tax and land tax will be replaced by the immovable property tax and vehicle property tax under the Tax Code starting from 1 January 2019.
Armenia does not have any transfer taxes.
Armenia does not have any stamp taxes.
The turnover tax is payable by commercial organisations and individuals (individual entrepreneurs). The turnover tax replaces VAT and (or) CIT obligations for SMEs, with the exception of individual entrepreneurs and notaries for whom it replaces only VAT.
There are certain revenue thresholds that taxpayers should not exceed to be considered as turnover taxpayers (see description of Value added-tax [VAT] above).
Businesses producing/importing excisable goods are required to account for VAT on their sales.
Certain ownership and inter-relation thresholds are also applicable for entities to be considered as turnover taxpayers.
The taxpayer should file an application to the tax authorities before 20 February of the calendar year to become a turnover taxpayer. Note that there are also some other requirements that the taxpayer should meet to become a turnover taxpayer. Subdivisions of foreign companies in Armenia (i.e. PEs) cannot become turnover taxpayers.
The turnover tax is imposed on the reporting period income (revenue) as follows:
|Type of income||Tax rate (%)|
|Trading activities *||5.0|
|Newspaper sales by publishing companies||1.5|
|Rental income, interest, royalties, and assets' disposal (including estate property)||10.0|
|Income on notary activities||10.0|
|Organising lottery activities||25.0|
|Income on public food organisation||6.0|
|Other revenues from the activities not included in the public food organisation section of the economic activity classifier of the turnover taxpayers operating in the public catering sector||20.0|
|Income on other type of activities||5.0|
* The tax rate on the sale of secondary raw materials is 1.5%. Turnover taxpayers engaged in trade activities may deduct 4% of cost of the goods for sale (including imported goods) purchased during the reporting period from the turnover tax payable for that period, provided such purchases are properly documented. However, the final tax payable for the trading activities, after the deductions, should not be less than 1.5% of the taxable turnover for the reporting period. The purchases not deducted in the reporting period because of the limitations above may be deducted in the future periods.
Starting from 1 January 2020, excise taxpayers may also be considered turnover taxpayers.
Taxpayers who are engaged in public catering activities may be considered taxpayers on their request, regardless of whether they qualify for a turnover taxpayer.
Turnover taxpayers are required to submit tax calculation on a quarterly basis and make tax payment within 20 days following the end of the reporting period.
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. 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 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 considered
participants of the microentrepreneurship system.
Payroll income paid by the employer (tax agent) is subject to final withholding on a monthly basis.
Starting 1 January 2020, personal income tax as part of dividends received by foreign citizens from Armenian sources, just like that of RA citizens, is to be calculated at 5% (instead of 10%). This rate applies to dividends received from net profits attributable to 2020 and reporting periods succeeding it.
The tax withheld from the dividends is subject to refund if the dividend received from a resident entity is invested in the capital of the same resident entity during the same tax year.
Social security contributions
Mandatory contributions to pension funds are applicable for both Armenian and foreign citizens who were born after 1 January 1974 (inclusive). However, some employees could have suspended the payment of social contributions until 1 July 2018 by submitting an appropriate application.
Employers should withhold social contributions from the monthly employment income at a rate of 2.5%. The maximum amount of monthly social payment is currently capped at AMD 12,500.