Armenia

Value-added tax (VAT)

Armenia’s current VAT is, in general, based 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 state budget.

The VAT recoverable amount is the negative difference between the output and input VAT. The taxpayer may claim a VAT refund from the state budget on a monthly basis.

The standard rate of VAT is 20%.

Exported goods and services are generally charged at zero-rate. Advertising, consulting, marketing, design, engineering, legal, accounting, audit, data processing, and other related services are charged at zero-rate if the receiver of the services is outside of Armenia. Various supplies, including most financial and education services, are VAT-exempt.

Reverse-charge VAT is applied to VAT payers in Armenia if they receive services from non-residents who do not have a PE in Armenia and the place of supply of the received services is Armenia.

Non-residents that do not have a registered PE in Armenia bear the responsibility to account for and pay the VAT for the transactions that result in Armenian VAT if the contractual party is not a VAT payer.

The turnover tax (see below) generally replaces VAT obligations for SMEs. One of the requirements is that the taxpayer must not cross the income threshold of AMD 115 million for the previous 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).

VAT compliance for electronic services

In 2022, the definition of electronic services was stated in the tax law. In particular, electronic services include software development, use of databases, provision of remote access, advertising, and consulting services that are provided via the Internet.

VAT liability from electronic services arise when the services are provided to Armenian customers.

A non-resident company should register with tax authorities, submit the VAT report, and pay VAT monthly if the electronic services are provided to Armenian legal entities that are not VAT payers and quarterly if the electronic services are provided to individuals.

The applicable VAT rate for electronic services is 20%.

Customs duties

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

Excise tax is payable on alcoholic beverages, tobacco products, and petroleum products, whether imported or produced domestically.

The excise tax rates for certain types of goods are as follows:

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 entered into force, and the property tax and land tax are no longer in force. 

Immovable property tax is assessed and collected at the municipal level on the buildings, land, and its improvements. 

The land cadaster (valuation system) is used to determine the value of the land. Tax on land 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 be assessed based on the market value.

The tax rate on public importance buildings should be calculated at 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 property tax to the municipal budget annually by 1 December of the tax year. The municipal bodies are liable to calculate the annual tax amount and publicly inform 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 immovable property tax.

Tax on vehicles

Tax on vehicles with up to ten seats is calculated as follows:

Tax on vehicles with more than ten seats is calculated as follows:

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 by 1 December of the tax year. The municipal bodies are liable to calculate the annual tax amount and publicly inform 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.

Transfer taxes

Armenia does not have any transfer taxes.

Stamp taxes

Armenia does not have any stamp taxes.

Turnover tax

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:

* 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 taxes

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:

• 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 1,125,000) minus AMD 25,000 if the monthly gross income is more than AMD 500,000.

The maximum threshold for the calculation of the pension contribution is AMD 1,125,000.