New Tax reforms in Armenia: what we should know?
From January 2020 Armenian switched to a flat income tax rate that sets income tax at 23% for each Armenia’s citizen regardless of their income size and will continue to decrease to 20% by 2023.
Previously, the income tax was 23% for those who received less than 150,000 AMD monthly salary, and 28% for those who received more than 150,000 drams (and 36% for those who earned more than 2 million). Higher salary – higher taxes.
From January 2020 all Armenia’s citizens pay 23% income tax in case of receiving 70 or 700 thousand drams. The authorities explained such an approach by the fact that they want to promote high salaries. On the other hand, these reforms will reach everybody by 2023, when income tax will continually decrease – 22% from 2021, 21% in 2022, and 20% in 2023. Hence, those who receive less than 150 000 AMD will pay a 20% income tax in 2023. The number of such is two-third of all hired employees in the republic.
At the same time, social payments for future pensions will gradually increase. From July 1, 2018, they decreased from 5% to 2.5%, and are applied for all working citizens born after January 1, 1974. Now, in parallel with the reduction of the income tax, in 2021-23 the tax payment will increase, first up to 3.5%, then up to 4.5%, and finally up to 5%.
Thus, the pension reform, which started in 2014, will reach its maximum threshold.
Meanwhile, expected income tax revenue drop of 30 billion AMD and payroll tax drop by 11 billion AMD will be compensated by the rise in excise taxes.
Excise tax on vodka was 84%, however, the price for 1l was no less than 835 AMD. According to the new tax reforms from 2020 Armenia passed to fixed excises and the price for 1l vodka increased to 1560 AMD. The excise tax on cigarettes changed in much the same way. In 2019, it was set at 15%, but no less than 8370 drams per thousand pieces. From 2020, the excise tax increased to 9625 AMD. Taxes on gambling industry also increased by 20%.
The mixed reactions from society elicited real estate appraisal and taxation introduced recently. According to the new policy, property taxes will be calculated based on market value instead of the cadastral value.
Beforе the new tax reforms even in the center of Yerevan, 1 square meter was estimated at about 120,000 AMD, while the market prices were about 4 times higher. That is why in the middle of 2019 the Cadastre Committee increased the prices, moreover in the expensive districts of Yerevan, less in the suburbs and regions. Based on the new cadastral prices, the taxes for elite apartments will increase 7-8 times (in the case of the elite villas – by hundreds of thousands, even millions of AMD).
Learn more about Investing in real estate in Armenia
The new tax policy will come into force from January 1, 2021, and will cause a property payment increase. Starting from 2021 and during the next six years, this tax will gradually increase․
Thus, real estate owners will pay for the first time a new property tax rate in December 2021 – 25% of property tax, in 2022 – 30%, in 2023 – 35%, in 2024 – 50%, in 2025 – 75%, in 2026 -100%.