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Armenia - Income Tax

Armenia - Income Tax

Taxation of international executives

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Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

20 April.

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in Armenia?

Residents

Employers are required to calculate income tax on a monthly basis from their employees’ salaries and transfer these amounts to the state budget, no later than the 20th day of the month following the month of calculation.

The Armenian resident individual receiving the income from sources other than Armenian legal entities shall declare it to the tax authorities and shall pay the tax themselves.

Non-residents

Income tax on income received by non-residents from tax agents is normally withheld at the source.

Amounts withheld (imposed) by a tax agent shall be considered as the final amount of the income tax for non-residents.

Non-residents will have an obligation to submit an Annual Income Tax Return only in the event they receive an income from Armenian sources but not through tax agents.

Tax rates

What are the current income tax rates for residents and non-residents in Armenia?

Residents

Income tax rate on wages and salaries of Armenian citizens, foreign citizens, and persons without citizenship starting 1 January 2020 is 23 percent.

According to the amendments to the RA Tax Code the income tax rate will decrease in the next years with the following sizes:

Period

Income tax rate

From 1 January 2021

22%

From 1 January 2022

21%

From 1 January 2023

20%

Non-residents

The same rates of income tax are applicable for non-residents.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Armenia?

The Tax Code provides that the following persons shall be deemed to be tax residents.

  • Individuals, who, during tax year (from 1 January to 31 December, inclusive), totally has spent 183 days or more in the Republic of Armenia (RA).
  • Individuals, whose center of vital interests are in the RA1.
  • Individuals, who are in the civil service of the RA, but are temporarily working outside Armenia.

Is there, a de minimum number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country/jurisdiction for more than 10 days after their assignment is over and they repatriate.

No.

What if the assignee enters the country/jurisdiction before their assignment begins?

No special implications. The residency of the assignee does not depend on the beginning of the assignment.

Termination of residence

Are there any tax compliance requirements when leaving Armenia?

There are no special requirements upon leaving the country/jurisdiction. In case of residency, the Annual Income Tax Return should be submitted for the tax year.
What if the assignee comes back for a trip after residency has terminated?

No special implications.

Economic employer approach

Do the taxation authorities in Armenia adopt the economic employer approach to interpreting Article 15 of the Organisation for Economic Co-operation and Development (OECD) treaty? If no, are the taxation authorities in Armenia2

The Economic Employer approach is not adopted by Armenian tax authorities.

Communication between immigration and taxation authorities

Do the immigration authorities in Armenia provide information to the local taxation authorities regarding when a person enters or leaves Armenia?

Yes (on a case-to-case basis).

Filing requirements

Will an assignee have a filing requirement in the host country/jurisdiction after they leave the country/jurisdiction and repatriate?

Being treated as tax resident in Armenia, the assignee will have an obligation to submit Annual Income Tax Return in host country/jurisdiction (Armenia) for tax year.

De minimus number of days

Are there a de minimum number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimum number of days?

No.

Types of taxable compensation

What categories are subject to income tax in general situations?

As a general rule, all types of remuneration and benefits received by an employee for services rendered constitute taxable income. These include, but are not limited to, the following:

  • wages and salaries
  • interests
  • dividends
  • royalties
  • income from leasing
  • benefits-in-kind.

Intra-group statutory directors

 

Will a non-resident of Armenia who, as part of their employment within a group company, is also appointed as a statutory director (i.e. member of the Board of Directors in a group company situated in Armenia trigger a personal tax liability in Armenia, even though no separate director's fee/remuneration is paid for their duties as a board member?

No.

a) Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in Armenia?

No.

b) Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in Armenia (i.e. as a general management fee where the duties rendered as a board member is included)?

No.

c) In the case that a tax liability is triggered, how will the taxable income be determined?

N/A.

Tax-exempt income

Are there any areas of income that are exempt from taxation in Armenia? If so, please provide a general definition of these areas.

