Armenia

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TAXES - ACCOUNTING

 

 

Corporate tax

Tax rate for resident companies

Under the Law on Profit Tax both residents and non-residents pay profit-tax in the the Republic of Armenia (RA). Legal entities are deemed to be residents if they have received state registration in Armenia. Residents are taxed on profit derived both in Armenia and abroad (while non-residents are taxed only on income within the RA). Non-residents operating through subdivisions in Armenia are taxed on profits earned from the activities in Armenia.
The annual profit tax rate is 20%.
The law may establish, for certain payers, groups of payers and types of activity, a fixed payment, which substitutes for profit tax.

   
Tax rate on long-term capital gains There is no long-term capital gains tax in Armenia.
   
System governing groups of companies and dividends paid by subsidiaries to their parent companies Dividends received by resident companies are not taxed.
   
Tax rate on branches There is no special branch tax in the Republic of Armenia.
The rules for the calculation of the tax differ from general rules applying to corporations. However in terms of accounting obligations the same rules apply to branches as to corporate entities.




Income tax

Fiscal year The tax year is the calendar year.
   
Income tax rate According to the Law on Income Tax residents of the RA and non-residents are liable to income tax. Residents are taxed on their worldwide income and non-residents are taxed on income from Armenian sources only. Individuals are considered to be resident in Armenia if they are physically present for 183 days or more in any consecutive twelve-month period commencing or ending in the tax year. Individuals whose center of vital interests is in Armenia, as well as those in the civil service of the Republic of Armenia outside the country are also considered as residents. Individuals who do not meet these conditions are non-residents.
Income tax is calculated by a tax agent (employer) on a monthly basis at the following rates:
a) Monthly taxable income : (0 – 80,000) AMD, Tax Rate is 10%
b) Monthly taxable income : More than AMD 80,000, Tax : 8,000 AMD + 20% of the amount exceeding 80,000 AMD
   
Tax deductions or other allowances Individual tax payers are subjected to the following deductions:
1. Personal Allowance: 20,000 AMD is deducted from personal monthly gross income before calculating tax,
2. Income of military personnel is tax free,
3. Grant, property and cash received as inheritance, dividends, income from realisation of agricultural productions,and insurance compensation are not taxed,
4.Contributions made to religious, public and other non-profit organizations (total contribution not exceeding 5% of the taxable income) are exempted from tax,
5. Scholarship and stipends paid to students and monetary & non-monetary gains from lotteries are not taxed.
6.For royalties, leasing and interest income the income-tax rate is 10% without taking into account the deductions specified above.



VAT rates

Standard rates Everyone who conducts independent economic activity (business) in a legal form and carries out taxable transactions must pay VAT with the exception of those who are subject to simplified tax (if revenue from taxable transactions during the previous calendar year does not exceed AMD 50 million).
The general VAT rate is 20% of the turnover of taxable goods and services, which is equal to 16,67% of VAT-inclusive prices.
   
Reduced rates According to the Law some transactions and operations are exempt from VAT and some are rated at zero per cent. The difference between exemption and zero rating is that exemption does not compensate a seller for VAT paid and incorporated at earlier stages of the distribution chain; it only exempts the value added by the seller. Zero rating removes taxes incorporated at all stages.

ZERO RATES: Zero rating applies to the following goods and services:
- exported goods;
- retail sale of goods for passengers of international routes in airports, in places specially allocated for that purpose beyond customs and passport control territories;
- maintenance, repair and re-equipment of the means of transport for international transportation;
- on processing and assembling of products from raw materials,
- semi manufactured goods, and materials provided by foreign residents and exported outside the customs of RA;
- services, whose place of provision is outside the domestic territory of RA;
- commodities for the official and personal use of diplomatic and consular personnel;
- transit transportation of foreign loads through the territory of the RA, etc.

EXEMPTIONS: The VAT law exempts certain items, among which the following are included:
- tuition for secondary, professional, and high schools;
- education material such as music books, albums for drawing, children’s and school literature;
- scientific research work; poisonous chemicals, fertilizers used in the production of agricultural products;
- radio and TV broadcasting, not paid for by the users;
- sales of newspapers and magazines;
- insurance, reinsurance and banking operations;
- sales of bread;
- sales of mazut;
- sales of precious and semiprecious stones, registered on the list, approved by the Government of the RA;
- products and services imported to the RA for humanitarian and charitable purposes.



Other important taxes


Name of tax
Rate
Excise Tax  
Different tax rates apply based on the qualtity, volume, and type of the product imported, in accordance with the country's Tax Code.  
Property Tax  
0.1%, 0.2%, 0.4%, 0.6%, 0.8%, etc. annually depending on the type of property.  
Land Tax  
Agriculture Land: It is calculated at 15% of the annual net-income determined by the "cadastral" evaluation.
Non-agricultural Land: The annual rate is 0.5-1% of the "cadastral" value of the land.
* 'Cadastre' is the land valuation system.  


