Taxation of international executives
When are tax returns due? That is, what is the tax return due date?
What is the tax year-end?
What are the compliance requirements for tax returns 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, 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.
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 Calculation only in the event they receive an income from Armenian sources but not through tax agents.
What are the current income tax rates for residents and non-residents in Armenia?
Income tax rates on wages and salaries of Armenian citizens, foreign citizens, and persons without citizenship effective starting 1 January 2018 are shown in Table A.
|Monthly taxable income||Tax rate|
|Up to AMD150,000||23% of taxable income|
|From AMD150,000 to AMD2,000,000
||AMD34,500 plus 28% of the taxable income exceeding AMD150,000|
|Over AMD2,000,000||AMD552,500 plus 36% of the taxable income exceeding AMD2,000,000
The income tax on salaries and wages and the income deemed equal thereto shall be calculated and withheld (imposed) at the rates specified in Table A.
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.
Is there, a de minimus 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/territory for more than 10 days after their assignment is over and they repatriate.
What if the assignee enters the country/territory before their assignment begins?
No special implications. The residency of the assignee does not depend on the beginning of the assignment.
Are there any tax compliance requirements when leaving Armenia?
There are no special requirements upon leaving the country/territory. In case of residency, the Annual Income Calculation should be submitted for the tax year.
What if the assignee comes back for a trip after residency has terminated?
No special implications.
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).
Will an assignee have a filing requirement in the host country/territory after they leave the country/territory and repatriate?
Being treated as tax resident in Armenia, the assignee will have an obligation to submit Annual Income Calculation in host country/territory (Armenia) for tax year.
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 Armenia
The Economic Employer approach is not adopted by Armenian tax authorities.
Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?
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:
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 exempted from the income tax:
income from securities, such as:
Are there any concessions made for expatriates in Armenia?
There are no concessions for expatriates in Armenia.
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.
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 for the below cases)
|Type of Income||Rate|
|**Dividends received by foreign citizens and individuals with no citizenship 5||10%|
|**Dividends received by Armenian citizens6||5%|
* In case the sum total of the rentals received during the tax year exceeds AMD58,35 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.
|Residency status||Taxable at:|
|Non-resident (foreign citizen)||N||Y||N|
|Other (if applicable)||N/A||N/A||N/A|
Gifts provided to individuals by tax agents are taxed as other income.
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?
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.
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.
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.
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.
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/territories, pursuant to the legislation thereof (with the exception of the amount of tax withheld in foreign countries/territories 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/territories, 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/territories to prevent double taxation and allow cooperation between Armenia and other tax authorities in enforcing their respective tax laws.
What are the general tax credits that may be claimed in Armenia? Please list below.
This calculation assumes a married taxpayer resident in Armenia with two children whose three-year assignment begins 1 January 2018 and ends 31 December 2020. The taxpayer’s base salary is USD100,000 and the calculation covers three years.
|Moving expense reimbursement||20,000||0||20,000|
|Interest income from non-local sources||6,000||6,000||6,000|
Exchange rate used for calculation: USD1.00 = AMD485.75 (25 Jan 2019)
Calculation of taxable income
|Days in Armenia during year||365||365||365|
|Earned income subject to income tax||83,063,250||75,777,000||83,063,250|
|Net housing allowance||5,829,000||5,829,000||5,829,000|
|Moving expense reimbursement||9,715,000||-||9,715,000|
|Total earned income||83,063,250||75,777,000||83,063,250|
|Total taxable income||83,063,250||75,777,000||83,063,250|
Calculation of tax liability
For 2018 the following new income tax rates will apply, which are provided by RA Tax code:
|Taxable income as above||83,063,250||75,777,000||83,063,250|
|Armenian tax thereon||27,892,770||25,269,720||27,892,770|
|Domestic tax rebates (dependent spouse rebate)||-||-||-|
|Foreign tax credits||-||-||-|
|Total Armenian tax||27,892,770||25,269,720||27,892,770|
|Income tax on interest||291,450||291,450||291,450|
Following is an overview of the concept of Armenia’s immigration system for skilled labor.
