[Previous Page] 39 [Next Page]

Unofficial translation

THE LAW OF THE REPUBLIC OF ARMENIA

"ON INCOME TAX"

Chapter I
General Provisions

Article 1. Taxpayers

The taxpayers of the income tax within the Republic of Armenia are:

Article 2. Object of taxation

The following monetary (in drams officially in circulation in the Republic of Armenia, or in foreign currency) and in-kind income derived by the individuals is object of taxation:

In-kind (non-monetary) income is taxed in accordance with the state fixed prices, and in the absence of such prices, in accordance with free (market) prices, according to the order established by the Government of the Republic of Armenia.

Income derived in foreign currency is recalculated in drams officially in circulation in the Republic of Armenia, proceeding from the exchange rate defined by the Central Bank of the Republic of Armenia as on the day of the deriving of such income.






[Previous Page] 40 [Next Page]

Article 3. Income not imposed on by income tax

1. The following items of income are not included in the list of taxable income of individuals:






[Previous Page] 41 [Next Page]






[Previous Page] 42 [Next Page]

2. Taxable income in each month is reduced in the amount of ten-times minimum monthly salary established by the legislation of the Republic of Armenia, if such income is received by the following individuals:

3. Taxable income in each month is reduced in the amount of eight-times minimum monthly salary established by the legislation of the Republic of Armenia, if such income is received by the military personnel in the sense of titles, salaries, monetary compensations, other monetary remuneration and payments.

4. Taxable income in each month is reduced in the amount of six-times minimum monthly salary established by the legislation of the Republic of Armenia, if such income is received by the following persons:






[Previous Page] 43 [Next Page]

5. Taxable income in each month is reduced in the amount of two-times minimum monthly salary established by the legislation of the Republic of Armenia, if such income is received by the individuals not mentioned in paragraphs 2, 3 and 4 of this Article at the location of principal employment.

6. In case of the presence of right on the reduction of income simultaneously by several bases provided by paragraphs 2-5 of this Articles, only one is retained, i.e. the largest one.

7. Taxable income is reduced in the amount of the minimum monthly salary established by the legislation of the Republic of Armenia, for each child and dependant before 18 years-old; for each student and pupil before 24 years-old; for each dependant who do not have independent sources of income.

The mentioned order is preserved for children before 18 years-old, students and pupils before 24 years-old, as well as in case of death of children and dependants.

The reduction of taxable income is applied to both spouses, as well as to dependant with respect to income received at the location of principal employment.

The reduction of taxable income of individuals is become effective from the month when a child is born, or such individual becomes a dependant.

In case of decrease of the number of dependants, except for cases of death of dependants, or arising of independent sources of income, the privileges are not applied to dependant from the month, following the month where number of dependant is decreased, or an independent source of income is arisen.

For taxation purposes, persons without independent sources of income are considered as dependants.

Monthly taxable income of individuals receiving income against fulfillment of their job responsibilities in enterprises, institutions and organizations is reduced by these enterprises, institutions and organizations.

The reduction of the taxable income of the other individuals is carried out by tax bodies upon the end of the year during the calculation of annual amount of income tax, based on those months during which such income have been received.






[Previous Page] 44 [Next Page]

Chapter II
The Order of Taxation of Income Received from Fulfillment of Labor and Civil and Legal Agreements

Article 4. Taxpayers and objects of taxation

In accordance with this Law, subject to taxation at the location of principal employment is monthly wage amount received by the individuals, as well as bonuses and any other remuneration and payments against fulfillment job responsibilities by them.

Article 5. Tax Rates

1. The following tax rates are applied to income listed in the Article 4 of this Law:

Amount of Monthly Taxable IncomeTax Rate
up to and including 10 times the minimum salary 12% of taxable amount
from the amount exceeding 10 times the minimum salary up to and including 20 times the minimum salary 120% of the minimum salary plus 18% of the amount exceeding 10 times the minimum salary
from the amount exceeding 20 times the minimum salary up to and including 40 times the minimum salary 300% of the minimum salary plus 25% of the amount exceeding 20 times the minimum salary
More than 40 times the minimum salary 800% of the minimum salary plus 30% of the amount exceeding 40 times the minimum salary






[Previous Page] 45 [Next Page]

2. The income tax rate of 12% is levied on the amounts which accrued to wages according to regional, mountainous and the other coefficients established by the legislation of the Republic of Armenia, as well as for the length of service.

