• Income Tax
Income tax is a direct tax paid by the taxpayers (through the tax
agent in causes specified by the law) into the state budget. The tax
period is the calendar year.
The Tax Base – Gross Income
The Armenian income tax system appears to use the comprehensive income
tax base upon which to apply taxes. The tax base of the income tax is
gross income. The gross income is the total of all the income, irrespective
of the source, received by a taxpayer in the course of a tax year. Gross
income includes: salaries and wages, interest, dividends, winnings prizes,
donations, inheritance, insurance compensation and income from business
activity, etc.
Deductions from Gross Income
Deduction of expenses to earn income is allowed. When determining taxable
income the following shall be subject to deduction from the gross income
of the taxpayer: property and cash received from individuals as inheritance
or gift, scholarships and stipends paid by the state, amounts of monetary
and in-kind assistance to individuals, insurance compensations etc.
According to the article 14 of the Law of the Republic of Armenia on
Income Tax, gross income is reduced by 20,000 drams for each month.
Rate
The tax rate applied on taxable income is as follows
• The tax on monthly income before 80,000 drams as well as on
the royalties, leasing and interest income paid to an individual should
be withheld by the tax agent on each payment at the rate of 10 per cent.
• For monthly income up to 80,000 drams, the rate is 10 per cent;
for monthly income greater than 80,000 drams, the rate is 8,000 drams
plus 20 per cent of the amount exceeding 80,000 drams;
• For income received as royalties, from property lease and as
interest, the rate is 10 per cent.
Taxation of non-resident
The taxation of income received from sources in Armenia by individuals
non-resident shall be performed pursuant to the general procedure established
by the Law of the Republic of Armenia on Income Tax. For the purposes
of this law the following shall be considered income received from sources
in Armenia: labour costs in the Republic of Armenia and other payments
deemed equal thereto, income received from the fulfilment of civil and
legal contracts in the Republic of Armenia, income derived from business
activity carried out by a non resident on the territory of Republic
of Armenia (the sales of products, goods and provision of services),
passive income.
The non-resident has the right to make deductions from the gross income
in accordance with the procedure established by the Law of the Republic
of Armenia on Income Tax.
Foreign Citizens and Stateless Persons
Taxes shall be withheld at the following rate on income received by
foreign citizens and stateless persons:
• For income from benefits received from insurance and freight
the rate is 5 per cent; and
• For incomes received as interest, royalty, lease payments, increase
in the value of property and other passive incomes, as well as other
income received from Armenian sources the rate is 10 per cent.
• Income tax on salaries and wages shall be calculated as described
above without the application of the personal deductions provided.
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• Profit Tax
The Profit tax is a direct tax to be paid by tax payers into the state
budget in the amount and according to the procedure established by the
law of Law of the Republic of Armenia on Profit. Taxable profit is the
positive difference between the gross income and deductions. The tax
period is the calendar year.
The Tax Base – Gross Income
Gross income is the total amount of income received by the tax payer
in the reporting year, including revenue from the sales of goods, services,
assets, interest, dividends, capital gains and patents.
Deductions from the Gross Income
When determining taxable profit, the growth income shall be reduced
in the amount of necessary and documentary supported expenses incurred
on deriving it. Expenses shall include in particular: material expenses,
labour costs and other payments deemed equal thereto, obligatory social
insurance payments, depreciation allowances, insurance premiums, non
refundable taxes, duties and other obligatory payments, interests on
loans and other borrowings, payments on guaranties letters of guarantee,
letters of credits and other banking services, advertisement expenses,
representative expenses, business trip expenses, court expenses, compensation
for the damage caused, fines penalties and other proprietary sanctions,
expenses of staff recruitment, expenses on audit, legal and other consulting,
information and administrative services, expenses on factoring trust
operations.