(e.g., which steps are required, authorities involved, in-country/territory and foreign consular processes, review/draft flow chart illustrating the process)
This summary provides basic information regarding business visits to, and work authorization for, Armenia. The information is of a general nature and should not be relied upon as legal advice.
Most foreign nationals who intend to engage in active, productive employment in Armenia will need a Residence Card and Work Permit. Depending on the purpose of travel to Armenia and the nationality of the traveller, there are different types of visas that will apply to the occasion, and which vary in their processes and processing times. For all work authorization types, foreign nationals must coordinate with their employer to collect and legalize corporate and personal documentation.
Citizens of EAEU8 member states have the right to unrestricted access to the Armenian labour market. A work permit won’t be require to work in Armenia.
Unless evidence can be provided that one is an EAEU national, a permit will be required to work in Armenia.
Armenia distinguishes further between Non-Visa Nationals and Visa Nationals. Non-Visa Nationals can enter Armenia for business visitor purposes without the need to apply for an entry visa.
However a Non-Visa national may not start working until the appropriate work permit and residence permit has been issued.
Residence permit must be obtained by means of a visa after entering Armenia. The Armenian embassy/consulate abroad or border-control points are responsible for visa applications. The entry visa is typically valid for a short period of time and must generally be converted to a work permit and Residence Card upon arrival in Armenia.
Describe (a) which nationalities may enter Armenia as non-visa national, (b) which activities they may perform and (c) the maximum length of stay.
The Government of Armenia provides the list of the countries/territories whose citizens are unilaterally exempted from the requirement of obtaining a visa. Citizens of foreign countries/territories for whom a visa-free regime is set can stay on the territory of the Republic of Armenia for not more than 180 days during one year if no other term is defined by the international agreements of the Republic of Armenia.
There are also certain countries/territories with which Armenia has a visa-free regime according to bilateral and multilateral agreements. If foreign nationals visit Armenia as either tourists or business visitors, they are allowed to enter Armenia using their passports for up to 120 days. This period can be extended for another 60 days.
List of the countries/territories, with visa exemptions for entry into Armenia are the followings:
In Armenia, visitors are generally free to perform the following activities:
Describe (a) the regulatory framework for business traveller being visa nationals (especially the applicable visa type), (b) which activities they may perform under this visa type and the (c) maximum length of stay.
Visa nationals are required to obtain an entry visa to be able to enter into Armenia for business visitor activities. The entry visa is typically issued for single entry unless otherwise provided for by the legislation or the international treaties of Armenia.
Entry visa eligible for in-country/territory extension for a period of up to 60 days.
The Government of Armenia defines the list of the countries/territories whose nationals can obtain an entry visa upon arrival to Armenia (PDF 235 KB) and the list of the countries/territories, whose nationals should apply for an entry visa upon invitation (PDF 418 KB) to the Armenian embassy/consulate in the respective country/territory of residence in order to be allowed to enter Armenia for up to 120 days rolling period.
In regards to the permitted activities and permitted duration of stay, please see previous section.
Outline the process for obtaining the visa type(s) named above and describe (a) the required documents (including any legalization or translation requirements), (b) process steps, (c) processing time and (d) location of application.
Visa nationals can enter Armenia through state border crossing points, on the basis of availability of a valid passport, on the basis of an entry visa or a document attesting the residence status and in case of availability of authorization of an authorized state administration body of the Government of Armenia carrying out border control. Entry visa could be obtained upon arrival in Armenia and upon invitation.
Entry visa is obtained:
Foreigners may be given an invitation to visit Armenia:
When submitting an invitation to the Ministry of Foreign Affairs of Armenia for approval, the citizens referred to in point (a) above shall submit a passport, the persons referred to in point (b) above — a passport and residence card (special passport of the Republic of Armenia), and legal entities referred to in point (c) above — a carbon copy of the registration certificate issued by the State Register Agency of Legal Entities of Armenia.
