EY
1 Northern Avenue Yerevan 0001 Armenia
Executive and immigration contacts
Zurab Nikvashvili
+995 (32) 243-9375, Ext. 2104 (resident in Tbilisi, Georgia)
Kamo Karapetyan
Fax: +995 (32) 243-9376 Email: zurab.nikvashvili@ge.ey.com
+374 (10) 500-720, Ext. 2612
Fax: +374 (10) 500-706 Email: kamo.karapetyan@am.ey.com
As of 26 July 2021, the exchange rate of the Armenian dram against the US dollar was AMD483.42 = USD1.
A. Income tax
Who is liable. Resident individuals are subject to income tax on their worldwide income. Nonresident individuals are subject to income tax on only income received from Armenian sources.
For tax purposes, an individual is considered resident if he or she satisfies either of the following conditions:
• He or she resides in Armenia for 183 or more cumulative days in the current tax year (same as a calendar year).
• His or her center of vital interests (the place of a person’s fam ily or economic interests) is in Armenia.
For the purpose of determining the residency status, days spent abroad by an individual as a civil servant of the Republic of Armenia (RA) are considered as days spent in the RA.
Income subject to tax. The taxation of various types of income is described below.
Employment income. Taxable income from employment consists of all types of compensation or benefits, whether received in cash or in any other form, subject to certain exemptions.
Self-employment and business income Corporate income tax is levied on an individual entrepreneur’s annual income, which consists of gross income less expenses (except for nondeductible or partially nondeductible expenses) contributing to the generation of the income.
Directors’ fees. Directors’ fees are included in taxable income.
Investment income Investment income is in the form of dividends, which is the income received or to be received by a participant as an allocation of profit (including an interim allocation) from participation (stock, share or unit) in the charter or share capital of an organization or joint activity.
The above taxes are withheld at source.
Exempt income. “Exempt income” represents part of the gross income of a taxpayer, which is deducted from gross income for determination of taxable income. Income derived by individuals that is considered exempt includes, among other items, the following:
• Contributions made by taxpayers on their behalf and/or by thirdparty taxpayers (including employers) within the voluntary accu mulative pension insurance system according to the terms and conditions established by RA legislation, but not more than 5% of the taxpayer’s gross income
• Contributions made by the state for the taxpayer within the obligatory accumulative pension insurance system in accordance with the terms and conditions established by RA legislation
• Compensation paid to employees within the norms specified in the legislation of the RA, with the exception of compensation paid for unused leave days in the event of quitting work
• Property and cash received from individuals as inheritance or gifts, with the exception of gifts of property received from individual real estate developers
• Assets, works and services received from noncommercial orga nizations free of charge
• Assets, works and services received free of charge on the basis of decisions of the state administration and local government bodies of the RA, as well as such items received from foreign states and international (intergovernmental) organizations
• Proceeds from the sale of property to non-entrepreneur indi viduals, with the exception of amounts received from the sale of property subject to entrepreneurial activity (property subject to entrepreneurial activity is a car that is alienated within 365 days after its acquisition)
• Scholarships and stipends paid by the state, noncommercial organizations, foreign states and international (intergovernmen tal) organizations to students and postgraduates of higher edu cational institutions, students of specialized-secondary and vocational schools and attendees of religious seminaries
• Insurance compensation with the exception of insurance com pensation received under the voluntary accumulative pension insurance system
• Income derived from the sale of shares, treasury bonds and other state securities
• Income received from securities that certify taxpayers’ partici pations in investment funds
• Amounts received as compensation for damages under the law, with the exception of compensation for lost income
• Lump-sum amounts paid on the death of an employee or his or her family members
• Prizes won at international competitions by athletes and coach es participating for the national team of the RA, and state awards (prizes)
• Monetary and in-kind winnings of the participants in advertis ing lotteries (lotteries organized by advertisers that fully estab lish the prize fund) implemented according to the procedures and terms specified by the law of the RA, in an amount not exceeding AMD50,000 for each winning
• Monetary and in-kind winnings of the participants of drawing, non-drawing, and combined lotteries and totalizators
• Value of monetary or material prizes received in competitions in an amount not exceeding AMD50,000 per prize
• Insurance payments up to AMD10,000 per month per head made by the employers for health insurance of their employees
• Income derived from the sale of agricultural production, as well as income received from other activities by individuals involved in agricultural production, to the extent that the income from such other activities does not exceed 10% of the income received from agricultural and other activities (if the 10% threshold is exceeded, the entire income from the other activi ties is taxed)
• State benefits paid under the legislation of the RA, with the exception of benefits for temporary work disability (including maternity)
• All types of pensions paid under the law of the RA with the exception of pensions received under the voluntary accumulative pension insurance system
• One-time compensation paid under the law of the RA to fami lies of deceased or disabled servicemen
• Alimony paid according to the law of the RA
• Amounts received by individuals for donated blood, breast milk and other types of donorship
• Income received from the alienation of land (regardless of the purpose for the use of the land)
• Honorary payments, financial aid and support received within the framework of the social protection system
• Fines accrued in favor of an individual for each delayed day if the refund of taxes to the individual taxpayer’s unified tax account is delayed for more than 30 days after the statutory due date
Taxation of employer-provided stock options. Employer-provided stock options are taxable benefits, with some exceptions depend ing on the type of stock options plans.
