ARMENIA Law and Practice Contributed by: Aram Orbelyan, Narine Beglaryan, Artur Hovhannisyan, Lilit Karapetyan, Sarkis Knyazyan and Shushanik Stepanyan, Concern Dialog
5. Tax Law 5.1 Taxes Applicable to Employees/ Employers Employees pay income tax on their employment remuneration. Employers act as tax agents for their employees. They calculate their employees’ income tax due every month and pay it by the 20th day of the following month. So effectively, employers bear liability for any wrong calculation or late payment of those taxes and payments. According to the Tax Code of Armenia, the income tax rate for employees is 20%. Besides income tax, employees must also pay a man - datory social security (pension) payment with the fol - lowing rates: • 5% on salary up to AMD500,000; and • AMD25,000 plus 10% on salary above AMD500,000, but not more than AMD87,500 (total cap). 5.2 Taxes Applicable to Businesses The following tax regimes apply in the RA. • General Taxation: In this case, taxpayers generally calculate and pay VAT and profit tax. • Special Taxation Regimes: (a) Turnover Tax: Taxpayers calculate and pay turnover tax, which replaces VAT and/or profit tax. (b) Micro-Enterprise Taxation System: The tax - payer, by carrying out the relevant activities defined by law, is exempt from all types of state taxes related to the enterprise. • Profit Tax: The object of taxation is the taxable profit, which is the gross income less expenses, and the profit tax rate is: (a) 18% for residents and non-residents that have a permanent establishment in Armenia (includ - ing a branch); and (b) 20% for non-residents who do not have a per - manent establishment in Armenia. • VAT: The VAT rate in Armenia is 20%.
• Turnover Tax: Only resident entities and individual entrepreneurs can pay turnover tax, which is 10% of income received from trade activities or render - ing services; the entity and an individual entrepre - neur can become a turnover taxpayer only if their turnover last year did not exceed AMD115 mil - lion. The following entities cannot be considered turnover tax payers: banks, credit organisations, insurance companies, insurance agents, insurance brokers, investment companies, specialised par - ticipants of the securities market, pawnshops, enti - ties engaged in foreign currency exchange opera - tions, investment funds, fund managers, payment and settlement organisations, entities engaged in organising casinos, games of chance, totalisa - tors and internet totalisators, entities engaged in organising lotteries, notaries, audit organisations, and providers of legal services, those engaged in legal and accounting activities, head office activi - ties, management consulting services, temporary employment services, and other labour supply activities. • Micro-Enterprise: Resident entities and individual entrepreneurs whose sales turnover for all types of activities without VAT during the previous calendar year did not exceed AMD24 million can be con - sidered micro-enterprises, which do not pay any taxes. • Dividends: Dividends received by natural persons are taxable at 5%. Dividends received by entities are added to the taxpayer’s tax base. • Interest Paid: Interest paid to shareholders is taxed at 20%. • IP Royalties: Royalties paid to shareholders are taxed at 10%. 5.3 Available Tax Credits/Incentives All taxpayers involved in agricultural production are exempt from profit tax until the end of the year 2026. Taxpayers who are dealing with handmade carpet pro - duction are also exempt from paying profit tax. 5.4 Tax Consolidation There is no tax consolidation prescribed in Armenian tax legislation.
37 CHAMBERS.COM
Powered by FlippingBook