The persons referred to in this part shall also submit information on covering by the inviter their living expenses, including those incurred from possible medical aid and departure from Armenia, or an undertaking on covering all those expenses by them, by submitting in both cases a state duty payment receipt.
An invitation shall contain data on the invitee and the inviter, the purpose of the invitation, as well as on the periods of stay of the invitee in Armenia.
Are there any visa waiver programs or specific visa categories for technical support staff on short-term assignments?
No such programs or visa categories are defined under the Armenian legislation.
What are the main work permit categories for long-term assignments to Armenia? In this context outline whether a local employment contract is required for the specific permit type.
Work Permit (local employment contract for Armenia required)
Work Permit - authorization of an authorized state administration body of the Government of Armenia, which entitles a foreigner to work in Armenia.
Employers of Armenia shall be entitled to conclude an employment contract (contract on delivery of services) with a foreign worker and use their work based on the work permit issued for the foreign worker by the authorized body.
Employer may apply to the authorized body for issuing a work permit for this specific foreigner for a certain time period, by submitting the following documents:
An employment contract (contract on delivery of services) shall be concluded in accordance for the validity period of the work permit. An employment contract (contract on delivery of services) shall also cover issues related to transportation to Armenia of a foreign employee and their family members, social security and insurance thereof, issues related to meeting them, providing with accommodation, keeping on records in the place of residence, and the return thereof.
In case of termination of activities of the employer, the foreign worker shall be entitled to conclude a new employment contract (contract on delivery of services) with another employer for the remaining validity period of the work permit, provided that at least three months are left till the expiry of the mentioned period, and the new employer has obtained the consent of the authorized body.
The employer shall, within five working days upon concluding an employment contract (contract on delivery of services) with a foreigner, submit the duplicate copy thereof to the authorized body, in person or by post or in an electronic form, for the purpose of keeping on records. The authorized body shall, on a regular basis, post on its official website the information on an employment contract and the amendments made thereto.
Provide a general process overview to obtain a work and residence permit for long-term assignments (including processing times and maximum validation of the permit).
Obtaining of work permit by the employer
Work permit is issued for a period of validity of an employment contract.
Obtaining of residence permit by the employee
Temporary residence permit shall be granted for a period of up to one year with a possibility of extension by one year each time.
Is there a minimum salary requirement to obtain a long term work and residence permit for assignments? Can allowances be taken into account for the salary?
The minimum monthly salary in Armenia is AMD55,000 (approx. USD115), which does not include taxes, social payments, supplements, bonuses and other incentive payments.
Is there a fast-track process which could expedite the visa/ work permit?
No, currently there is no fast-track option for Armenia.
At what stage is the employee permitted to start working when applying for a long term work and residence permit (assignees/ local hire)?
The employee is permitted to start working, when the work permit is obtained by the employer.
Can a short term permit/ business visa be transferred to a long term permit in Armenia?
Technically, it would be possible to transfer a short term permit/ business visa to a long term permit in country/territory. This needs to be reviewed case by case as it is highly depended on the circumstances. For this purpose, the foreign national during the validity of their visa (if required) should start employment relationship with an Armenian employer, who has to obtain a work permit for the foreign national. Based on the work permit the foreign national should apply for temporary residence permit.
If a transfer would not be possible, the applicant would need to leave Armenia.
Is it possible to renew work and residence permits?
The Legislation of Armenia does not provide the possibility to renew the work permit.
It is a possibility to renew the temporary residence permit but, in fact, it can be done according to valid work permit, the extension of which is not provided by the local legislation.
Is there a quota or system or a labour market test in place?
Armenia does not have a quota system.
Employers of Armenia shall be entitled to conclude an employment contract (contract on delivery of services) with a foreign employee and use their work based on the work permit issued for the foreign employee by the authorized body. When issuing a work permit for a foreign worker, the authorized body shall take into account the needs and developments of the labour market of the Republic of Armenia.
