VAT, GST and Sales Tax in Armenia

Summary

Name of the tax Value-added tax (VAT)
Local name Avelacvats arzheqi hark
Date introduced 1-Jul-93
Trading bloc membership None
Administered by Ministry of Finance (http://www.minfin.am) State Revenue Committee (http://www.taxservice.am)
VAT rates
Standard 20%
Other 0%
VAT number format
Legal entities and sole entrepreneurs Tax identification number/1
Physical persons Tax identification number/0
VAT return periods
Monthly For persons that had VAT taxable turnover during the preceding calendar year in excess of AMD100 million
Quarterly For persons that had VAT taxable turnover during the preceding calendar year of AMD100 million or less
Thresholds
Registration AMD115 million for the calendar year
Recovery of VAT by non-established businesses No

Scope of the tax

VAT applies to the following transactions that are considered to be carried out in Armenia:

  • Supply of goods (including produced and purchased goods, fixed assets, real estate and other goods) to persons for full or partial compensation (including barter transactions) or as a gratuitous supply
  • Rendering of services (including sales of intangible assets and lease of goods and real estate) to other persons for full or partial compensation (including barter transactions) or as a gratuitous supply
  • Importing goods into Armenia for domestic consumption with certain exceptions specified by law

Who is liable

All individual entrepreneurs, legal entities and branches of for­eign legal entities that are registered as conducting entrepreneur­ial activities or having the right to carry out entrepreneurial activities are considered VAT payers from the moment they reach the VAT threshold (AMD115 million) calculated for the calendar year. All such entities whose turnover subject to VAT has not exceeded AMD115 million during the preceding or current cal­endar year are not considered VAT payers, with certain excep­tions specified by law. These entities may voluntarily become VAT payers by submitting an appropriate written statement to the tax authorities.

All individuals and legal entities that do not have the right to carry out entrepreneurial activities, such as unincorporated orga­nizations, local governmental bodies and institutions created by them, the Central Bank of Armenia and notaries, shall be consid­ered as bearing VAT payment obligation when carrying out VAT taxable transactions. The VAT threshold (AMD115 million) may be applied to individuals in certain cases defined by the law.

Group registration. The Armenian VAT law does not provide for group reporting of VAT. Each group member company must report VAT individually.

Non-established businesses and tax representatives. A “non-established” business is a foreign business that does not have a fixed establishment in Armenia. Such a business cannot register for VAT even if it makes taxable supplies of goods and services in Armenia. Reverse-charge VAT generally applies to supplies of goods and services and imports made by non-established busi­nesses in Armenia (see Reverse charge).

The Armenian VAT law does not provide rules for tax representa­tives.

Reverse charge. Special reverse-charge rules apply to non-es­tablished businesses conducting VAT taxable entrepreneurial activities in Armenia. Persons considered VAT payers or bear­ing VAT payment obligations that have contractual relations with foreign businesses are responsible for bearing any VAT liability instead of such non-established businesses according to the terms and procedures established by the law.

An Armenian person engaged in business activities with a non-established business may issue a tax invoice indicating its own tax identification number and VAT number on behalf of a foreign entity that is not registered in Armenia as a person supplying goods or services. This tax invoice shall be considered to be issued by the foreign supplier and accordingly shall allow that person to deduct the amount of VAT from output tax.

Late-registration penalties. No late-registration penalties are imposed in Armenia.

Deregistration. No special rules are defined by law for deregistra­tion. The VAT payer is deregistered automatically when the con­ditions for considering a person to be a VAT payer are not met.

Digital economy. Not applicable.

Registration procedures. VAT registration is performed automati­cally when conditions for considering a person to be a VAT payer are met or when the person or entity submits an application to the tax authorities in a form established by the government of Armenia. The application can be submitted either electronically or in hard copy. The electronic application is submitted through the taxpayer’s account at https://file-online.taxservice.am. The hard copy is submitted to the regional tax inspectorate in two copies. After submission, registration is completed immediately, and the second copy is returned to the taxpayer.

VAT rates

The term “taxable supplies” refers to supplies of goods and ser­vices that are subject to VAT.

The VAT rates are 20% (standard rate) and 0%. The 20% rate applies to supplies of goods and services unless a specific mea­sure provides the zero rate or an exemption.

