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 is AMD 115 million for the tax year.
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 EEU member states are determined based on the CBA rate on the date the good is imported into Armenia territory (crosses the Armenia border) or is exported from Armenia territory (crosses the Armenia border). No tax offence occurs when the tax base and initial value of goods imported/exported from/to EEU member states after 1 January 2018 are calculated using the CBA rate on the date the Armenia 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 per unit of measure (AMD)|
|Grape wines||1 litre||150|
|Vermouth and other grape wines||1 litre||1,000|
|Vodka made of fruits and/or berries||1 litre||800|
|Cognac, brandy, and other spirits||1 litre (by recalculation of 100% spirit)||
|Other brewed drinks (apple cider, pear cider, honey-drinks)||1 litre||270|
|Ethyl spirit||1 litre (by recalculation of 100% spirit)||
|Spirituous liquors||1 litre||
|Whisky and rum and other spirits||1 litre||
|Tobacco products||1,000 units||
|Lubricating oil||1 kilogram||500|
|Tobacco substitutes||1 kilogram||1,500|
|Raw oil and oil materials||1 ton||27,000|
|Gases produced from oil and other hydro-carbons (except compressed natural gas)||1 ton||1,000|
|Compressed natural gas||1,000 m³||34,000|
|Petrol *||1 ton||40,000|
|Diesel fuel||1 ton||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.
Tax on immovable property
Starting from 1 January 2021 the tax on immovable property and vehicle property came into force, meantime the Law on property tax and land tax have lost its force.
Immovable property tax is assessed and collected at the municipal level on the buildings, lands and its improvements.
The land cadaster (valuation system) is used to determine the value of the land. Tax on land tax for agricultural land is calculated at 15% of the net income determined by the cadastrial evaluation. For non-agricultural land, the rate is 0.25% to 1.0% of the cadastrial value. Cadastrial value should assessed based on the value closed to the market value.
The tax rate on public importance buildings should be calculated by the following rates:
- for 2021 tax year - 25% from its cadastrial value * 0,3%;
- for 2022 tax year - 30% from its cadastrial value * 0,3%;
- for 2023 tax year - 35% from its cadastrial value * 0,3%;
- for 2024 tax year - 50% from its cadastrial value * 0,3%;
- for 2025 tax year - 75% from its cadastrial value * 0,3%;
- for 2026 tax year - 100% from its cadastrial value * 0,3%.
Legal entities should pay immovable tax to the municipal budget annually up to the 1 December of the tax year. The municipal bodies are liable to calculate annual tax amount and publicly inform to the taxpayers no later than 1 November of the tax year. Starting from 1January 2021 the Tax Code does not define a requirement for submission of the returns on the immovable tax.
Tax on vehicles
Tax on vehicles with up to ten seats is calculated as follows:
|Capacity (horsepower)||Tax rate (per horsepower)|
|Up to 120||AMD 200|
|121 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|
Tax on vehicles property 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 pay vehicle tax to the municipal budget annually up to the 1 December of the tax year. The municipal bodies are liable to calculate annual tax amount and publicly inform to the taxpayers no later than 1 November of the tax year. Starting from 1 January 2021 the Tax Code does not define a requirement for submission of the returns on the vehicle tax.
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.
Payroll income paid by the employer (tax agent) is subject to final withholding on a monthly basis.
Starting 1 January 2020, PIT as part of dividends received by foreign citizens from Armenian sources, just like that of Armenia citizens, is 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 according to the following rates:
- 3,5% of the monthly gross income, if it is less than AMD 500,000.
- 10% of the monthly gross income (but not more than AMD 1,020,000) minus AMD 32,500, if the monthly gross income is more than AMD 500,000.
The maximum threshold for the calculation of the pension contribution is AMD 1,020,000.