3. In cases when, in accordance with the employment payment conditions the income has not been paid out in full, or not been paid out at all, and the final calculation is done after a season or other long-term period the total amount of wage received in the result of such calculation is distributed among the months when the employment payment against the fulfilled work has been done for taxation purposes.

Bonuses paid out in the end of the season or year are distributed in the same manner in the branches carrying seasonal implications for taxation purposes.

4. Amounts of income received by individuals from liquidated enterprises (including income from realization of the property of such enterprises) are taxed together with other income as of the month of calculation.

Article 6. Taxation of income received at the location of non-principal employment

1. In accordance with this Article the following income is subject to taxation:

2. The tax on income indicated in this Article is levied in accordance with the tax rates established by Article 5 of this Law.






[Previous Page] 46 [Next Page]

Article 7. Procedure of Calculation and Payment of the Income Tax

1. The tax on income provided by Chapter II of this Law is calculated and paid to the budget by enterprises, institutions and organizations which paid out such income.

2. Enterprises, institutions and organizations which withdrawal the amount to be paid to individuals in banks are transfer the calculated tax amounts upon such withdrawal.

Enterprises, institutions and organizations that paid out wages and other payments at the expense of cash revenue of goods (work, services) are paid (transfer) the respective calculated tax amounts to the banks on the next day when such wages were paid out.

3. It is prohibited to carry out the payment of tax amounts calculated from wages, other remuneration and other income at the expense of resources of enterprises, institutions and organizations.

Chapter III
The Procedure of Taxation of Royalties

Article 8. Taxpayers and taxable objects

1. The following items are taxed in accordance with the procedure and rates provided by this Article:






[Previous Page] 47 [Next Page]

Article 9. Tax Rates

1. The income tax from double or multiple royalties paid to individuals indicated in the Article 8 of this Law (except for legatees or heirs of the authors), is levied at the following rates:

Income tax is levied under rates defined by sub-paragraph






[Previous Page] 48 [Next Page]

2. Tax rate of 70% is applied towards the legatees or heirs of the authors receiving double or multiple royalty.

Article 10. The procedure of calculation and payment of the tax

1. Income tax from individuals indicated in this Chapter of the Law during a year is calculated and tax withhold in accordance with the rates defined in sub-paragraph a) paragraph 1 of the Article 9 of this Law. For each following payment, a recalculation of the tax is performed, based on the total amount of payments executed at respective employment in the current year.

Upon the completion of a year, individuals (except for legatees or heirs of authors), are obligated to submit to the domicile tax body the tax return on actually received income of the past year no later than by March 1.

The return on actual income by individuals indicated in the Article 8 of this Law can be not submitted in following cases:

2. In case of presence of the agreements on creation, publication, execution or the other usage of scientific, literature, and arts pieces, the advance remuneration upon these agreements and paid out at the final calculation, is summarized and distributed for taxation purposes among the number of the months during which the agreements are effective.

In case of absence of the respective agreements, the royalty received for work done during several years and exceeding 60 times the minimum salary, by an application of a taxpayer, is distributed on three years and taxed in the composition of total income received during the year in which income is taxed, less tax amounts previously paid.

A similar procedure is applied to amounts of remuneration, received by authors of findings, inventions and industrial samples during the first years of their usage.






[Previous Page] 49 [Next Page]

3. The final income tax amount of the individuals (except for legatees and heirs of the authors) indicated in Article 8 of this Law, according to the order established by this Law, is determined by the taxpayers, and indicated in the tax returns on annual income and expenses connected to the receipt of such income. If, mentioned expenses are not supported by respective documentation, or not supported by respective documentation in full, such expenses are calculated in compliance with the norms approved by the Government of the Republic of Armenia. Tax amounts withdrawn at the location of income payment in the course of a year, are taken into consideration during final calculation.

