The Armenian tax legislation specifies that Armenian-sourced income consists of income directly paid by Armenian entities as well as income resulting from activities performed in Armenia.
The Republic of Armenia (RA) law “On income tax” was adopted by RA National Assembly, which is effective from 01 January 2013. The law replaced the existing laws “On income tax” and “On Mandatory social security payments (SSP)”. and defines “new income tax” instead of previous income tax and SSP.
The adoption of the Law was conditioned by the adoption of funded pension schemes in Armenia, which has voluntary and mandatory components. The mandatory part had to be effective starting from 2014 and was obligatory for individuals born in/after 1974. However, effective from 01 July 2014, the following major changes have been made in the RA Law “On funded pensions”:
Currently the minimum monthly net salary is AMD 55,000.
However the above threshold should be applied starting from 01 July 2020. Up to 01 July 2020 the maximum monthly threshold of basic income is established AMD 500,000. Meanwhile the person, who as at 01 July 2014 has been in employment relationship with an employer registered in Armenia, has the right to refuse of making social payments up to 01 July 2017 by submitting a relevant application. Otherwise, the employee is subject to social contributions starting from 01 July 2014.
The purpose of the scheme is to establish that employees also receive pension income directly connected to the size of contributions to the pension fund besides the state pension. Voluntary cumulative pension contributions performed by the individual and (or) a third party (including employer) are deducted from the gross income in the amount not exceeding 5 percent of the gross income of the individual this provision is effective from 1 January 2011).
Income tax payers are resident and non-resident individuals of RA, including individual entrepreneurs and notaries.
For the purposes of the law, an individual that, during any 12-month period starting or ending in a tax year (from 1 January to 31 December inclusive) has been residing in the RA for a total duration of 183 days or more, or whose center of vital interests is in the RA, as well as an individual in the civil service of the RA who is temporarily working outside the territory of the RA, shall be considered a resident.
The center of a person’s vital interests is the place where a person’s family or economic interests are located. Interests of a person shall be deemed, in particular, to be located in the RA, provided the house or apartment where the person’s family resides is therein, or the principal personal or family property, as well as the principal place of implementation of the economic (professional) activity is located therein.
For residents, taxable income received within or outside the territory of the RA is considered the object of taxation. For a non-resident, taxable income received from Armenian sources is considered the object of taxation.
The Armenian tax legislation places no minimum threshold with respect to when the individuals begin to have tax obligations in the country. Thus, from an Armenian perspective, personal income tax is levied from the 1st day during which work is performed in Armenia. In the case of income received from tax agents, it is taxed at the source of payment. For residents receiving income from non-tax agents, income tax is paid annually based on declaration.
Generally, all types of income (monetary and/or nonmonetary) are subject to personal income tax in Armenia unless specifically exempted. In view of this the following categories of income will be treated as taxable:
Wages and salaries of Armenian citizens, foreign citizens, and persons without citizenship are taxed at graduated income tax rates ranging from 24.4 to 36 percent. Income from receipt of pensions from the amount of voluntary funded insurance scheme, royalties, leasing, and interest received by Armenian citizens are subject to income tax at 10 percent, without making any deductions from ncome received.
The following types of income for foreign citizens or persons without citizenship are subject to income tax, which should be withheld at the source through a tax agent.
|Type of income||Rate|
|Insurance reimbursements and income
from transportation (freight) Royalties, interests, lease payments.
|An increase in the value of property and other passive income, as well as other income received from Armenian sources.
In case the income received from rent exceeds AMD 58.35 mln. the individuals are subject to additional 10 % income tax on amount exceeding the threshold without considering any deductions, including taxes paid by tax agent. Individual entrepreneurs have to file and submit to the tax authorities an annual declaration of business income and expenses exclusively electronically by 15 April in the following year.
Taxpayers (namely who were engaged in business activities) have to file an Annual Income Tax Declaration of business income and expenses by 15 April of the following year.
The resident individuals receiving income from sources other than Armenian legal entities shall pay the income tax through self-declaration and submit an Annual Income Tax Declaration by 15 April of the following year.
Employers are required to calculate and withhold income tax on a monthly basis from their employees’ salaries and transfer these amounts to the state budget, no later than the 20th day of the month following the month of calculation.
Employers submit reports on income tax exclusively electronically on a monthly basis.
Armenia has entered into double tax treaties with approximately 41 countries to prevent double taxation and allow cooperation between Armenian and other tax authorities in enforcing their respective tax laws.
Armenian domestic legislation does not contain a provision according to which an entity must have a permanent establishment (PE) for the purposes of exercising business activities in Armenia. The definition of PE is applied with respect to double tax treaties (DTT) only, and the PE is the base for the determination whether the income received by the resident of a contractual state is subject to taxation on the source basis or the residency basis under the DTT provisions.
There is the potential that a PE could be created as a result of extended business travel, but this would be dependent on the type of activities/services performed and the level of authority the employee has, as well as the provisions of the relevant tax treaty.
Value-added tax (VAT) is applicable at 20 percent for taxable turnover.
In January 2013 by the legislative initiative of the RA Government draft Law on Transfer Pricing was presented for the discussion by the RA National Assembly. On 18 January 2014 the edited version of the draft Law was included in the agenda of the session and was adopted at the first reading on 20 June 2014. The law is applicable to the taxpayers, whose
In case the tax payer conducts a controlled transaction the taxable income and royalty of the tax payer is determined based on “arm’s length transaction” principle.
However the law is not fully adopted and is not effective yet. Meanwhile there is a provision in RA Law “On taxes” according to which, if the transaction is considered as being performed without keeping the arm’s-length principle, the potential risks with respect to the indirect calculation of tax liabilities will exist.
As a general rule, a visa is required for visiting Armenia. There are some countries with which Armenia has a non-visa regime (mainly Commonwealth of Independent States (CIS) countries). Starting from 10 January 2013 no entry visa will be required for EU member state citizens as well as citizens of Iceland, Lichtenstein, Norway and Switzerland to visit Armenia.
Where a visa is required, it must be applied for before the individual enters Armenia (in consulate bodies or electronically), or on the crossing points of the Armenian border (e.g. airport). Documents required for a visa and the type of visa will depend on the individual’s country of citizenship and the purpose of the individual’s entry into Armenia. Visas entitle the person to stay in Armenia for 120 days with the option to extend its term for 60. To stay in Armenia for longer periods, a residence permit should be obtained.
Currently work permits are not required for foreign citizens to work in Armenia, however there are plans to apply the requirement for work permits in future.
Armenia has data privacy legislation. As a general rule, processing of the personal data of an individual is permitted only on the basis of their consent.
Armenia does not restrict the flow of Armenian or foreign currency into or out of the country. Certain reporting obligations are imposed, however, to control money laundering. Certain limitations on the amount of importing and exporting of cash without customs declaration are applied (for export – the limit is equivalent to 5 million Armenian dram (AMD) (approximately 10,000 euros (EUR)), for import – the limit is equivalent to EUR15,000).
If the expense-supported documentation is properly kept, the Armenian tax legislation does not prescribe any limitation for assignees’ cost deduction.
As businesses become increasingly global, we have witnessed a dramatic rise in the number of business travelers now working in foreign jurisdictions.