The Tax Legislation of Republic of Armenia offers tax benefits for many types of economic activities for both resident and non-resident taxpayers. Some of the most notable tax benefits include the benefits defined by the law on State Support of IT Sphere, the recent changes to the law on Profit tax, and the tax exemption of economic activities in frontier rural communities.
The tax benefits include the following:
family owned businesses are free of all State taxes (e.g. profit tax, income tax, VAT), as well as the obligation of providing a report about the volume and prices of services and goods provided, and personal income tax for each employee is paid at the fixed rate of 5000 AMD.
Handmade carpets manufacturers are free of profit tax, personal income tax, and VAT for the income obtained from the production and realization of handmade carpets.
For IT companies licensed and operating under the law on Sate Support of IT Sphere, the income obtained from the realization of of the IT products is considered deductible income which is not a part of taxpayer’s gross income. These IT companies calculate the personal income tax from the salaries of their employees at the rate of 10%.
Resident tax business entities operating exclusively abroad and performing construction and installation works pay profit tax at the rate of 5%. Their resident employees pay personal income tax at the rate of 13%.
Profit tax for resident taxpayers that engage exclusively in exporting activities is accounted at the rate of 5% if the cost of exported goods is over 40 billion AMD annually, and 2%, if the cost is more than 50 billion AMD.
Personal income tax from the income obtained from rented property is calculated at the rate of 10% if the annual income exceeds 58,35 million AMD. These benefits apply only to natural persons who are not individual entrepreneurs or notary.
The realization of agricultural products is free of profit tax if the taxpayer’s other income is not more than 10% of their gross income. Additionally, the income obtained from the realization of agricultural production is considered deductible income if other types of income are not more than 10 % of the taxpayer’s gross income.
For resident taxpayers, income obtained in free economic zones is 100% deductible from profit tax. Non-residents’ income obtained in free economic zones is not taxable by RA.
Economic activities (retail trade, production of goods (regardless of their places of realization), activities defined by the law on License Fees) in frontier rural communities are tax exempt:
Income obtained by retailers is free of turnover tax, and the retailers don’t pay personal income tax.
taxpayers engaged in production activities are free of turnover, profit, and personal income taxes for the income obtained from the realization of their products, the sales transactions are VAT exempt.
Businesses engaging in activities defined by the law on License Fees don’t pay license fees and are free of personal income tax.
For taxpayers importing goods defined in the 6th article of law on VAT, the VAT payment deadline can be delayed for 1, 2, and 3 years, depending on the cost of imported goods (< 70 million AMD, > 70 million AMD, and > 300 million AMD, respectively). Aside from the goods defined in the aforementioned article, Government-approved individual entrepreneurs and organizations can get a 3 year VAT payment deadline delay for goods imported under investment programs.
To be eligible for special turnover tax regime, the taxpayer’s annual income must be below the turnover tax threshold. As of now, the threshold for turnover tax is 58,35 million AMD annually, but the amendments going into effect July 1st, 2015 change that number to 115,0 million AMD. The tax rates for turnover tax in Armenia are 1% for trading activities (the amendments will also change that rate from 1% to 5%, but give the taxpayers the ability to deduct expenses from it in a sum equal to up to 4% of it), 3,5% for production of goods, 10% for income obtained from lease, royalties, interest, 20% for notary activities, and 5% for other type of income.
Turnover taxpayers and taxpayers engaging in activities defined in the Appendix #7 of the law on License Fees pay personal income tax in the sum of 5000 AMD monthly. Taxpayers engaging in activities defined in the Appendix #1 of the law on License Fees are free of personal income tax.
Resident companies that meet a list of requirements defined by the law on Profit tax, can deduct 50% of their profit tax but no more than 300 million AMD for each accounted year. These requirements are:
listed ordinary shares in stock Exchange before December 31st, 2012,
write and publish their financial reports according to IFRS,
their annual median number of shareholders is more than 100,
20% or more of its shares belong to public shareholders (a list of persons regarded as public shareholders is defined by the law).
For the two years following the year of starting their activities, residents operating under a Government-approved business plan can deduct from profit tax 100% of the salaries and equaled to it payments made, but no more than 30% of the accounted profit tax.
Salaries paid to disabled employees are deductible from taxpayer’s gross income in the amount equal to 150% of paid sums.
In Gyumri and Disaster area the minimum depreciation period for assets defined by the law is 1 year, the depreciation tax deduction is done at the rate of 100% of the cost of the assets.
The following activities are VAT exempt:
tuition for secondary schools, children’s creative and cultural centres, musical, painting, art, sports schools, secondary professional and higher educational qualification,
sales of copy-books, drawing albums, music books, children’s and school literature, educational publications, scientific and research works, scientific and educational editions,
sales of newspapers and magazines,
insurance and reinsurance operations,
financial operations and transactions carried out by banks, credit organizations, and securities market specialized entities,
sales of prosthetic and orthopedic items, medical assistance services
realization of precious and semiprecious stones, precious metals and jewelry made of precious metals,
import of cultural values to RA,
realization of tobacco products by entities that are neither tobacco manufacturers nor importers,
Internet gambling, operation of casinos, gambling machines,
import and sales of diesel fuel,
goods and services provided to entities operating in free economic zones,
transactions within the framework of humanitarian assistance and charitable projects,
other goods included in the list of imported goods exempted from VAT (agricultural products, ores and concentrates, fuel, machinery, medical items, etc.).