The following are several types of income that are exempt from income tax: income from securities, such as:

  • income from sale of stocks and other investment securities
  • interest or discount received from government bonds and other government securities as well as bonds issued by the Pan-Armenian Bank
  • income from trading in government securities and bonds issues by the Pan-Armenian Bank
  • income from securities providing participation in the investment funds
  • income received from shares, bonds or other securities listed on the stock exchange in the Republic of Armenia, except for those bonds issued by banks, the maturity of which is less than 2 years from the moment of placement.
  • the property and monetary means which have been inherited or received as a gift, received from individuals
  • assets, services and work received from non-profit organizations free of charge
  • property and cash provided by foreign as well as intergovernmental organizations without compensation
  • insurance compensation
  • scholarship and stipends.

Expatriate concessions

Are there any concessions made for expatriates in Armenia?

There are no concessions for expatriates in Armenia.

Salary earned from working abroad

Is salary earned from working abroad taxed in Armenia? If so, how?

Residents are taxed on worldwide income. Non-residents are taxed only on Armenian- sourced employment income.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in Armenia? If so, how?

There is no capital gains tax in Armenia. However, incomes received from the tax agents as a result of the sale of the property are subject to 10 percent Income tax, except the income received from the cars alienated within the 365 days after acquisition, which are subjected to 1 percent income tax, but not less than AMD150 per each horsepower of the engine power of the car.

The income received from the alienation of the land are not subject to income tax.

Dividends, interest, and rental income

Type of Income

Rate

Interest

10%

Royalty

10%

Rentals*

10%

Dividends**

5%***


* In case the total sum of the rentals received during the tax year exceeds AMD60 million, an additional income tax at a 10 percent rate shall be calculated for the exceeding part.
** Tax Code provides an opportunity to refund from the state budget tax amounts paid to the state budget from dividends, in case during the year these dividends are received they are invested according to the procedure established by the legislation in the charter or share capital of the same RA resident entity that pays dividends.
*** 5 percent rate applies to the dividends related to profits attributable to the periods after 1 January 2020 received by citizens of Armenia and foreign citizens (dividends received by foreign citizens related to profits attributable to 2017-2019 tax years are taxed by 10 percent of income tax).
Dividends received from shares listed on stock exchange operating in the republic of Armenia are exempt from income tax.

Gains from stock option exercises

Residency status Taxable at:
  Grant Vest Exercise
Resident N Y N
Non-resident (foreign citizen) N Y N
Other (if applicable) N/A N/A N/A

Foreign exchange gains and losses

Not applicable.

Principal residence gains and losses

Not applicable.

Capital losses

Not applicable.

Personal use items

Not applicable.

Gifts

Gifts provided to individuals by tax agents are taxed as other income.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Armenia? If so, please discuss?

There is no capital gains tax in Armenia.

Are there capital gains tax exceptions in Armenia? If so, please discuss?

Not applicable.

Pre-CGT assets

Not applicable.

Deemed disposal and acquisition

Not applicable.

General deductions from income

What are the general deductions from income allowed in Armenia?
 

Voluntary cumulative pension contributions performed by the individual and (or) a third party (including employer) are deducted from the gross income in the amount not exceeding 5 percent of the gross income of the individual.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Armenia?

Employers are required to calculate income tax on a monthly basis from their employees’ salaries and transfer these amounts to the state budget. There is no reimbursement method used in Armenia.

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in Armenia? For example, Pay- As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

Employers are required to calculate income tax on a monthly basis from their employees’ salaries and transfer these amounts to the state budget.

Pay-as-you-go (PAYG) withholding

Not applicable.

PAYG installments

Not applicable.

When are estimates/prepayments/withholding of tax due in Armenia? For example: monthly, annually, both, and so on.

It depends on type of income. If it is salary, income tax withholdings are made for each month, for other type of income, Income tax withholdings are made for each payment.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in Armenia? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

Income tax payable by residents of the RA shall be reduced by the amount of tax withheld from them in foreign countries/jurisdictions, pursuant to the legislation thereof (with the exception of the amount of tax withheld in foreign countries/jurisdictions from income subject to deduction from gross income, pursuant to the legislation of the RA). The amount of the deducted (credited) tax should not exceed the amount of the tax payable in Armenia on income received in foreign countries/jurisdictions, in accordance with the provisions of Tax Code.

