Armenia: Business Environment

Company Tax

18%

Tax Rate For Foreign Companies

Non-resident companies are subject to the same tax treatment as resident firms but are only imposed on their Armenia-source income. Non-resident firms are exempt from tax on interest gains deriving from Armenian government bonds in foreign currency and on income derived from the sale and exchange of such bonds.
Resident entities, registered permanent establishments, and individual entrepreneurs are required to withhold income tax at source on payments to non-residents not having a registered PE in Armenia.

In general, the domestic interpretation of the Permanent Establishment (PE) aligns with the definition found in the OECD Model Tax Convention. Specifically, a non-resident's PE in Armenia refers to a registered place of business with the tax authorities, through which the non-resident conducts business activities in Armenia, regardless of the duration of those activities.

Capital Gains Taxation

Capital gains are taxed at the ordinary corporate income tax rate of 18%. Non-residents are taxable on the realised capital gains from the increase in the value of the assets located in Armenia.
Capital gains derived by a non-resident firm from the sale of securities are exempt.

Main Allowable Deductions and Tax Credits

Documented expenses incurred in the course of business activities are generally deductible.
Depreciation of tangible and intangible assets is tax-deductible (except for land). Goodwill cannot be amortised for tax purposes.
Start-up and interest expenses are generally tax-deductible. The portion of interest exceeding the double of the settlement rate fixed by the Central Bank of Armenia on December 31st of the taxation year is not deductible (the current rate is 24%). Rental payments and bad debts are also deductible. Receivables that are not collected between 91 and 180 days after their cut-off date are deductible by 25%. The rate is 50% for outstanding debts between 181 and 270 days after the cut-off date and 75% between 271 and 365 days. Debt deductibility is capped at AMD 100,000. Larger claims must be settled through the legal process.
Donations to charitable organisations are deductible up to 0.25% of gross income. Expenses for business trips outside Armenia are limited to 5% of the gross income of the tax year. Representative expenses are limited to 0.5% of the gross income of the reporting year or AMD 5 million, whichever is lower. Expenses on management services received from non-resident companies or individuals are limited to 2% of the gross income of the reporting year. Funded contributions made within the framework of the voluntary funded pension scheme are limited to 7.5% of the salary of the employee.
Commercial fines are tax-deductible, as opposed to those paid to municipal or national authorities. Non-refundable taxes are deductible.
Certain IT companies as well as income from agricultural activities and tapestry are exempt from corporation tax.
Tax losses can be carried forward up to five years. The carryback of losses is not permitted.

Other Corporate Taxes

Employers are not required to contribute to social security. Nonetheless, they are required to withhold social contributions from the monthly employment income according to progressive rates (4.5% of the monthly gross income up to AMD 500,000; above this threshold, 10% of the monthly gross income minus AMD 27,500). The pension contribution calculation is limited to a maximum threshold of AMD 1,125,000.
SMEs are subject to a turnover tax that replaces VAT and corporation tax. Rates vary between 3.5% (a reduced rate of 1.5% applies to the sale of secondary raw materials and newspapers by publishing companies) and 25% depending on the type of income and apply to any SME with an annual turnover below AMD 115 million.
Starting from 1 January 2021 the taxes on immovable property and vehicle property came into force and replaced the law on property tax and land tax. The immovable property tax is assessed and collected at the municipal level on the buildings, lands and their improvements. The value of the land is determined according to the land cadaster. Tax on land tax for agricultural land is calculated at 15% of the net income determined by the cadastral evaluation (in the case of non-agricultural land, the rate is 0.25% to 1.0% of the cadastral value). The cadastral value should be assessed based on the value close to the market value. The tax rate on public importance buildings is set at 35% from its cadastral value multiplied by 0.3% in 2023 (the percentage of the cadastral value increases to 50%, 75%, and 100% in 2024, 2025, and 2026, respectively).
The taxes on vehicles depend on the number of seats and horsepower.

Other Domestic Resources

Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Tax Rate

Allowable Deductions and Tax Credits

Individual taxpayers enjoy the following deductions:
- Paid benefits
- Pension and insurance benefits
- Insurance premiums (paid by employers on behalf of their employees - up to AMD 10,000 per month)
- Amounts of single-sum assistance in case of an employee’s (or family member’s) death
- Work, service or assets received free of charge from non-commercial organisations
- Monetary prizes received at competitions (up to AMD 50,000 per prize).

Special Expatriate Tax Regime

Residents are taxed on their worldwide income whereas non-residents are only taxed on their Armenia-sourced income.

In order to be considered tax residents in Armenia, individuals must fulfill at least one of the following conditions:

• they are physically present in Armenia for 183 days or more within the tax year, spanning from 1st January to 31st December
• their centereof vital interest is located in Armenia
• they are employed in the civil service of Armenia.

Individuals who do not meet any of these criteria are classified as non-residents.