The new Tax Code of Armenia entered into force on 1 January 2018. Under the Tax Code, all separate tax laws are consolidated in the single Code alongside with major changes in tax rates, policies, and administration.
The most significant changes effective from 1 January 2018 are as follows:
- The transfer pricing regulations entered into force (see Transfer pricing in the Group taxation section).
- Fixed and intangible assets should be depreciated using the straight-line method, replacing previously applicable depreciation by pools (see Depreciation and amortisation in the Deductions section).
- Some expense deductibility limits were changed or removed (see Other significant items in the Deductions section).
- The definition of permanent establishment (PE) of a non-resident entity is introduced under the Tax Code (see Permanent establishment in the Corporate residence section). Previously, there was no specific PE definition.
- The non-resident taxpayers conducting activity in Armenia through a PE should keep separate accounting books (it is no longer allowed to use an indirect taxation method while calculating Armenian corporate income tax [CIT]).
- The submission deadline of the annual CIT return is changed to 20 April (inclusive) following the reporting period (previously 15 April).
- The income received by a non-resident entity conducting activity in Armenia through a PE is considered income received by the PE if the income-supporting documents are issued in the name of that PE.
- The registered PEs may now carry forward tax losses (previously, only residents were allowed to carry forward tax losses, unless the appropriate double tax treaty [DTT] was applied).
- The withholding tax (WHT) on the income from the alienation of securities is 0% (previously 10%).
- Residents and non-resident entities conducting activity in Armenia through a PE should make quarterly CIT prepayments by the 20th day of the last month of the quarter of 20% of the CIT paid for the previous reporting period (previously 18.75%).
- Taxpayers engaged in agricultural production are exempt from CIT on that income until 31 December 2024 (previously there was no exemption period defined).
- Armenian resident companies implementing a business plan approved by the government may deduct the amount of the annual salaries for the newly created jobs from the CIT liability of that year, but not greater than 30% of the actual CIT calculated. The incentive is applicable for five fiscal years, in addition to the year of the start of the business.
- Non-residents that do not have a registered PE in Armenia bear the responsibility to account and pay the value-added tax (VAT) for the transactions that result in Armenian VAT if the party to the transaction is not a VAT payer.
- Starting from 1 January 2018, all VAT payers should submit VAT returns on a monthly basis. Previously, the VAT payers should submit the VAT returns on a quarterly basis if they did not exceed the particular turnover threshold.
- The Law on Presumptive Tax is no longer in force as of 1 January 2018.
- Excise tax rates are changed for some products (i.e. whiskey, rum, and other alcoholic liquors) (see Excise tax in the Other taxes section).
- Turnover tax for income on notary activities is decreased from 20% to 10%.
- Turnover tax for income on lottery organising activities is 25% (previously lottery activities were taxed under presumptive tax with a fixed tax based on total value of lotteries sold during the month).
- Turnover tax for income on sales of newspapers by publishing companies is 1.5% (previously taxed as general trading activity at 5%).
- The customs relations in Eurasian Economic Union (EEU) member states are now regulated by The Customs Code of EEU that entered into force on 1 January 2018.
The most significant changes of the Tax Code that entered into force during 2019 and from 1 January 2020 are as follows:
- Starting 29 June 2019, the tax bases and initial values during the import or export of goods from/to EEU member states are determined based on the Central Bank of Armenia (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.
- Starting 29 June 2019, e-commerce transactions and activities may be documented with documents issued by companies providing payment and settlement services or documents printed via machines that serve the payment tools used by those companies.
- For the year 2019, those resident taxpayers whose sales turnover exceeds 115 million Armenian dram (AMD) (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.
- Based on an application of the taxpayer, input VAT amounts that are subject to refund can be debited to the unified tax account of the taxpayer on a quarterly (instead of semi-annual) basis. This provision applies to VAT amounts that need to be refunded based on the VAT and excise tax unified reports covering reporting periods after 1 July 2019.
The most significant changes to the Tax Code that entered into force during 2020 are as follows:
- Starting from 21 April 2020, in case of late tax payment, a 0.04% fine is calculated for each overdue day (previously 0.075% was applicable).
- The minimum amortisation period of fixed assets imported or acquired (constructed, processed) from 1 July 2020 to 31 December 2020 should be not less than one year.
- CIT is to be decreased by two percentage points to 18%. This rate is to be applied to the calculation of CIT attributable to 2020 and reporting periods succeeding it.
- Dividends received by non-resident organisations are to be taxed at 5% instead of 10%. This rate applies to dividends received from net profits attributable to 2020 and reporting periods succeeding it.
- Personal income tax (PIT) is to be calculated at a flat rate of 23% and to be gradually lowered to 20% for each subsequent year (decreasing by 1%). In parallel to the decrease in PIT rates, according to the Armenia Law ‘On funded pensions’, the principle of equal participation by citizens and the state in respect of funded pension allocations will be restored.
- PIT as part of dividends received by foreign citizens from Armenian sources, just like that of Armenia 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.
- Only VAT payers will be allowed to get exempted from VAT payment when importing goods included in the VAT exemption list according to the Armenia Law “On approving the list of goods not subject to taxation under the excise tax whose import by organisations and sole entrepreneurs is exempted from taxation under VAT”.
- 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.
- Excise tax rates of ethyl alcohol, vodka (except vodkas made from fruits and berries), beer, and tobacco products will be raised.
- All provisions of the Code related to the patent tax will lose force. The patent tax will be removed from the taxation system.
- The Tax Code will substitute the chapter on the family entrepreneurship system and the system of taxation of self-employed entities with a newly drafted chapter on the micro-entrepreneurship system.
- Road tax for trucks registered in the Armenia will be eliminated, and the government shall prescribe the requirements for the documentation of expenses incurred abroad by international transportation service providers.
- The taxation of totalisators (including Internet totalisators) and games of chance (including Internet games of chance) will be reconsidered starting 1 January 2020 and 1 January 2021, respectively. In particular, considering the growth of the industry, it is proposed to tax these activities under CIT.
- Also starting 1 January 2020, totalisators (including Internet totalisators), which were listed under the activities covered by the patent tax, will be included in the activities exempted from VAT.