Examples of zero-rated transactions (taxed at a 0% rate)

  • Export outside the customs border of Armenia
  • Supply of fuel for airplanes on international flights and supply of goods for consumption during the flights for the staff and passengers of the airplanes
  • Supply of goods for passengers of international routes in duty-free shops operating in the Republic of Armenia (RA), as well as supply of those goods by other taxpayers to the organizers of the duty-free shops.
  • Supply of maintenance (including navigation, take-off and land­ing services), repair and re-equipment of the means of transport for international transportation, as well as supply of services for passengers, baggage, cargo and mail on international flights and supply of services to passengers during the flights
  • Supply of services (including those provided by agencies and intermediaries) directly related to the provision of services described in the preceding item
  • Supply of services outside Armenia
  • Supply and import of goods for the official use of diplomatic representations and consular institutions, as well as interna­tional intergovernmental organizations deemed equal thereto, and supply of services to them
  • Supply of transportation services of foreign loads in transit through Armenia

The term “exempt supplies” refers to supplies of goods and ser­vices that are within the scope of VAT taxation but are specifi­cally exempted from VAT taxation. Such exempt transactions do not give rise to a right of input tax deductions (see Section F).

Examples of exempt supplies

  • Supply of education at secondary schools, vocational schools for qualification and requalification and specialized secondary and higher educational institutions
  • Supply of copy books and music books, albums for drawing, children’s and school literature and school educational publica­tions
  • Sale of scientific and educational editions published by higher educational institutions, specialized scientific organizations and the National Academy of Sciences of Armenia
  • Implementation of scientific and research programs, basic edu­cational programs as well as organization of educational com­petitions, tournaments and Olympics organized in accordance with the standards established by the government of Armenia
  • Supply of services related to the care of children in preschool institutions, care for persons in boarding schools, children’s homes, institutions caring for disabled children and invalids and nursing homes, as well as supply of goods produced and ser­vices rendered by the persons living under the care of these institutions
  • Supply of newspapers and magazines
  • Supply of insurance and reinsurance, including related services rendered by insurance mediators (third parties who establish insurance relationships between insurers or reinsurers and poli­cyholders and support the implementation of organizational, legal and other activities) and agents
  • Supply of pension insurance, including related services ren­dered by mediators and agents
  • Supply of financial services by banks, persons participating in securities’ markets, payment and settlement organizations and lending organizations (certain cases)
  • Supply of prosthetic and orthopedic items, medical assistance services (including prophylactic diagnostic measures) and goods related to treatment that are prepared within the context of medical assistance by patients in prophylactic enterprises and organizations, and services rendered by them
  • Supply of goods and services (according to the procedure established by the government of Armenia) financed by funds intended for the preparation of credit and grant programs of international financial organizations
  • Gratuitous supply of goods and services by public (including benevolent) and religious organizations
  • Supply of precious and semiprecious stones indicated in the list specified by the government of Armenia
  • Supply of goods and services within humanitarian assistance and charitable projects by foreign states, international intergov­ernmental organizations, international, foreign, and Armenian public organizations (including charities), religious and similar organizations and individual donors, as well as supply of goods and services directly related and essential to the implementa­tion of such projects by Armenian VAT payers
  • Transfer of property (except for immovable property) into the share capital of legal entities by individuals except for sole entrepreneurs
  • Transfer of property (except for immovable property) into the share capital of legal entities by individuals except for sole entrepreneurs, if individual’s share corresponding to this invest­ment was not alienated during the three years after the invest­ment was made
  • Supply of services to the organizer and operator of a free-eco­nomic zone and the supply of goods in the territory of a free-economic zone
  • Transactions carried out within the scopes of subsidies, subven­tions and grant projects if these projects are awarded the endorsement of the professional commission formed by the government of the RA

Option to tax for exempt supplies. Not applicable.

Yet another category is the supply of goods and services that are outside the scope of VAT. These also do not give rise to a right of input tax deduction.

Time of supply

The time when VAT becomes due is called the “tax point.” The tax point is the moment when goods are delivered to or accepted by the customer or services are performed. For continuous sup­plies (for example, operating leases), the tax point is the last day of a reporting period.

Imported goods. The time of supply for imported goods is the moment of importation of goods into Armenia in accordance with the procedures established by the government of Armenia.