 

Accounting

Introduction
The 'Law on Accounting' in Armenia defines the uniform bases for the organization and conduct of accounting, the preparation and filing of financial reports in the Republic of Armenia, regulates other relations pertaining to accounting.
This scope of this law extends to enterprises, institutions and organizations, and branches & representations of foreign organizations (including banks).
The regulation of accounting in the Republic of Armenia is implemented by the government of the Republic of Armenia and/or a body (bodies) of state governance authorized by the latter, and in case of banks by the Central Bank of the Republic of Armenia.


General accounting principles
The main rules governing Accounting and Financial reporting in the Republic of Armenia are as given below:
a) going concern: the organization is going to continue its operation in the foreseeable future and has no tendency or need to liquidate itself or to substantially curtail its operations;
b) consistency: accounting policies should not change from one reporting period to another, with the exception of cases when the nature of organization’s operations undergoes substantial changes, or when the changes in accounting policies provide for a more essential information, or when changes have taken place in the legislation regulating accounting;
c) accrual - the results of economic operation (assets, equity, liabilities, incomes and expenses) are reflected in the accounting at the time of their execution, irrespective of the date of payment or receipt of monetary means with relation to them;
d) understandability - the information provided in financial reports has to be understandable to the user;
e) relevance - the information is deemed relevant if non-disclosure of it affects the economic decisions of the users of financial reports made on the basis of such reports;
f) uniformity - accounts similar in the accounting and functional nature thereof shall be joint in financial reporting, unless their separate presentation would contain relevant information;
g) reliability - the financial reports are deemed reliable if they show neutrality, prudence and completeness;
h) comparability - the financial reports of the same organization for different reporting periods, as well as the financial reports of different organizations shall be comparable;
i) mutual quit - no mutual quit shall be allowed between the assets, equity and liabilities, articles of income and expense except for the cases when such mutual quit is provided for by the legislation regulating accounting
j) delineation - the assets and liabilities of an organization are detached from the assets and liabilities of the proprietors thereof and from the assets and liabilities of other organizations.
Other principles might be defined in accordance with the accounting standards.

Obligations and publications
It is OBLIGATORY for an organisation to respect the below given basic accounting rules:
a) accounting should be conducted in the currency of the Republic of Armenia - the dram
b) accounting should follow the method of double entry pursuant to the accounting charter of accounts
c) accounting should be conducted continuously from the moment of state registration of the organization until the moment of its reorganization or liquidation in a procedure stipulated by the legislation of the Republic of Armenia
d) the data in the analytical (detailed) accounting and in the synthetic (generalized) accounts must correspond to each other
f) The results of all economic operations shall be illustrated in the accounts in a timely manner.

The various financial reports to be prepared by an organisation while conducting accounting are as follows:
a) the accounting balance, which characterizes the financial standing of the organization as of the reporting date. The components of the accounting balance immediately pertaining to the assessment of the financial standing are the assets, equity and the liabilities;
b) the report on the financial results, which characterizes the financial results of the operation of the organization within the reporting period. The components in the report on the financial results immediately pertaining to the operation are the incomes and expenses;
c) the reports on the cash flow, as well as other reports on changes in the financial standing which reflect the changes in the components of the accounting balance sheet and the components of the report on the financial results;
d) the footnotes attached to the accounting balance sheet and the report on financial results, which disclose the accounting policies of the organization and, in accordance with the requirements of accounting standards, supply additional information;
e) the audit conclusion affirming the trustworthiness of the financial reports, provided the financial reports of the organization in question, pursuant to the legislation of the Republic of Armenia, are subject to mandatory audit.

Certification and auditing
The "Auditing Standards" in Armenia are based on International Auditing Standards and these have been approved by the country's Ministry of Finance and Economy through Order# 324, dated 10th September 2001. IFCA Code of Ethics is followed by most of the audit companies, though it has not been officially adopted in the country.
For Joint-Stock companies, banks and insurance companies; the annual financial statements have to be audited by an independent auditor.
For other companies, it is not required that the financial statements are audited by an auditor.

Professionals and representative organizations
1. Armenia Development Agency
2. Ministry of Finance and Economy of Republic of Armenia

Comments
1. The accounting information (both in paper and eletronic formats) need to be archived by the organization in the manner and in the time-frame provided for by the legislation of the Republic of Armenia, but for not less than five years.
2. The reporting period for organizations is the reporting year constituting the period of time between January 1 and December 31 of the year in question. For newly established organizations the first reporting year is the period between the day of their registration and December 31 of the same year.
3. The director of the organization and other persons responsible for the organization and conduct of accounting bear responsibility in the manner prescribed by the legislation of the Republic of Armenia for violating the legislation of the Republic of Armenia on accounting.



Useful links
Armenia Development Agency
European Chamber of Commerce in Armenia

Last modified in mai-07
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