Foreign Ownership

Foreign nationals are allowed to own real estate in Armenia. There is no need to have a residence permit or otherwise show any links to Armenia. On the other hand, owning property in Armenia can be a legal basis for obtaining a temporary or permanent residence permit. Foreigners can acquire, hold, lease, sell, bequest and otherwise dispose of their property.

The only restriction applies to foreign ownership of agricultural land. In order to own agricultural land in Armenia a foreigner will have to set up a legal entity and acquire land in the name of that entity. Agricultural land can also be owned by foreigners who have special residency status in Armenia.

Buying/Selling Process

The transfer of ownership is done by signing a written contract of sale with detailed description of the property and purchase price. Normally the contract must be reviewed and 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 his ownership rights with the Cadastre. The failure to register these rights within 30 days 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 in Armenia is not required to complete the formalities.

Armenia ranks very high – the 13th – among 190 countries on the World Bank’s “Registering Property” index which measures both the efficiency and the quality of the property registration system. By way of comparison, the U.S. ranks 36th, the U.K. – 47th, , France – 100th.

Managing Legal Risks

Because all deed records are kept in a single database and in computerized format  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 encumbered by third party rights.

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:

• Claims by third parties, such as creditors, former owners, their spouses, ex-spouses, children and heirs

• Outstanding tax liabilities and maintenance fees

• Actions in bad faith of the agents having a power of attorney

• Insolvency of the real estate developer

• Bankruptcy of the former owner (preferential and fraudulent transfers)

• Issues with building permits and unauthorized constructions

Taxation

Stamp duty

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.

Other Taxes

Tax on rental income – 10%

Gifts tax – 0%

Inheritance tax – 0%

Notary & Government Fees

The buyer and the seller shall agree 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.

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