ARMENIA Law and Practice Contributed by: Varoujan Avedikian, Tamara Martirosyan, Sofya Sargsyan and Larisa Gevorgyan, Andersen Legal
nian tax through withholding obligations imposed on specific types of Armenian-source payments. VAT Armenia also applies VAT, functioning as the main con - sumption tax alongside the CIT system. The standard VAT rate is set at 20% and applies to most goods and services supplied within Armenia. VAT is also levied on imports. Certain categories of transactions, particu - larly exports of goods and related services, are zero- rated, which aligns with international VAT principles. Armenia also maintains a VAT registration threshold, whereby companies are required to register once their annual turnover exceeds AMD 115 million (about USD300,000), unless they voluntarily opt in earlier for commercial or compliance reasons. Turnover Tax Regime In addition to the standard corporate tax system, Armenia offers alternative simplified taxation regimes that may be attractive for small and medium-sized businesses or companies engaged in specific types of activities. One of the most prominent simplified systems is the turnover tax regime, which replaces both CIT and VAT for qualifying businesses. Under this system, companies pay tax based on gross rev - enue rather than net profit, and rates vary significantly depending on the nature of the business activity. For example, rates may range from as low as 1.5% to as high as 25% of turnover, depending on the sector and the type of income generated. This regime is particu - larly useful for businesses seeking simplified compli - ance obligations, though eligibility requirements and exclusions apply. Micro-Enterprise Regime The micro-enterprise regime grants highly favourable tax treatment to very small entrepreneurs whose annu - al turnover does not exceed AMD24 million (about USD62,000). Businesses under this regime may be exempt from both CIT and VAT, significantly reducing their administrative and financial burdens. 9.2 Withholding Taxes on Dividends, Interest, Etc Dividends and interest paid by Armenian companies to non-resident/foreign investors are subject to with -
holding tax (WHT), and the following tax rates are applicable: • interests, royalties, income from the lease of prop - erty and capital gains (except capital gains from the sale of securities) are subject to 10% WHT; • dividends paid to non-residents shareholders are subject to 5% WHT; and • other types of income (from services) received from Armenian sources is subject to 20% WHT. The RA has signed double taxation avoidance agree - ments (DTAAs) with 47 countries. Many treaties reduce Armenia’s 10% withholding on interest to 5%, or in a few cases to 0%. In many treaties, royalties are capped at 5%, though again it depends on the country. Reduced WHT rates under Armenia’s double tax trea - ties are generally available only when two fundamen - tal conditions are satisfied. First, the income recipient must qualify as the beneficial owner of the dividends or interest, meaning the foreign investor must be the genuine owner of the income rather than acting through an intermediary entity. Second, the foreign investor must present a valid tax residency certificate issued by the competent authority in its home jurisdic - tion. This documentation is required to confirm treaty eligibility and to permit application of the reduced rates. 9.3 Tax Mitigation Strategies Acquisition Structures that “Step Up” the Depreciable Asset Basis The main tax differences between asset acquisition and share acquisition are that asset acquisitions are subject to 20% VAT, whereas share acquisitions are not. Additionally, in a share acquisition, the company’s existing tax regime remains unchanged, while in an asset acquisition, the tax treatment of the acquired assets may change. Earnings Stripping With Intercompany Debt This method can be useful in certain cases, as interest paid on debt is generally deductible for CIT purposes. However, Armenian legislation imposes specific limi - tations, and there are circumstances in which interest payments may not be deductible.
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