The tax is calculated on the basis of monthly average income in compliance with the tax rates defined in the Article 5 of this Law, and then multiplied by 12, if the only source of income is creative activity; or on the basis of annual income in compliance with the tax rates defined in sub-paragraph a) of paragraph 1 of the Article 9 of this Law, if such activity is not the only source of income.

4. Enterprises, institutions and organizations withdrawing the tax payments of individuals, no later than February 1 of each year, are obliged to submit the information in written form to the local tax bodies on amounts paid by such individuals during last year, mentioning their permanent addresses, as well as tax amounts withdrawn from this income.

Tax bodies located in the area of enterprises, institutions and organizations paying authorís royalties, forward that information to the tax bodies located in the area of the permanent residence of persons receiving the royalties, for the purpose of complete and proper accounting of taxes.

5. In cases, when in compliance with the tax returns on income (or calculations executed by a taxpayer) the additional tax amount is subject to pay, such amount is paid no later than March 1 of the following year.

If the necessity of the refund of excessive tax amounts paid in the course of a year from the budget is arisen, then, on the basis of the respective conclusions of the tax bodies, such amounts must be refunded from the budget no later than within the month after the day the respective tax bodies are advised on such amounts.






[Previous Page] 50 [Next Page]

Chapter IV
Taxation of Income Received by Individuals from Business Activity and the Other Sources not Connected with Execution of Employment Responsibilities

Article 11. Taxpayers

The following persons are paid income tax in conformity with the procedure and rates defined in this chapter of Law:

Article 12. The taxable object and calculation of the taxable income

1. In accordance with the procedure established by this Chapter, the income of individuals derived from business activity, and income derived from other sources (not stipulated in the Articles 4, 6, and 8 of this Law) which is not related to the execution of employment responsibilities. Moreover, income derived during the definition of the taxable income is reduced (except reductions provided for by the Article 3 of this Law) on the expenses connected to generation of such income, and which is calculated in accordance with the procedure established by the legislation of the Republic of Armenia, based on general norms mentioned in the decision "On composition of expenses that included in the cost of production (work, services) in the enterprises of the Republic of Armenia" confirmed by the Government of the Republic of Armenia.

If such expenses are not supported by respective documents, or are not supported in full, such expenses are calculated in accordance with the norms established by the Government of the Republic of Armenia.

2. At calculation of expenses the peculiarities of the composition of expenses connected with production and realization of products (work, services) in the separate are taken into consideration when calculating expenses, and such peculiarities shall be defined in compliance with the procedure established by the Government of the Republic of Armenia.






[Previous Page] 51 [Next Page]

Article 13. Tax rates

The following rates are established for the taxable income of individuals indicated in this Chapter of Law:

Article 14. The procedure of calculation and payment of the tax

1. The tax amount is calculated from the total annual income received by the taxpayers indicated in this Chapter, irrespective of the types of such income.

Calculation and payment of the tax amount is executed by taxpayers, and, according to the established procedure, is reflected in the tax returns submitted to tax bodies at place of domicile. Moreover, in cases when, in compliance with this Law, taxation of a certain part of such income is performed, in accordance with the established procedure, by the employer, other enterprises, institutions, organizations at the location of tax payment, the tax amounts paid during the respective year are taken into consideration at the final calculation.

Tax return on the annual income may not be submitted by individuals, who receive income exclusively from share participation, securities, and deposits from one enterprise, institution, organization, as well as in cases, when exclusively above described income is received in the course of a year and the total amount of which does not exceed the threshold established by the Government of the Republic of Armenia, by consent of the Permanent Commission on Economy, Finance and Budget of the National Assembly of the Republic of Armenia /Amendments of November 9, 1995, effective from November 9, 1995/.






