Foreign nationals can own real estate in Armenia. There is no need to have a residence permit or otherwise show any links to Armenia. The only restriction applies to foreign ownership of land. In order to own land in Armenia a foreigner will have to obtain a special residency status or set up a legal entity and acquire land in the name of that entity. Foreigners can acquire, hold, lease, sell, bequest and otherwise dispose of the property.
The transfer of ownership is done by signing a written contract of sale with detailed description of the property and purchase price. The contract has to be authenticated by a notary public. In certain cases an employee of the Cadastre (the Registry) can authenticate the contract. The buyer then has 30 days to register the ownership rights with the Cadastre. The failure to register will result in invalidation of the transaction.
It is customary to sign a preliminary agreement by which the seller agrees to take the property off the market for an agreed period of time in return for a small advance payment. If the buyer then fails to sign the main contract the advance payment will be forfeited. If the seller defaults he will be required to return the advance payment and pay a penalty.
Buyers and sellers can be represented by attorneys, their physical presence is not required.
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Managing Legal Risks
Title search and title insurance are not common practices in Armenia. However, the sales contract can be authenticated only after a certificate is issued by the Cadastre confirming that the property in question is not mortgaged, under arrest or otherwise subject to third party rights. Armenia is ranked very high (13th) by the World Bank in both quality and efficiency of property registration.
Several banks offer escrow account services which enable the buyer to deposit the funds with the bank and have them transferred to the seller only after the transaction is completed and a new ownership certificate is issued to the buyer.
The risks involved in buying property in Armenia normally relate to one of the following factors:
- Third party rights, including creditors, former owners, spouses and ex-spouses of sellers, heirs, children etc.
- Tax liabilities and maintenance fees
- Multiple owners, validity of representation with power of attorney
- Building permits
There is no stamp duty for real estate transactions in Armenia.
Personal income tax
Normally transfer of real property between individuals is not taxable provided that both the buyer and the seller are individuals and are not registered as private entrepreneurs. Thus, tax on capital gains realized by individuals form selling real estate is 0%. However, if either party is a legal entity or a private entrepreneur a withholding tax of 10% is applicable.
Moreover, a 10% tax is applicable to re-selling (“flipping”) of a real estate if it is sold within one year of its acquisition. Sale of property for commercial, industrial or public use is taxed at a rate of 10% or, if the buyer is a legal entity or private entrepreneur, at a rate of 20%.
Individual real estate developers are taxable at 20% of the sales price.
Corporate income tax
A legal entity selling real property at profit is subject to profit tax. The single profit tax rate in Armenia is 20%. Therefore, capital gains from selling appreciated property are generally taxed at 20%.
Small and medium enterprises with annual turnover not exceeding AMD 58.35 million (approx. USD 120,000) may opt to be taxed with turnover tax. The turnover tax rate for selling real property is 10%.
Value Added Tax
Value added tax (VAT) is applicable only to legal entities and private entrepreneurs. Sale of real property is treated as supply of goods and therefore is subject to VAT of 20%. Legal entities and private entrepreneurs are normally exempted from VAT if their annual turnover does not exceed AMD 58.35 million (approx. USD 120,000) and they opt to be taxed with turnover tax.
Real Estate Tax
The real estate tax is payable by the owner or the real property on an annual basis. Tax rates are in the range of 0% to 1% of the cadastral value which is normally significantly lower than the market value. Where the real property is sold by an individual the new owner assumes liability for any unpaid property tax.
Tax on rental income – 10%
Gifts tax – 0%
Inheritance tax – 0%
The parties shall decide on who will bear the costs of registration, which typically is around $200. Official fees are fixed and do not depend on the value of the property. Fast-track services are also available for additional fees.
|Fee for authentication by notary public||$21-31|
|Notarization state duty||$10|
|Cadastre fee for certificate of free title||$21|
|State duty for conveyance registration||$41|
|Cadastre fee for property rights registration||$52|
The law requires the seller and the buyer to make payments in Armenian drams. In practice, payments in cash are normally made in U.S. dollars.
Normally a valid ID document (e.g. passport) will be sufficient. If you are married you may also need your marriage certificate.
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