ARMENIA LAW AND PRACTICE Contributed by: Aram Orbelyan, Narine Beglaryan, Artur Hovhannisyan, Lilit Karapetyan, Sarkis Knyazyan and Shushanik Stepanyan, Concern Dialog
transaction is compared with the price of the object of a comparable uncontrolled transac - tion; • the resale price method – where the mark- up derived from the resale of an object of a controlled transaction is compared with the mark-up derived from the resale of an object of a comparable uncontrolled transaction; • the cost-plus method – where the mark-up on the direct and indirect costs incurred during the supply of an object of a controlled trans - action is compared with the mark-up on the direct and indirect costs incurred during the supply of an object of a comparable uncon - trolled transaction; • the transactional net margin method – where the net profit realised from a controlled trans - action relative to an appropriate base – in par - ticular, costs, sales and assets – is compared with the net profit realised from a comparable uncontrolled transaction relative to the same base; and • the profit split method – where each of the related taxpayers participating in a con - trolled transaction receives the share of the profit generated or loss incurred from the transaction in question, which a person not considered as related would anticipate when participating in a comparable uncontrolled transaction (within the meaning of this point, the profit generated from the transaction shall mean the positive difference between the income generated and the costs incurred within the scope of the transaction in ques - tion). 5.7 Anti-Evasion Rules The Armenian legislation envisages liabilities provided by the Code on Administrative Offenc - es of the Republic of Armenia, Tax Code of the Republic of Armenia and Criminal Code of the Republic of Armenia.
• The Code on Administrative Offences of the Republic of Armenia provides an administra - tive liability for failure to register with the tax authorities within the specified period (Article 170.4) and failure to report information to tax authorities within the specified period or reporting incorrect information (Article 170.6). For these offences, the Code envisages liabil - ity for the taxpayer in the form of a fine․ • The Tax Code of the Republic of Armenia envisages tax liability for the taxpayer for tax evasion, which can be expressed by delay - ing the payment of tax beyond the prescribed time limits, by submitting or not submitting the tax calculation after the prescribed time limit, by understating the amount of tax, by overstating the tax loss, by not keeping the accounting records in the prescribed order or by not submitting the accounting data to the officials who check the accounting data. • Apart from the liability for the taxpayer legal entities, during 2023-2025, the income declaration system will be implemented in a phased manner, as a result of which natural persons (individuals) will also be obliged to declare their income, from which the relevant income tax should be calculated. The Tax Code provides tax liability in the form of fines, penalties and interests for taxpayers who have committed the abovementioned tax offences. • Concerning criminal liability, it should be mentioned that since the new Criminal Code of the Republic of Armenia entered into force (1 July 2022), a criminal liability for tax eva - sion will be applied if the amount of unpaid taxes is more than AMD10 million (approxi - mately USD26,000) (Article 290 of the Crimi - nal Code). The envisaged punishment for this crime is a fine or even imprisonment for up to eight years. With the new Criminal Code, criminal liability is envisaged also for the legal
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