Taxes in Armenia

In Armenia, taxation varies based on the size of the business. Medium and large businesses adhere to standard tax rates, whereas smaller enterprises can benefit from special tax regimes designed to alleviate both the tax burden and paperwork.

Companies can opt for turnover tax or micro-business regimes within 20 calendar days following the registration of the company. 

Employers are required to withhold both personal income tax (PIT) and social security contributions. This encompasses various forms of income such as salaries, benefits, bonuses, temporary disability compensation, and maternity leave compensation. As of 2023, a uniform personal income tax rate of 20% applies to all forms of compensation, regardless of the amount involved.

Apart from PIT, employers are also responsible for deducting social security payments. The rate for these payments stands at 5% for income up to 500,000 AMD (approximately $1,309) and 10% deducted 25,000 AMD for income exceeding this threshold. It's important to be aware that there's a maximum salary limit for social security payments, currently capped at 1,125,000 AMD per month (equivalent to 15 times the minimum monthly wage of 75,000 AMD).

Military taxes (contributions to the insurance foundation of servicemen) are withheld in the following manner:

• 1,500 AMD ($4) for salaries of up to 100,000 AMD ($261)
• 3,000 AMD ($8) for salaries of 100,000-200,000 AMD ($523)
• 5,500 AMD ($14) for salaries of 200,000-500,000 AMD ($1,309)
• 8,500 AMD ($22) for salaries of 500,000-1,000,000 AMD ($2,619)
• 15,000 AMD ($39) for salaries in excess of 1,000,000 AMD ($2,619)

It's important to note that social security payments and military taxes are obligations that exclusively apply to Armenian citizens and residents (i.e. individuals holding residence permits). Generally, those born before 1974 enjoy an exemption from social security payments.

For instance, in the tax year 2023, consider an employee earning a monthly salary of AMD 600,000 (equivalent to $1,571). This individual will be subject to a flat income tax rate of 20% on their entire income, amounting to income tax of AMD 120,000 (approximately $314). Furthermore, the employee will be liable for social security payments totaling 35,000 AMD (around $91) and an additional military tax of 8,500 AMD (approximately $22). Consequently, the after-tax income for this individual will be AMD 436,500 (calculated as 600,000 - 120,000 - 35,000 - 8,500), which is equivalent to $1143. This results in an overall tax burden of approximately 27%.

In Armenia, typically, there's a 20% Value Added Tax (VAT) applied to imported goods, although some goods enjoy exemptions from this tax. Notably, for goods imported under government-approved projects, there's an option to defer VAT payments for a period of up to three years.

Moreover, Armenia is part of the Eurasian Economic Union (EAEU), which includes countries such as Russia, Belarus, Kazakhstan, and Kyrgyzstan. Importantly, goods imported from these EAEU member countries are exempt from import duties. However, when importing goods from countries outside the EAEU, import duties are imposed based on rates set by the EAEU Commission.