Reverse-charge services. The time of supply for services subject to the reverse-charge rules is determined in accordance with rules that are similar to the standard rules described above.

Recovery of VAT by taxable persons

A taxable person that performs economic activities in Armenia may generally recover input tax by deducting it from output tax, which is VAT charged on supplies made. Input tax includes the following:

  • Amounts of VAT indicated in tax invoices issued by the suppli­ers of goods and services purchased or received during the reporting period in Armenia
  • Amounts of VAT withheld (or subject to withholding) by cus­toms bodies of Armenia for goods imported into Armenia

To deduct input VAT, the following conditions must be satisfied:

  • The goods and services must be purchased or received in Armenia for production or other commercial purposes.
  • The payments for the goods and services must be made to sup­pliers’ bank accounts through a bank or post office (for cash purchases, deductions are available for purchases of up to AMD300,000 per transaction and up to AMD3 million per month).

If all other conditions for VAT set-off stipulated by the law are met, input VAT amounts reflected in tax invoices for the pur­chased goods and services can be deducted without the payment to suppliers, according to the following dates:

  • From 1 January 2015 by persons whose taxable turnover (with­out VAT) on supply of goods or rendering of services has not exceeded AMD100 million during the previous calendar year
  • From 1 January 2016 by persons whose taxable turnover (with­out VAT) on supply of goods or rendering of services has not exceeded AMD500 million during the previous calendar year
  • From 1 January 2017 by all VAT payers
  • The VAT payer must submit information to the tax authorities about purchase and sale tax invoices issued during the quarter that have a VAT taxable amount exceeding AMD100,000, except for tax invoices issued or accepted electronically through the Internet.

The excess of input VAT over output VAT in the reporting period may be carried forward and offset against output VAT in subse­quent reporting periods.

Nondeductible input tax. Input VAT may not be deducted in the following circumstances:

  • The person carrying out entrepreneurial activities is not consid­ered to be a VAT payer.
  • VAT was paid for transactions that are exempt from VAT (see Section D), not subject to tax or not regulated by the Armenian law on VAT.
  • VAT was paid for the goods and services purchased and/or used for non-production or noncommercial purposes.
  • Input VAT on purchased goods or services exceeds the output VAT on the sale of the same goods or services, except for cases in which the resale price is fixed by the government of Armenia.
  • VAT was paid on the purchase or import of passenger cars, except for the cars acquired for the purpose of resale.
  • The taxpayer failed to submit the required information to the tax authorities on tax invoices issued by suppliers within the quarter.

Examples of items for which input tax is nondeductible

  • Example 1. Taxpayer conducts one of the activities mentioned in Section D that is exempt from VAT. At the end of the month, the taxpayer receives a tax invoice for electricity. The taxpayer cannot deduct the amount of VAT indicated in the tax invoice as the activity that he/she conducts is exempt from VAT.
  • Example 2. Taxpayer purchases a passenger car for office use. The taxpayer cannot deduct the VAT amount paid for the pur­chased car. The VAT amount is capitalized in the value of the car and is depreciated during the useful life of it.

Examples of items for which input tax is deductible
(if related to a taxable business use)

  • Example 1. Taxpayer conducts an activity that is subject to VAT. At the end of the month, the taxpayer receives a tax invoice for electricity, rent of office premises and purchased fixed assets. The taxpayer deducts the amount of VAT indicated in the invoices after all the requirements of the law are met (described in second paragraph of Section F).
  • Example 2. A construction company buys construction materi­als for its business needs. The taxpayer can deduct VAT amount indicated in the tax invoice as the activity it conducts is subject to VAT and the materials that it had bought are for its business use.

Partial deduction. If a taxable person makes both taxable and non­taxable (exempt or outside-the-scope-of VAT) transactions, it may not deduct input VAT in full from output VAT. It may deduct only the amount of input VAT related to the goods and services used in taxable transactions. For this purpose, VAT payers shall maintain separate accounts for taxable and nontaxable transactions, as well as for the services and goods purchased for conducting such trans­actions.

If it is impossible to maintain separate accounts, the amount of input VAT subject to deduction in each reporting period must be prorated based on the ratio of taxable turnover to total turnover (VAT exclusive) of the business in the reporting period.