Where the amount of the income tax subject to reduction exceeds the income tax liability respectively for the given reporting year, the amounts of taxes in excess shall be subject to reduction from the liabilities of the following reporting years of the individual.

In addition to above domestic arrangements that provide foreign tax credit, Armenia has entered into double tax treaties with 46 countries/jurisdictions to prevent double taxation and allow cooperation between Armenia and other tax authorities in enforcing their respective tax laws.

General tax credits

What are the general tax credits that may be claimed in Armenia? Please list below.

Not applicable.

Sample tax calculation

This calculation3 assumes a married taxpayer resident in Armenia with two children whose 3-year assignment begins 1 January 2019 and ends 31 December 2021. The taxpayer’s base salary is 100,000 US dollars (USD) and the calculation covers 3 years.

 

2019

USD

2020

USD

2021

USD

Salary

100,000

100,000

100,000

Bonus

20,000

20,000

20,000

Cost-of-living allowance

10,000

10,000

10,000

Housing allowance

12,000

12,000

12,000

Company car

6,000

6,000

6,000

Moving expense reimbursement

20,000

0

20,000

Home leave

0

5,000

0

Education allowance

3,000

3,000

3,000

Interest income from non-local sources

6,000

6,000

6,000


Exchange rate used for calculation: USD1.00 = AMD479.36 (14 Jan 2020)

Other assumptions

  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year and accrue evenly throughout the year.
  • Interest income is not remitted to Armenia.
  • The company car is used for business and private purposes and originally cost USD50,000.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income

Year Ended

2019

AMD

2020

AMD

2021

AMD

Days in Armenia during year

365

366

365

Earned income subject to income tax

       81,970,560  

       74,780,160  

                 81,970,560  

Salary

       47,936,000  

       47,936,000  

                 47,936,000  

Bonus

         9,587,200  

         9,587,200  

                   9,587,200  

Cost-of-living allowance

         4,793,600  

         4,793,600  

                   4,793,600  

Net housing allowance

         5,752,320  

         5,752,320  

                   5,752,320  

Company car

         2,876,160  

         2,876,160  

                   2,876,160  

Moving

expense reimbursement

         9,587,200  

                    -    

                   9,587,200  

Home leave

                    -    

         2,396,800  

                              -    

Education allowance

         1,438,080  

         1,438,080  

                   1,438,080  

Total earned income

       81,970,560  

       74,780,160  

                 81,970,560  

Other income/Interest

         2,876,160  

         2,876,160  

                   2,876,160  

Total income

       81,970,560  

       74,780,160  

                 81,970,560  

Total taxable income

       81,970,560  

       74,780,160  

                 81,970,560  


Calculation of tax liability

 

2019

AMD

2020

AMD

2021

AMD

Taxable income as above

       81,970,560  

       74,780,160  

                 81,970,560  

Armenian tax thereon

         27,499,402

         17,199,437

                   18,033,523

Less:

                    -    

                    -    

                              -    

Domestic tax rebates (dependent spouse rebate)

                    -    

                    -    

                              -    

Foreign tax credits

                  -    

                    -    

                              -    

Total Armenian tax

       27,499,402  

       17,199,437  

                 18,033,523  

Income tax on interest

            287,616  

            287,616  

                      287,616  

Disclaimer

All information contained in this publication is summarized by KPMG Armenia LLC, the Armenian member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The information contained in this publication is based on the Tax Code of the Republic of Armenia of 2016 and subsequent amendments, including but not limited to:

—          RA Law "On Property Tax" No-HO-491-N, 30 December 2002

—          RA Law "On Land Tax" No.-HO-101, 14 February 1994, HN-1005-1

—          RA Law “On compensation for fallen or damaged servicemen during the defense of the Republic of Armenia”, No-HO-245-N, 15 December 2016

—          RA Law “On funded pension” No-HO-244-N, 22.12.2010

—          RA Tax Code No.HO-165-N, 04 October 2016.

© 2021 “KPMG Armenia” LLC, a company incorporated under the Laws of the Republic of Armenia and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.


For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance.

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