[Previous Page] 52 [Next Page]

2. The tax is paid in accordance with the following procedure:

3. Taxation of taxpayers who indicated in the Article 11 of this Law is implemented:






[Previous Page] 53 [Next Page]

4. Enterprises, institutions, organizations withdrawing the tax payments of individuals, as well as persons engaged in business activity, are obliged to submit no later than February 1 of each year, to the local tax bodies the data in written form on income paid out to such individuals (except for amounts paid out at the location of principal employment), withdrawn tax amounts and permanent addresses of such individuals. Tax authorities shall forward such data to the local tax administration authorities wherein such individuals are registered.

5. Distribution of income amongst persons carrying out economic activity on the basis of the right of joint ownership (family enterprise) is executed by consent of such persons, that mentioned in the tax return submitted to the tax body.

6. The income tax of individuals which signed labour contract with employer is paid to the budget in accordance with the rates defined in the Article 5 of this Law, and such payment performed by employer when paying the contract to such persons.

7. The income tax of individuals from share participation, securities, and deposits (dividend, share, interest) are calculated and withdrawn immediately at the location where the remuneration is paid out, in accordance with the rates defined in sub-paragraph a) of paragraph 1 of the Article 9 of this Law. During each following payment, recalculation of tax is performed based on total payment amount executed during the year at the location of payment.

To this end, the paid tax amount is transferred to the budget on the working day following the day when payment of such income was executed.






[Previous Page] 54 [Next Page]

Chapter V
Peculiarities of Taxation of Foreign Citizens and Stateless Persons

Article 15. Definition of taxable income

1. Taxable income of foreign citizens and stateless persons (hereinafter foreign individuals), is defined in accordance with the same procedure that applies to the taxable income of the citizens of the Republic of Armenia.

2. Amounts that subject to transfer by employer of foreign individuals to the Social Insurance Fund, Pension and Employment Fund are not included in the composition of taxable income.

Article 16. Tax rates

1. Income of foreign individuals is subject to taxation by the rates provided by this Law for the taxation of similar income.

2. Income of owners of individual enterprises is subject to taxation by the rates provided by the Article 9 of this Law.

Article 17. Procedure of calculation and payment of the tax

1. Foreign individuals who have domicile in the Republic of Armenia and receiving income from sources outside the Republic of Armenia are submit a tax return in accordance with the procedure defined by this Law.

Tax return on actually received income is submitted before March 1 of the year following the reporting year, to the tax body at the location of carrying out of activity or by the residing address of foreign individuals.

Foreign individual having domicile in the Republic of Armenia in accordance with this Law, submits the tax return on expected income in the course of the current year within one month from arrival to the Republic of Armenia.

In case of termination of activity of foreign individuals in the course of the current year, and departure from the Republic of Armenia the tax return on actually received income must be submitted at least one month before departure.

2. The tax amount of foreign individuals income taxed on the basis of tax return is calculated by the tax body at the location of carrying out of the activity or by the residing address of the taxpayer in the Republic of Armenia. The taxation document sent by the tax body to the taxpayer is payment notification.

Advance tax amount is calculated to the taxpayer on the basis of tax return on expected income, and such advance tax amount is subject to pay during the year at 75% of tax obligations of such taxpayer. Recalculation of the tax amount is executed on the basis of the data on actual income.

The tax amount payable in the course of the current year is executed in three equal parts - before May 15, August 15, and November 15. Additional payment at recalculation of tax amount on reporting year is carrying out within one month after the writing out of the payment notification. Excessive tax amount paid by a taxpayer by his request, is returned to him, or credited against future tax payments to be executed by such taxpayer.






[Previous Page] 55 [Next Page]

3. The reduction of income of foreign individuals for taxation purposes is executed in according to the procedure and rates defined by this Law. To this end, foreign individuals, who are submitted tax returns for the first time in the Republic of Armenia, and have children and dependants whom a decrease of their taxable income is provided, for receiving a tax privilege are obliged to attach to the submitted tax return respective documents, confirming the existence of such dependants, and such documents must be authenticated by authorities of the countries, where such taxpayers had permanent residing before arriving to the Republic of Armenia; in cases when such dependants reside in the Republic of Armenia, documents are submitted according to the established procedure.

