Taxes in Armenia
Foreign entrepreneurs and investors value the rapidity of economic reforms, the safety, freedom, and openness that Armenia offers. Many prefer to visit Armenia in person and register a business as a first step to enter the market.
Micro-businesses, companies operating within free economic zones, industrial zones, select border towns, and villages can benefit from a zero-tax status. Similarly, smaller businesses with annual sales under approximately $280,000 are subject to a nominal sales (turnover) tax, ranging from 1.5% to 5%. Remarkably, Armenia follows a lenient tax policy regarding individual capital gains from the sale of securities, real estate, and various assets. Additionally, insurance and pension payments are exempt from taxation, as are gifts, inheritances, and net worth.
Navigating Armenia's business landscape can be greatly simplified with the assistance of a knowledgeable local lawyer. These experts play a pivotal role in minimizing potential risks through meticulous compliance with tax, labor, and immigration regulations. By harnessing their expertise, businesses can adeptly sidestep potential pitfalls while capitalizing on tax benefits and government assistance programs.
Overview of Taxes in Armenia
Business Tax Options
Examine the various tax regimes for businesses in Armenia.
Investigate the payroll taxes withheld by the employers.
Explore the taxes for import-export business activities.
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Legal & Compliance
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Business Tax Options
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.
By default, businesses are subject to the general tax regime, which includes an 18% corporate income tax (CIT) and a 20% value-added tax (VAT). VAT is reduced to 0% for goods or services that are exported. Under this regime, CIT returns are filed annually, while VAT returns must be submitted on a monthly basis.
Turnover tax is a form of a sales tax, with rates typically ranging from 1.5% to 5%. It serves as a replacement for both CIT and VAT. However, this tax regime is only available to small businesses with annual sales totaling less than AMD 115 million (approximately $280,000). Turnover tax returns are filed quarterly.
Micro-businesses, defined as those with annual sales below AMD 24 million (about $62,000), enjoy exemptions from both CIT and VAT. It's important to note that certain businesses, such as those located in the capital city of Yerevan and various service sectors, are excluded from this tax system and cannot take advantage of these exemptions.
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.
Armenian companies may be subject to various taxes based on their specific business activities. These taxes can include excise tax, environmental tax, road tax, as well as real estate and vehicle property taxes.
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What Makes Armenia a Good Choice for Residency
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The residency application usually takes about 80 days and only a valid passport is required.
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