Tax laws Armenia
Armenia has a progressive tax system that includes a mix of personal income taxes, corporate taxes, and indirect taxes, with a strong focus on attracting foreign investment and supporting economic growth. Below is an overview of the tax laws in Armenia:
1. Personal Income Tax
Personal Income Tax (PIT) in Armenia is progressive and applies to residents on their worldwide income. Non-residents are taxed only on income sourced from Armenia.
- Flat Rate: Armenia uses a flat income tax rate for individuals, which is set at 23% for income exceeding a specific threshold.
- Income Tax Rates:
- For individuals earning up to 150,000 AMD per month (approximately USD 310), a 23% tax is applied.
- Higher income earners above this threshold are still subject to the same 23% flat rate.
Additionally, social security contributions are mandatory, both for employees and employers:
- Employee contribution: 5% for pensions and 3% for health insurance.
- Employer contribution: 5% for pensions and 3% for health insurance.
2. Corporate Income Tax
Corporate Income Tax (CIT) in Armenia is applied to companies based in Armenia. Armenian companies are taxed on their worldwide income, while foreign companies are taxed only on income earned in Armenia.
- The corporate tax rate is set at 18% on taxable income. However, certain businesses can benefit from reduced rates or tax incentives, especially in sectors that promote economic growth, such as technology, tourism, and renewable energy.
Companies are also subject to property taxes, land taxes, and social security contributions for their employees.
3. Value Added Tax (VAT)
- Armenia imposes a Value Added Tax (VAT) on most goods and services, with the standard rate set at 20%.
- Certain goods and services, such as basic foodstuffs, medical supplies, and educational services, are exempt or subject to a zero-rate.
- Businesses with an annual turnover exceeding a specific threshold are required to register for VAT and file monthly VAT returns.
4. Property Taxes
- Property Tax is levied on both residential and commercial properties.
- The tax is calculated based on the cadastral value of the property (the market value as estimated by the authorities), and the rate can vary depending on the property’s location, size, and value.
5. Capital Gains Tax
- Armenia does not impose a specific capital gains tax on the sale of real estate or other assets. However, capital gains may be treated as ordinary income and subject to the standard income tax rate if they are related to a business or income-generating activity.
6. Withholding Tax
Armenia applies withholding taxes on specific types of income paid to foreign entities or individuals, such as dividends, interest, and royalties.
- Dividends: 10% withholding tax is applied to dividends paid to non-residents.
- Interest: 10% withholding tax on interest paid to non-residents.
- Royalties: 10% withholding tax on royalties paid to non-residents.
7. Social Security Contributions
- Social Security Contributions are mandatory for both employers and employees in Armenia.
- The employee’s contribution is 5% for pensions and 3% for health insurance.
- The employer’s contribution is 5% for pensions and 3% for health insurance.
8. Inheritance and Estate Tax
- Armenia does not have an inheritance tax or estate tax, which makes it a favorable jurisdiction for estate planning.
- However, there may be tax obligations for the transfer of assets depending on the nature of the property and the relationship between the deceased and the heir.
9. Environmental Taxes
- Armenia imposes various environmental taxes related to activities that impact the environment, such as pollution or waste disposal.
- These include taxes on emissions, waste management, and the use of natural resources, designed to encourage sustainable practices and limit environmental harm.
10. Customs Duties
- Customs duties are applied to goods imported into Armenia, with rates depending on the type of goods being imported.
- Customs duties generally range from 5% to 30%, but some essential goods like foodstuffs and medicines may be exempt or subject to lower rates.
11. Double Taxation Treaties
- Armenia has entered into several double taxation treaties (DTTs) with countries such as Russia, Germany, France, and the United States. These treaties generally allow individuals and companies to avoid being taxed twice on the same income and provide for reduced withholding tax rates on dividends, interest, and royalties.
12. Tax Incentives
- Armenia offers tax incentives for certain industries and activities, particularly those related to:
- High-tech and information technology (IT) businesses, which are eligible for tax holidays or reduced corporate tax rates.
- Export-oriented businesses, which may benefit from tax exemptions or reduced VAT rates.
- Special economic zones (SEZs) that offer customs duty exemptions and reduced tax rates for businesses operating in targeted sectors like manufacturing, tourism, and agriculture.
13. Tax Filing and Compliance
- Corporate tax returns must be filed annually, and businesses are required to keep accurate accounting records to comply with Armenian tax laws.
- VAT returns must be filed monthly, and businesses are required to report sales and purchases subject to VAT.
- Personal income tax returns are generally not required, except for self-employed individuals or those earning income from sources that are not subject to withholding tax.
Conclusion
Armenia offers a relatively straightforward tax system with a flat personal income tax rate of 23% and a corporate tax rate of 18%. The country’s tax laws are designed to encourage investment, particularly in sectors like technology, tourism, and manufacturing, through tax incentives and special economic zones. While there are social security contributions, customs duties, and VAT, Armenia remains an attractive jurisdiction for businesses and individuals seeking tax efficiency, with the added benefit of no inheritance tax and favorable tax treaties.
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