Armenia tax system - taxation of Armenian companies and individuals: VAT, income tax and capital gains. Tax treaties of Armenia

Individuals are divided into two categories for income tax purposes:

• Residents are responsible for taxing their worldwide income.
• Non-residents are responsible for taxing only their income from sources in Armenia.

The standard income tax rate for individuals in Armenia is 21%.

Income in the form of royalties and interest (unless exempted) is taxed at 10%.

Rental income is taxed at 10%. Beginning January 1, 2020, if rental income exceeds AMD 60,000,000 during the tax year, the individual must pay an income tax of 10% in addition to the tax withheld by the tax agent.

Income from the sale of property is taxed at 10% or 20% (depending on the type of property and whether it is sold to the withholding agent or the individual). Sales of non-business property to individuals are exempt from tax.

Armenian companies pay tax on worldwide income, foreign companies pay tax on income from sources in Armenia.

The standard income tax rate is 18%.

Taxable income is defined as the difference between the taxpayer's gross income and deductible expenses:

Gross income includes all income received by the taxpayer from all economic activities unless the income is expressly exempt from taxation by law.

Deductible expenses include all necessary and documented expenses that are directly related to the conduct of the business, unless a specific provision of law limits the deduction.

Micro-organizations are exempt from all basic taxes and may employ an unlimited number of individuals (whether or not they are family members) in their business as employees whose monthly personal income tax will be AMD 5,000.

Turnover tax replaces VAT and/or income tax obligations for small and medium-sized businesses, except for sole proprietors and notaries, for whom it only replaces VAT.

There are certain income thresholds that taxpayers must not exceed in order to be considered turnover tax payers.

Depending on the type of activity, the turnover tax under the simplified regime may have different key rates: 1.5%, 3.5%, 5%, 6%, 10%, 20%, and 25%.

To switch to the simplified regime certain criteria must be met.

Existing VAT legislation in Armenia is based in general terms on the principles of EU VAT Directive.

The standard VAT rate for sale of goods and services in the domestic market and for import of goods is 20%.

Exported goods and related services are subject to zero rate.

Advertising, consulting, marketing, design, engineering, legal, accounting, auditing, data processing and other related services rendered to non-residents are subject to zero rate if the non-resident is located outside Armenia.

Various supplies, including most financial and educational services, are not subject to VAT.

The VAT registration threshold is AMD 115,000,000 per tax year.

VAT payers submit a single VAT and excise tax return monthly by the 20th of the month following the reporting period (inclusive).

Payment of income to non-resident taxpayers is subject to withholding tax at the following rates:

• Interest, royalties, income from lease of property and capital gains (except capital gains from sale of securities) are taxed at source at the rate of 10%.
• Dividends paid to non-residents are subject to withholding tax at the rate of 5%.
• Capital gains from the sale of securities are subject to withholding tax at the rate of 0%.

Other income (from services) from sources in Armenia is taxed at source at the rate of 20%.

Income tax rates for non-residents may be reduced under the existing double taxation treaty (DTA).

None.

The Transfer Pricing Regulation entered into force on January 1, 2020 in accordance with the Tax Code.

These regulations define the scope of transfer pricing control, introduce the arm's length principle and transfer pricing methods, determine the sources of information for transfer pricing analysis and determine transfer pricing documentation requirements.

Not available.

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

The land registry is used to determine the value of land. Agricultural land is taxed at 15% of net income as determined by the cadastral valuation. For non-agricultural land, the rate is between 0.25% and 1.0% of the cadastral value. The cadastral value should be assessed on the basis of market value.

The tax rate for buildings of public value shall be calculated at the following rates:

• for the 2022 tax year: 30% of its cadastral value - 0.3%;
• for the 2023 tax year: 35% of its cadastral value - 0.3%;
• for tax year 2024: 50% of its cadastral value - 0.3%; for tax year 2024: 50% of its cadastral value - 0.3%;
• for tax year 2025: 75% of its cadastral value - 0.3%; for tax year 2025: 75% of its cadastral value - 0.3%;
• for tax year 2026: 100% of its cadastral value - 0.3%; for tax year 2026: 100% of its cadastral value - 0.3%.

Legal entities must pay property tax to the municipal budget annually until December 1 of the tax year.

Employers must deduct social contributions from monthly income from employment at the following rates:

• 4.5% of monthly gross income if less than AMD 500,000;
• 10% of monthly gross income minus AMD 27,500 if the monthly gross income exceeds AMD 500,000.

The maximum threshold for the pension contribution is AMD 1,020,000.

Armenia has 46 Double Tax Treaties (DTC) with the following jurisdictions:

46 DTCs: Austria, Belarus, Belgium, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, India, Indonesia, Iran, Ireland, Italy, Kazakhstan, Kuwait, Latvia, Lebanon, Lithuania, Luxembourg, Moldova, Netherlands, Poland, Qatar, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Tajikistan, Thailand, Turkmenistan, Ukraine, UAE.

In addition, Armenia has signed but not yet ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI).

In general, there are no restrictions on foreign exchange transactions.