In this article, we’re going to review some important tax rules of interest in Armenia

The tax legislation rules in Armenia are rather flexible and are subject to frequent changes. These changes often happen so quickly that even many professionals do not have time to respond in time.

In general, the tax system in Armenia offers small and medium-sized businesses a number of tax advantages to allowing this sector to stabilize and develop.

One such system is the taxation of micro-enterprises. This tax system exempts companies operating in a number of sectors and individual entrepreneurs-from paying the normal taxes.

One of the prerequisites for using this type of tax system is that the sales turnover should not exceed 24 million AMD per year. This type of taxation has been applicable since the beginning of 2020 and has enabled thousands of businesses to remove lighten the tax burden. This type of tax came to replace the previous patent tax, which required fixed payments for each month of operation and was a huge issue for many small businesses.

Banks, insurance companies, accounting companies, casinos, and many other types of organizations cannot be considered as turnover taxpayers.

This is not the only tax that allows businesses to lighten the tax burden. The other type of tax that may replace the profit tax or VAT – is the turnover tax. However, there are certain preconditions for operating by paying turnover tax. If the company meets those conditions then it will be able to get exempted from VAT or profit tax. To qualify, the turnover of the company should not exceed 115 million AMD per year. In addition, both for being considered as a micro-enterprise or as a turnover taxpayer, there are additional conditions to meet, in order to be able to operate in the turnover tax system. For example, banks, insurance companies, casinos, accounting companies, and many other types of organizations cannot be considered as turnover taxpayers.

Reporting about the type of taxpayer is essential
If the business does not submit an application for operating in these tax systems on time, then it will be considered as a VAT payer

If the business does not submit an application for operating in these tax systems on time, then it will be considered as a VAT payer. So, the accountant of the company shall submit VAT reports each month and pay and pay the VAT at the rate of 20% VAT on the monthly turnover. However, the VAT payer offsets/deducts the amount of VAT included in the acquisitions from the VAT payable amount.

As for each tax year, the accountant shall submit a profit tax calculation by April 20 of the following year and pay an 18% profit tax at the rate of 18%. However, it will be available to offset (deduct) the amount of VAT included in the earnings from the amount to be paid.

Concluding on the above-mentioned points, depending on the nature of the business and managerial characteristics, the tax consultant can offer the type of organization that best suits the specific business such as LLC, CJSC, OJSC, etc. Each of these organizational forms has its own characteristics, so before starting a business in Armenia, the business owner should study them in-depth and choose the one that best suits its needs.

Author Elen Baghdasaryan | Tower.am