With a view of assessing the needs of the labour market of Armenia, a time limit shall be established for the employer upon the decision of the Government of the Republic of Armenia, during which the employer shall be obliged to fill the available vacancies from among the citizens of Armenia.
In case of absence of candidates, to be nominated by the authorized body within the time limit prescribed, who will meet the requirements of the employer, as well as in case of rejection by the employer of the nominated candidate, the employer may find a foreigner meeting these requirements and apply to the authorized body for issuing a work permit.
Would it be possible to bring family members to Armenia?
According to the legislation of Armenia, an employment contract (or contract of services provision) shall also cover issues related to transportation to Armenia of a foreign employee and their family members, social security and insurance thereof, issues related to meeting them, providing with accommodation, keeping on records in the place of residence, and the return thereof.
Besides, temporary residence permit shall be granted to every foreigner, if they prove the existence of circumstances justifying their residence in the territory of Armenia for one year and a longer period.
Such circumstance may be the fact of being the spouse, parent or child of a foreigner holding temporary residence permit in Armenia.
Is it possible to obtain a permanent residence permit?
According to the legislation of Armenia, foreigner cannot apply for permanent residence permit except the following cases:
Permanent residence permit shall be granted to a foreigner, if they:
Permanent residence permit shall be granted for a period of 5 years with a possibility of extension for the same period each time. An application for extension of a permanent residence permit must be filed at least 30 days prior to expiry of the validity period of the permanent residence permit.
What if circumstances change after the Work and Residence application process (e.g., change of employment or personal situation, including job title, job role or salary)
Any change in the term of the employment or personal situation, including job title, job role or salary may require that a new work permit needs to be secured or an appropriate notification to be made.
How long can a permit holder leave Armenia without their permit becoming invalid?
The legislation of Armenia does not contain any regulation on this issue.
Must immigration permissions be cancelled by the end of the assignment/employment?
According to the legislation of Armenia, the work permit shall be terminated, if the validity period of the employment contract (contract on delivery of services) has expired, or the contract has been rescinded.
Are there any penalties for individuals and/or companies in place for non-compliance with immigration law?
Violation by the foreigners visa or residence permit terms or stay in Armenia upon invalid documents, as well as violation of transit traffic through the territory of Armenia shall entail imposition of a penalty in the amount up to AMD100,000 (approx. USD200).
Non carrying by the inviter the costs of inviting a foreigner to Armenia, including their possible medical care and expenses for departure from Armenia, shall entail the imposition of a penalty in the amount up to AMD100,000 (approx. USD200).
Employment of foreigners by the Employers without appropriate residence and work permits shall entail the imposition of a penalty in the amount up to AMD150,000 (approx. USD310). If the employer is a legal entity, the penalty is assigned to the director.
List any other important items to note, or common obstacles faced, in Armenia when it comes to the immigration processes.
Below you will find a list of other important items to note and the most common obstacles:
1This provision came into force on 1 January 2017 and shall be applicable for the dividends declared after 1 January 2017.
2In terms of RA Tax Code (Article 25), the place where a person’s family or economic interests are concentrated shall be considered the center of the person’s vital interest. Interests of a person shall be deemed; in particular, to be located in RA, if the house or apartment where the person’s family resides is therein, or the principal personal or family property, as well as the principal place of the economic (professional) activity is located therein.
3Certain tax authorities adopt an ‘economic employer’ approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country/territory for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country/territory employer but the employee’s salary and costs are recharged to the host entity, then the host country/territory tax authority will treat the host entity as being the ‘economic employer’ and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country/territory.
4For example, an employee can be physically present in the country/territory for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.
5This provision came into force on 1 January 2017 and shall be applicable for the dividends generated after 1 January 2017.
6This provision came into force on 1 January 2018 and shall be applicable for the dividends generated after 1 January 2018.
7Sample calculation generated by KPMG in Armenia, the Armenian member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the RA Tax Code No-HO-165-N, 04 October 2016.
8Eurasian Economic Union
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