business overview : corporate taxation : individual taxation : VAT : excise tax : property tax : land tax : withholding tax

VALUE ADDED TAX (VAT)

Taxpayers

Everyone who conducts independent economic activity (business) in a legal form and carries out taxable transactions must pay VAT.
Individuals importing goods into Armenia also pay VAT if the quantity or the cost of commodities imported exceeds the legal limits (USD 500 or Weight 50 kg) established under the Law.

VAT Threshold

All persons conducting business must exceed the threshold before paying VAT. Businesses do not pay VAT if their revenue from taxable transactions during the given quarter and the preceding three quarters does not exceed AMD 10 million.
For the purposes of determining whether a business exceeds the taxable threshold, deductions are not permitted to be offset against revenue. Therefore, commercial entities will have revenue equal to turnover.
After exceeding the threshold limit, VAT should be calculated and paid on the amount exceeding AMD 10 million.

Taxable Transactions

• The following transactions are subject to VAT,
  
• supplies of goods and services;
  
• free or partially free consumption and delivery;
  
• import of goods, with the exemption of:
  

1. goods, included in the approved list, imported into the territory of the RA by entities and individual    entrepreneurs, the rate of custom duty on which is set 0% by the Law and which are not subject to    the excise tax;
2. goods imported into the territory of the RA in the field of humanitarian assistance and charity, whose    turnover is determined to be exempt from VAT by the authorized bodies of the Government of the    Republic of Armneia.

Non-taxable Supplies

VAT is not levied on:

• services for which state duties have been established;
  
• the import of goods and services by individuals for personal needs;
  
• the import of personal property by citizens entering the RA for permanent residence;
  
• sales of values and treasures without owner, inherited to or bought by the State, etc.
  

Determination of Taxable Base

    1. In case of the delivery of goods and services the taxable base is considered to be the value        (in terms of money) of delivered goods and services (including other payments joint to this        value pursuant to the Law) excluding VAT which is paid by the purchaser to the supplier;
    2. for goods imported into the RA, the taxable base is the sum of their customs value, customs        duty and any excise tax levied at the moment of import;
    3. for imported goods, which have been earlier exported from the territory of the RA by VAT        payers for the purpose of processing or repair, the taxable base is the value of processing         and repair [thereof] which has been paid as an indemnity to foreign legal persons or citizens.        When it is impossible to define this value the taxable base is the difference between the        customs value of the imported goods after processing and repair and the customs value        declared at export;
    4. for intermediary services, the taxable base is the payment received excluding VAT;
    5. in cases of the free delivery of goods and services, the taxable base is the price paid for        similar supplies at the time of the transaction;
    6. the taxable base for barter transactions is determined on the basis of their VAT exclusive           price applied at the time of delivery ;
    7. in case of delivery of goods subject to the excise tax, the taxable base should include also           the excise tax.

There are some peculiarities of the calculation of VAT in the tourism field:

• the taxable turnover for persons providing services in the field of tourism, who sell travel tickets (or render services) to citizens on behalf of other persons, shall be the difference between the whole amount paid by the tourists to the agency and the value of the services rendered by other persons;
• In cases when the delivery of goods and the provision of services related to tourism is carried out wholly outside the territory of the Republic of Armenia, the zero tax rate is applied.
  

Rates

VAT is a non-cumulative tax. In calculating the VAT, Armenia uses the credit method for all businesses, i.e.
VAT paid to suppliers is creditable against VAT collected from customers. Therefore, only the difference between the total VAT collected from customers and the total VAT paid to suppliers during a reporting period is paid.
The general VAT rate is 20% of the turnover of taxable goods and services, which is equal to 16,67% of VAT-inclusive prices.

Exemptions and Zero Rating

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 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;
• services on international transportation of passengers, baggage loads and post by all means of transport in the part of transportation implemented outside the territory of the Republic of Armenia;
• maintenance, repair and re-equipment of the means of transport for international transportation;
• services on processing and assembling of products from the raw material, semi manufactured good, and materials provided by foreign residents and exported outside the customs body of RA;
• services, whose place of provision is outside the domestic territory of the Republic of Armenia;
• commodities for the official and personal use of diplomatic and consular personnel;
• transit transportation of foreign loads through the territory of the Republic of Armenia, etc.
  

Upon the export of commodities purchased in Armenia by foreign citizens, VAT amounts paid in Armenia shall be returned by customs officials in compliance with governmental decision.
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;
  
• veterinary medicines, poisonous chemicals, fertilizers used in the production of agricultural products;
  
• sale of agricultural products produced in Armenia by the producer; radio and TV broadcasting, not compensated by the users;
  
• sales of newspapers and magazines; sales of lottery tickets at the face value; insurance, reinsurance and banking operations;
  
• sales of bread;
  
• sales of black oil;
  
• precious and semiprecious stones, registered in the list, defined by the Government of the Republic of Armenia;
  
• products and services imported to Armenia for humanitarian and charitable purposes.
  

Tax Invoices

Tax invoices must be filed by those suppliers of goods and services who pay VAT. The Tax invoice is the document that confirms the provisior- of goods and services.

VAT on Imported Goods

The VAT on imported goods is levied at the point of importation by customs officials. VAT is calculated and levied for those imported goods that are subject to customs duties; goods, on the approved list, that are subject to zero percent customs duties and are not subject to excise tax, will not be subject to VAT.

Peculiarity of the Foreign Persons Taxation

If foreign businesses or individuals fail to register their business activity and do not register as taxpayers, then any VAT paying Armenian resident who acts on their behalf or at their expense, (including commissions and auction sales), will be deemed as the supplier of the commodities or services in Armenia. Hence, they undertake any VAT liabilities arising from these transactions instead of the foreign businesses or individuals. The taxable turnover arising from the supply of these goods and the provision of these services is equal to their cost in monetary value minus the VAT.

Payments

VAT on imported goods must be paid no later than 10 days after entering the country. Tax declarations must be made each quarter or monthly at the request of the taxpayer. Tax payments must be made before the 20th day of the following month.
VAT is calculated on the taxable turnover with deductions permitted for:
      1) VAT noted on the tax invoices received from sup pliers of goods and services;
      2) VAT withheld by customs bodies of the RA - for goods imported into the territory of the RA.
In cases when the norms differ from those provided by this Law and those which are established by international agreements, concluded and ratified by the RA, the norm of the international agreements shall take precedence.