Capital gains and losses. Capital gains are subject to regular income tax when they are realized. Unrealized capital gains are not subject to tax. Capital gains arising from certain types of activities, such as the sale of shares and other specified types of property as mentioned in Exempt income are exempt from income tax.
Individual entrepreneurs may offset their capital losses against capital gains. If the capital loss cannot be offset in the year in which it is incurred, it can be carried forward to offset gross income in the following five years.
Deductions
Business deductions. Individual entrepreneurs may deduct all business-related and documented expenses (for example, mate rial expenses, depreciation allowances, lease payments, salaries and wages, and interest paid) except for nondeductible or par tially deductible expenses.
Nondeductible or partially deductible expenses include, but are not limited to, the following:
• Business-trip expenses that exceed the norms established by the Tax Code of the RA.
• Representative expenses exceeding 0.5% of gross income (but not more than AMD5 million) for the tax year. The limit of 0.5% is not taken into account in the tax year of registration as an individual entrepreneur.
• Fines, penalties and other proprietary sanctions transferred to the state and municipal budgets.
• Assets, works and services provided free of charge and debts forgiven.
• Expenses related to the generation of income that is exempt from income tax.
• Interest paid on loans and borrowings above the established limit of 24% per year.
• Management service expenses that exceed the norms estab lished by the Tax Code of the RA.
• Amounts of financial aid, food provided to individuals, costs for organization of social and cultural events, and similar expenses exceeding 0.25% of the taxable income before deducting expenses.
Depreciation (amortization) allowances for fixed and intangible assets owned by individual entrepreneurs are deducted for tax purposes in accordance with the terms and conditions provided by the Tax Code of the RA. Details regarding the depreciation (amortization) of fixed and intangible assets are provided below.
The annual value of depreciation (amortization) allowances for fixed and intangible assets is calculated by dividing the acquisi tion cost or revalued cost (if the revaluation is carried out accord ing to the procedure established by the respective law of the RA) of fixed and intangible assets by the depreciation period deter mined for the appropriate group of fixed assets or for intangible assets. The following minimum periods are established for depre ciation purposes.
depreciation Group Assets period (years)
homes,
Fixed and intangible assets with a value up to AMD50,000 (inclu sive) are depreciated in the tax year of their acquisition.
Individual entrepreneurs who import or acquire (construct or develop) fixed assets included in the list of investment or business programs that are approved by the government of the RA may set the depreciation period of those assets at their discretion, but for not less than one year.
Taxpayers importing or acquiring (constructing or developing) fixed assets between 1 July 2020 and 31 December 2021 may set the depreciation period at their discretion, but for not less than one year.
Intangible assets are amortized over their useful economic lives. If it is impossible to determine the useful life of an intangible asset, the minimum depreciation period of such asset is set at 10 years, but it may not be longer than the period of the individ ual entrepreneur’s activity.
Land is not subject to depreciation.
For the purposes of determination of taxable income, an indi vidual entrepreneur may choose a different depreciation period for fixed assets at his or her discretion, but it may not be less than one of the abovementioned periods for the appropriate group.
Rates. The income tax rates are provided below.
Income tax is calculated using a flat rate of 22% for the 2021 tax year. For subsequent tax years, income tax will be calculated using the following rates:
• 2022: 21%
• 2023: 20%
A 10% rate applies to salaries and other income equivalent to salaries that are paid to employees by employers certified accord ing to procedures established by the RA Law on State Support of Information Technologies. This provision will remain in force until 31 December 2022.