The minimum period of depreciation for the transmission devices, buildings
and constructions of hotels, boarding houses, rest homes, sanitariums,
which are located in the disaster area shall be established with in
a period of one year. In case when the total amount of investment in
the equity capital of a resident with foreign investments (except banks)
actually performed by foreign investors after January 1, 1998 constitutes
at least 500 million drams, the amount of the profit tax for the resident
in question shall be reduced. In case during 2001 and 2002 the mentioned
amount is invested, profit tax of the resident for the following years
will be reduced again, this time by 50%.
Rate
The tax rate applied on taxable profit is 20 per cent.
Taxation of Non-Residents
Income from business activity, passive income and other income derived
by non-residents shall be considered as income from Armenian sources.
Income not mentioned here from certain sources shall also be included
in income for taxation purposes. Deductions from the gross income of
the expenses incurred in connection with the activity implemented in
the Republic of Armenia are allowed.
The profit tax for non-residents shall be withheld by the tax agent
(from the total amount of income paid to a non-resident) as follows:
• For income from insurance compensations, reinsurance payments
and incomes from freight the rate is 5 per cent; and
• For incomes received as dividends, interest, royalty, income
from the lease of property, increase in the value of property and other
passive incomes, as well as other income received from Armenian sources
the rate is 15 per cent.
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The excise tax is an indirect tax applied to beer, grape and other wines,
wine ingredients, spirits, cigars, cigarillos and cigarettes with tobacco
or its substitutes, petrol and diesel fuel. Taxes are applied monthly.
The Tax Base
Goods as described above imported into Armenia and produced in Armenia
are considered the base upon which taxes are applied.
The Tax Rate
The rates vary depending on the good in question Taxes are applied to
the quantity of the goods subject to the excise tax. For example, a
tax of 70 drams is applied to one litre of beer, 1,500 drams is applied
to one kilogram of tobacco substitutes, 11,500 to one ton of diesel
fuel. These amounts are indexed to the rate of growth of consumption
prices. Where a good subject to excise tax is an input into a good that
is subject to the excise tax, only the net amount of excise tax is paid.
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The property tax is a direct tax to be paid for the property defined
by the law, which is owned by the taxpayers in virtue of the ownership
right or complete (partial) economic disposal (hereinafter - ownership
right) in the amounts and according to the procedure established by
the law.
The Tax Base
For the purposes of this law the following items owned by a taxpayer
in virtue of the ownership right shall be considered as objects of taxation:
dwelling buildings (flats in dwelling houses, garage, garden house,
dwelling house, and economic structures near it: cattle-shed, bakery,
summer kitchen, hay house, etc.); structures of public and productive
importance (hereinafter-buildings); motor vehicles, with the exception
of those by which the transport activity is implemented, based on the
licenses obtained in accordance with the procedure established by the
legislation of the RA, means of water transport.
The Tax Rate
The property tax for buildings shall be calculated at the following
annual rates:
a. For buildings of public and productive importance 0.6%;
b. The property tax rate for garden houses and separately standing garages,
owned by individuals who are considered as taxpayers, shall constitute
0.2% of the taxable base;
c. The property tax rate of other dwellings depended on the amount of
the taxable base vary from 0 to 0.8 percents.
c. The annual property tax rate for means of transport varies from 100
to 500 drams for each horsepower.
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Social security payments are compulsory payments made by employers,
employees and sole proprietors for financing state social security programs.
Calculation Bases for Social Payments
The calculation bases for social payments are: amounts paid by employers
as compensation for work, salaries, received by employees, annual income
of sole proprietors, the cadastre income from agricultural land.
Tax rates
Employers make the social payments from the work compensation of each
employee: for amount up to 20000 drams, social payments are 5000 drams,
for amount up to 100000 drams, social payments are 5000 drams plus 15%
of the amounts exceeding 20000 drams, for amount above 100000 social
payments are 17000 drams plus 5% of the amount exceeding 100000.
Employers make social payments at the amount of 3% of their salaries.
Sole proprietors make social payments equal to the 15% of their annual
income not exceeding 1200000 drams and 5% of the amount exceeding 1200000
drams.
Owners of agricultural land make social payments equal to the 5% of
the net cadastre income, but not more than 60000 drams.
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