Gratuitous or partially compensated transactions in Armenia are subject to full VAT taxation based on the real (market) value of the goods and services provided. Article 6(3) of the Law on VAT. If the goods (services) are sold at a price which is substantially lower than the normal price, the transaction shall be treated as a partially compensated (or gratuitous) transaction and the VAT will be levied on the real (market) value rather than the invoice value. Article 6(3) of the Law on VAT. “Substantially lower” means lower by 20% or more than the real value of the transaction. Article 8(6) of the Law on VAT. If the transaction is gratuitous or partially compensated the taxable amount shall be equal to 80% of the real value of identical goods (services) provided by the same taxpayer (or another taxpayer if there is insufficient data). Article 8(6) of the Law on VAT.
To establish the existence of a substantially lower price the State Revenue Committee has to use special “measurement” procedures or information received from third parties. Court of Cassation in VD/5276/05/09.
In case of real estate transactions the minimum price for VAT purposes shall be the cadastral value of the real property. Court of Cassation in VD/3112/05/08.
The Court of Cassation clarified that the parties to a contract are free to fix any price they wish, including a price substantially lower than the real value. However , for purposes of taxation the State Revenue Committee shall determine the real value of the transaction by comparing identical transactions in comparable circumstances. Court of Cassation in VD/0457/08/09.
This rule on adjustment of prices for VAT purposes does not apply if the taxpayer notifies the State Revenue Committee at least two business days in advance of its intention to sell goods and services at a discount. Article 8(6) of the Law on VAT. The form of the notification was approved by the State Revenue Committee and is available online.