A 10% rate applies to the following types of income derived by individuals (except for individual entrepreneurs) in Armenia:
• Royalties.
• Income derived from property leases. If the total amount of income from property leases exceeds AMD60 million during the tax year, an additional 10% tax is paid by the individual on the excess amount.
• Interest income. Interest or discounts derived from Armenian treasury bonds and other state securities are not taxable.
• Income from the sale of property (except for land, the alienation of which is exempt from tax) to tax agents. If the property is the object of entrepreneurial activity (that is, a car that is alienated within 365 days after its acquisition), a 1% income tax applies, but not less than AMD150 multiplied by each horsepower of the car’s engine.
Dividends received by Armenian and foreign citizens are taxed at a 5% rate. Dividends and other income derived from stocks, bonds or other investment securities listed on the Armenian stock exchange are not taxable with some exceptions.
Income received by a real estate developer from the alienation of a building or its apartments or other areas is taxed at a 20% rate.
Credits. The income tax liability of Armenian tax residents is reduced by the amount of tax paid by them abroad under foreign law, with the exception of the amount of foreign tax paid on income that is exempt from tax under the law of the RA.
However, the foreign tax credit may not exceed the amount of tax that would be due in the RA on this income.
Relief for losses. Individual entrepreneurs may carry forward operating losses for up to five years. No carryback is allowed.
B. Other taxes
Inheritance and gift taxes. Armenia does not impose inheritance and gift taxes.
Wealth tax. Armenia does not impose wealth tax or net worth tax.
Real estate tax. For individuals and individual entrepreneurs, land, buildings and constructions are subject to real estate tax.
For purposes of the real estate tax, buildings and constructions include the following:
• Residential construction units
• Multi-flat dwelling buildings
• Nonresidential areas of residential buildings
• Separate constructions for the parking of vehicles that are built on plots
• Constructions for public use
• Constructions for production use
• Incomplete (semi-built) construction units
• Newly constructed and/or modified real estate that is registered and evaluated by the cadastral body but that has not yet had state registration of rights, as well as buildings and structures built without a construction permit on a land parcel by taxpay ers having the right of ownership over the given land parcel, including constructions built without authorization in multiapartment buildings or adjacent to the buildings
The real estate tax rate for agricultural lands is 15% of the net income determined by cadastral evaluation. The real estate tax rate for non-agricultural lands ranges from 0.25% to 1% of the cadastral value assessed under procedures defined by the Tax Code of the RA.
The tax base for buildings and constructions is considered to be the cadastral value assessed under procedures defined by the Tax Code of the RA. The real estate tax rate for a residential apart ment building, an apartment in a residential apartment building or a nonresidential area of an apartment building ranges from 0.05% applied to the tax base up to AMD1,326,000 to 1.5% applied to the part exceeding AMD200 million of the tax base. The real estate tax rate for private houses and garden houses ranges from 0.05% up to AMD1,223,500 to 1.5% applied to the part of the tax base exceeding AMD200 million. The real estate tax rates for other types of constructions range from 0.2% to 0.3% of the tax base.
Vehicle tax. For purposes of the vehicle tax, vehicles include the following:
• Motor vehicles
• Watercrafts
• Snowmobiles
• Quattro cycles
• Motorcycles
The tax base for vehicles is motor power (horsepower or kilo watt). The vehicle tax for motor vehicles is calculated at the following annual rates.
Type Tax amount
Motor cars with up to 10 passenger seats
From 1 to 120 horsepower
AMD200 per horsepower From 121 to 250 horsepower AMD300 per horsepower and additional AMD1,000 for each horsepower above 150 251 and more horsepower
AMD500 per horsepower and additional AMD1,000 for each horsepower above 150
Motor cars with 10 or more passenger seats and trucks
From 1 to 200 horsepower
AMD100 per horsepower 201 and more horsepower AMD200 per horsepower Watercrafts, snowmobiles and quattro cycles
AMD150 for each horsepower Motorcycles AMD40 for each horsepower Trucks of more than 20 years 0
Vehicle tax on motor vehicles used for up to three years is calcu lated at 100%. The amount of vehicle tax on motor vehicles used for more than three years is reduced for each year following the third year by 10% but not by more than a total of 50% of the tax amount. The time in use is calculated from the date on which the motor vehicle is produced.