Capital goods. Effective from 1 January 2012, a capital goods adjustment applies for input VAT related to the purchase, con­struction or importation of fixed assets.

An input tax adjustment is required if input VAT is deducted for the purchase, construction or importation of fixed assets in a reporting period and if the asset is used in a subsequent reporting period for making supplies of goods or services that are not sub­ject to VAT. The adjustment applies to 20% of the amount of amortization calculated for the fixed asset under the Profit Tax Law.

An adjustment may also be made if no input tax is deductible in the reporting period in which the acquisition is made because, at the time of acquisition, the fixed asset is directly attributable to making non-VATable supplies and if the asset is subsequently used for making supplies that are subject to VAT. If the taxpayer makes both taxable and exempt supplies, the input tax recovery is based on 20% of the amount of amortization calculated for the fixed asset under the Profit Tax Law and on the ratio of taxable to nontaxable supplies made.

Refunds. Under the Armenian law on VAT, refunds are available only for zero-rated transactions (except for the export of ferrous and nonferrous scrap). In all other cases, excess input VAT can be deducted only from the taxpayer’s future VAT liabilities.

Preregistration costs. Not applicable.

Recovery of VAT by non-established businesses

Non-established businesses cannot recover VAT in Armenia, because only VAT payers in Armenia may recover input tax.

Invoicing

VAT invoices and credit notes. VAT payers supplying goods and services to legal entities and individual entrepreneurs must issue tax invoices if these supplies are subject to the standard rate of VAT. VAT invoices are not issued for supplies that are subject to the zero rate of VAT. A tax invoice must be issued on delivery of goods to, or acceptance of services by the customer. A VAT invoice is necessary to support a claim for input tax deduction. Tax invoices can be issued electronically or in hard copies. Depending on the business carried out by the taxpayer, tax invoices may be issued in advance, provided that the goods are supplied or the services are rendered on the supply date men­tioned in the tax invoice.

The VAT law in Armenia does not contain any rules with respect to the issuance of credit notes.

Invoices issued in a foreign currency. In general, tax invoices are issued by VAT payers in Armenian currency (AMD) only. However, commercial invoices can be issued in foreign currencies for transactions carried out with non-established businesses. In such cases, the daily foreign currency exchange rates published by the Central Bank of Armenia are taken into consideration.

Proof of exports. For export purposes, appropriate declarations are filed with the customs authority by specialized brokers based on the invoice information issued by the exporter. The customs authority grants approval for export after confirming that the invoice data and declarations are consistent and that all necessary documents are presented.

VAT returns and payment

VAT returns and payment. VAT payers that had VAT taxable turn­over during the preceding calendar year in excess of AMD100 million must file monthly VAT returns with the local tax authori­ties. All other VAT payers must file their VAT returns quarterly. VAT due is payable to the state budget by the 20th day of the month following the reporting period.

For goods imported into Armenia, VAT must be paid within 10 days after importation in accordance with the procedure estab­lished by the government of Armenia. VAT payment may be deferred on the importation of certain goods.

If the previously declared customs regime (under which VAT is not levied on the goods passing the customs border) is replaced by the import for domestic consumption regime, the taxpayers must pay the amount of applicable VAT within 10 days after the redeclaration of goods or after the day when it became known.

Special schemes. Not applicable.

Electronic filing and archiving. Starting in 2012, all VAT payers file all returns electronically through their accounts at https:// file-online.taxservice.am. There are no special rules defined by the law for archiving. All tax returns are kept electronically in the taxpayers’ accounts at https://file-online.taxservice.am.

Annual returns. Not applicable.

Penalties

The penalty for understatement of VAT payable equals 50% of the amount not declared. A penalty of 100% of the above-men­tioned amount is applied if a violation is repeated within one year or if the VAT invoice is annulled for the purpose of decreasing VAT payable.

The penalty for the violation of instructions established by the government of Armenia for the issuance of tax invoices (includ­ing adjusted tax invoices) equals double the amount of the remu­neration with respect to the respective tax invoice (including the amount of VAT) but not less than AMD5 million.

The penalty for filing a VAT return late is 5% of the calculated tax for each 15-day period, up to a maximum penalty of the total tax amount.

In addition, interest is charged on late tax payments at a rate of 0.15% of the tax due for each day of delay (up to 365 days).