4. The following income of foreign individuals isn't to subject to taxation:

5. Levying income tax on foreign individuals may be terminated or limited on a bilateral basis, in case when the respective foreign country undertakes identical measures to citizens of the Republic of Armenia, that must be confirmed by the tax bodies of such foreign country.






[Previous Page] 56 [Next Page]

Chapter VI
Peculiarities of Taxation of Income of Persons not Domiciled in the Republic of Armenia

Article 18. Procedure of taxation

Taxation of income (except for income indicated in Chapter II, as well as in paragraph 6 of the Article 14 of this Law) received by persons who are not domiciled in the Republic of Armenia from sources within the Republic of Armenia is executed at 20% tax rate, unless otherwise provided by the treaties of the Republic of Armenia.

Enterprises, institutions, organizations, as well as individuals registered according to the procedure established by the legislation of the Republic of Armenia to carry out business activity advise of the local tax bodies on such income and amounts of withdrawn tax .

Chapter VII
Tax Return of Annual Income

Article 19. The procedure of submission a tax return on annual income

1. Individuals paying taxes according to the procedure established by this Law are obliged to submit the tax return on their annual income.

2. The form of tax return and procedure of tax return of annual income are established by the Government of the Republic of Armenia.

3. Tax return is not submitted in the following cases:

4. Income of under age persons declared by their parents (tutor) and such income is included in the composition of income of the parents.






[Previous Page] 57 [Next Page]

Article 20. Accounting of Income.

Individuals who submitted the tax return are obliged to carry on accounting of income derived as a result of their activity, as well as of expenses connected with receiving of such income in accordance with the procedure of tax return indicated in the Article 19 of this Law.

Chapter VIII
Avoidance of Double Taxation and the Application of Treaties

Article 21. Avoidance of double taxation

The amount of income of taxpayers in the Republic of Armenia received out of the Republic of Armenia is included in the total amount of income subject to taxation in the Republic of Armenia and taken into account at the calculation of the amount of tax.

The income tax amount levied in the Republic of Armenia is reduced at the tax amount levied from the taxpayers of the Republic of Armenia in foreign countries according to the legislation of those foreign countries. To this end, the reduced amounts can not exceed the tax amount, payable in the Republic of Armenia from the income received in foreign countries.

Article 22. Treaties

If treaties of the Republic of Armenia establish the rules differ from the rules included in this Law, then the rules of the treaties are applied.

The mentioned rules are effective after ratification by the Supreme Council of the Republic of Armenia of the above- mentioned treaties.






[Previous Page] 58 [Next Page]

Chapter IX
Concluding Provisions

Article 23. Concluding provisions

1. Taxpayers bear responsibility for the violation of this Law according to the legislation of the Republic of Armenia.

2. Issues connected with the rights and obligations of taxpayers, carrying out of the control over tax payment, as well as over the return of income tax amounts paid by mistake to the budget are regulated in accordance with the procedure established by the Law of the Republic of Armenia "On Taxes and Duties in the Republic of Armenia".

3. The Government of the Republic of Armenia by consent of the Permanent Commission on Economy, Finance and Budget of the National Assembly of the Republic of Armenia, can establish fixed payments on income tax other rates and limits, other procedure of their calculation and payment as well as privileges for individual payers or group of payers /Amendments of November 9, 1995, effective from November 9, 1995/.

4. The instructions for implementation of this Law are worked out and published by the State Tax Inspectorate of the Republic of Armenia in agreement with the Ministry of Finance and Ministry of Justice of the Republic of Armenia.



[previous page]GO TO PREVIOUS PAGE
[next page]GO TO NEXT PAGE


The Law of the Republic of Armenia "On Income Tax" from February 8, 1995, N HC-1129-1-3P-130 ( with amendments of November 9, 1995, N C-047-1-3P-11; March 23, 1996, N 3P-41; and April 25, 1996, N 3P-49).

The taxable income is the derived income minus not taxed part, i.e. taking into consideration the respective privileges.

The taxable income is derived income minus not taxed part, i.e. taking into consideration the respective privileges.