C. Tax filing and payment procedures
The tax year in Armenia is the calendar year.
Individuals must submit income tax returns regarding their annual taxable income to the tax authorities by 20 April of the year following the tax year, except in the following cases:
• The taxpayer received exempt income only.
• The taxpayer received only income subject to taxation at source by a tax agent, regardless of the amount of such income during the tax year.
The amount of income tax calculated must be paid to the state budget by 20 April of the year following the tax year.
Individual entrepreneurs must submit corporate income tax returns to the tax authorities by 20 April of the year following the tax year.
Individual entrepreneurs engaged in economic activities in Armenia must make advance payments of corporate income tax during the tax year. The amount payable must be the lower of the following:
• 20% of the amount of corporate income tax for the preceding tax year
• 2% of revenue received from the supply of goods, performance of works, and/or the provision of services during the preceding quarter
The advance payments must be made quarterly by the 20th day of the last month of each quarter.
At the end of the reporting year, an individual entrepreneur cal culates the amount of corporate income tax at a rate of 18% based on the accrued taxable income, setting off the amounts of advance payments made for such reporting year.
D. Double tax relief and tax treaties
Armenia has entered into tax treaties with the following jurisdic tions.
Austria Indonesia Serbia Belarus Iran Slovak
Belgium Ireland Republic Bulgaria Italy Slovenia Canada Kazakhstan Spain
China Mainland Kuwait Sweden
Croatia Latvia Switzerland Cyprus Lebanon Syria
Czech Republic Lithuania Tajikistan Denmark Luxembourg Thailand Estonia Moldova Turkmenistan Finland Netherlands Ukraine France Poland United Arab
Georgia Qatar Emirates Germany Romania United Greece Russian Kingdom Hungary Federation India
If a foreign citizen who is nonresident for tax purposes in Armenia receives income from Armenian sources and meets the conditions of a double tax treaty, a tax agent can apply the treaty exemption on the basis of a tax residency certificate issued by the competent tax authority of the foreign country.
E. Visas
One of the legal bases for a foreign citizen’s stay in Armenia is the entry visa. In general, entry visas are issued by the Passport and Visa Department of the Police of the RA at the bordercrossing control points or on the territory of Armenia or by the Ministry of Foreign Affairs of the RA at the diplomatic missions and consular posts of the RA. The Ministry of Foreign Affairs of the RA also provides electronic entry visas to foreign citizens. Citizens of certain countries (principally the countries of the former USSR) are not required to have a visa to enter Armenia and stay in the country for up to 180 days during a calendar year.
Armenian entry visas are provided for a period of stay up to 120 days, with the possible extension for a maximum of 60 days, and are issued for single or multiple entries. The following types of Armenian visas are available:
• Visitor visa
• Official visa
• Diplomatic visa
• Transit visa
Currently, at the border-crossing control points of the RA, visa services of the Passport and Visa Department of the Police of the RA issue the following visas only:
• Single-entry, 3-day transit visas
• Single-entry, 21-day visitor visas
• 120-day visitor visas
Electronic visas are valid for entry at all border-crossing points of the RA.
Citizens of the following jurisdictions may apply for Armenian entry visas only to Armenian diplomatic representations or con sular posts abroad and only on the basis of an invitation letter.
Afghanistan Ethiopia Rwanda Algeria Gabon
St. Helena
Angola Gambia Island Bangladesh Ghana São Tomé
Benin Guinea and Príncipe
Botswana Guinea Bissau Saudi Arabia
Burkina Faso Kenya Senegal
Burundi Lesotho Seychelles
Cameroon Liberia Sierra Leone Cape Verde Libya Somalia
Central African Madagascar South Sudan Republic Malawi Sri Lanka Chad Mali Sudan Comoros Mauritania Syria Congo (Democratic Mauritius Tanzania Republic of) Morocco Togo Congo (Republic of) Mozambique Tunisia
Côte d’Ivoire Namibia Uganda Djibouti Nepal Vietnam Egypt Niger Yemen
Equatorial Guinea Nigeria Zambia Eritrea Pakistan Zimbabwe Eswatini Palestinian Authority
Citizens of the above jurisdictions who have an Armenian ances try may obtain an entry visa at the border-crossing control points of Armenia.
Visa application forms are usually processed at the diplomatic missions and consular posts of the RA within three working days. In some cases, additional checking may be required and process ing time can be extended.
