General Tax Regime. Unless a company opts for a special tax regime it will be subject to 18% corporate income tax (CIT) and 20% value-added tax (VAT).
Value-added tax (VAT)
Certain goods and services are exempt from VAT while some are zero-rated. Certain basic products (eg. bread), education services, educational materials are exempt from VAT while exported products are zero-rated.
Turnover tax is a form of a sales tax, with tax rates normally up to 5% , replacing CIT and VAT. Only small businesses with annual sales of less than AMD 115 million (approximately, $240,000) can qualify for this tax regime.
Excise tax is levied on the import of spirits, beer, wine, tobacco substitutes, crude oil, gas (except compressed natural gas), petroleum and diesel fuel.
Micro-businesses. Micro-businesses, defined as businesses with annual sales of less than AMD 24 million (approximately, $50,000) are exempt from CIT and VAT. However, there is a list of excepted businesses that cannot take advantage of this tax system, such as traders based in the capital city of Yerevan and the majority of service businesses.
• Income Tax rate
Employers are required to withhold personal income tax (PIT) and social security payments from income paid to their employees or individual contractors (salary, benefits, bonuses, temporary disability compensation, maternity leave compensation etc). Starting from January 1, 2020, personal income tax is applied at a single flat rate of 23%, irrespective of the amount of compensation. This rate will be gradually brought down to 20% over the next few years.
In addition to PIT, employers are required to withhold social security payments at the rate of 5% (income up to 500,000 drams or $1,030) or 10% (income in excess of 500,000 drams). However, the maximum amount of salary subject to social security payments is currently capped at AMD 1,020,000 AMD per month (15 times minimum monthly wage of AMD 68,000 AMD). Moreover, as a temporary rule, starting from July 2018, only 50% of that amount is contributed by the employee while the remaining 50% shall be paid by the government.
23% flat rate for 2020
To be reduced as follows:
22% from 1 January 2021
21% from 1 January 2022
20% from 1 January 2023
• Income from royalties and interest 10% (when not exempt)
• Income from lease of property 10% (+10% for incomes in excess of AMD 60 million)
• Income from the sale of property
10% or 20% (according to the type of property and the nature of the buyer)
The sale of non-entrepreneurial property to individuals is exempt from tax
• Dividends attributable to 2020 and subsequent reporting periods
5% (instead of 10%)
• Due to the COVID-19 crisis, from 20 April 2020 the fine for overdue payments is lowered from 0.075% to 0.04% for each overdue day.
Allowable Deductions and Tax Credits
Individual tax payers enjoy the following deductions:
• Paid benefits
• Pension and insurance benefits
• Insurance premiums (paid by employers on behalf of their employees – up to AMD 10,000 per month)
• Amounts of single-sum assistance in case of employee’s or family member’s death
• Work, service or assets received free of charge from non-commercial organizations
• Monetary prizes received at competitions (up to AMD 50,000 per prize)
Special Expatriate Tax Regime
Residents are taxed on their worldwide income whereas non-residents are only taxed on their Armenia-sourced income.
Double taxation treaties
Countries With Whom a Double Taxation Treaty Have Been Signed
See the list of the tax conventions signed by Armenia (Tax Service of the Republic of Armenia)
Dividends: 5% (dividends attributable to 2020 or after)/10% (dividends attributable to 2019 or before), Interest: 10%, Royalties; 10%. Payment for insurance, reinsurance and transport is also subject to a withholding tax at the rate of 5%.
Imported goods are generally subject to 20% VAT, although a number of goods are exempt from this tax. Moreover, VAT payments can be deferred by up to three years for goods imported under government-approved projects.
Armenia is a member of the Eurasian Economic Union (EAEU) together with Russia, Belarus, Kazakhstan and Kyrgyzstan. Goods imported from these countries are exempt from import duties, while goods imported from third countries are subject to import duties established by the EAEU Commission.