F. Work permits
Under the Law of the RA on Foreigners, employers may enter into labor contracts with foreign employees and employ them based on work permits issued by the competent authority. The issuance of work permits to foreign employees is based on the procedures and terms established by Decree N 493-N of the gov ernment of the RA.
The Law of the RA on Foreigners provides that certain categories of foreign citizens are not required to obtain work permits for work in Armenia. These include, among others, the following:
• Foreign nationals having permanent and special residence sta tus in Armenia
• Foreign nationals with a temporary residence permit who are close family members (parents, brothers, sisters, spouses, children, grandparents and grandchildren) of Armenian citizens or foreign citizens having permanent or special residence status in Armenia
• Foreign nationals with a temporary residence permit for a period not exceeding the term of the residence permit if their spouse, child or parent has a temporary residence permit in Armenia
• Employees working close to the border, as well as persons with a specialization in culture and sports who arrive for a short period of time
• Founders, directors or authorized representatives of commercial organizations with foreign capital participation
• Employees of foreign commercial organizations coming to Armenia for the purpose of working in representative offices located in Armenia
• Foreign specialists arriving for a period of not more than six months in order to qualify employees for the installation, repair and utilization of vehicles, equipment and machinery delivered by a foreign trade organization to its branch or representative office or purchased from foreign trade organizations
• Professionals or other persons arriving in Armenia under authority of international agreements
• Lecturers from foreign educational institutions coming to Armenia for the purpose of lectureship in Armenian educa tional institutions
• Certified representatives of foreign organizations practicing journalistic activities
• Foreign citizens and stateless persons who have the status of refugees and have received political asylum with a term not exceeding the period of residence
• Students working within the framework of job exchange for vacation time by virtue of international agreements
• Foreigners who are exempted from the requirement of obtain ing a work permit by virtue of the corresponding international treaties of Armenia
• Highly qualified foreign specialists engaged in professions as defined by the government of Armenia
• In accordance with the law, persons who have the status of a victim or the status of a special victim and legal representatives of victims of a special status
• Foreign convicts or detainees, as well as foreigners who are beneficiaries of probation
• Foreign athletes who have a professional status and have signed a contract on sports activities, including an employment contract with an employer
• Close family members of employees of authorized diplomatic missions, consular posts, international organizations and their representations in Armenia, on the basis of mutuality
G. Residence permits
The types of residence status provided by the Law of the RA on Foreigners are described below.
The Passport and Visa Department of the Police of the RA grants temporary residence status to the following foreign citizens:
• Individuals studying in Armenia
• Individuals having a work permit in Armenia
• An individual who is spouse, parent or child of a foreigner hav ing temporary residence status in Armenia
• An individual who is spouse or a close family member (parent, brother, sister, child, grandmother, grandfather or grandchild) of a citizen of Armenia or of a foreigner having permanent or special residence status in Armenia
• Individuals engaged in entrepreneurial activities in Armenia
• Individuals of Armenian ancestry
Temporary residence status is granted for up to a one-year term with possible extension periods of one year per extension.
Permanent residence status is granted by the Passport and Visa Department of the Police of the RA to a foreign citizen who satis fies all of the following conditions:
• The individual proves the presence of a spouse or a close fam ily member (parent, brother, sister, child, grandmother, grand parent or grandchild) in Armenia who is a citizen of Armenia or has special residence status in Armenia.
• The individual is provided with housing and means for living in Armenia.
• The individual has been legally residing in Armenia for at least three years before submitting an application for permanent resi dence status.
Permanent residence status can also be granted to a foreigner of Armenian ancestry as well as to a foreigner engaged in entrepreneurial activities in Armenia.
Permanent residence status is granted for a five-year term with possible extensions of five years per extension.
The Prime Minister of Armenia may grant special residence sta tus to foreign citizens of Armenian ancestry and to foreign citi zens who are engaged in economic or cultural activities in Armenia. The special residency status is granted for a 10-year term. It can be granted several times.
The documents establishing types of residence status in Armenia described above are temporary or permanent residence certificates and special passports.
H. Driver’s permits
A foreign national with an international driver’s license may legally drive in Armenia using this license. Citizens of Common wealth of Independent States (CIS) countries may drive legally in Armenia with their home-country driver’s licenses for up to one year. A foreigner may obtain an Armenian driver’s license after passing written and practical examinations.