Taxpayers are charged with the Armenian personal income tax on both, their Armenian-sourced income and income made overseas. The tax system depends on an individual’s tax residence status and the tax deducted depends on the total income. Armenian-sourced income as deemed by the Tax Code is any form of income paid directly by local companies or profits realized from carrying out business activities within the state.
This is a detailed guide to the tax system of Armenia; and the various types of taxes.
Who is liable to pay the tax
Income taxpayers are residents and non-residents within the territory. According to the tax code, if a person resides in the RA for 183 days or more, earns money in the civil service of the nation, or works temporarily outside the territory, such a person is deemed to be a resident.
Every taxable income made by residents within or outside the territory is levied. However, for non-residents, taxable income with Armenian sources is levied.
Since the law has no minimum threshold as to when an individual starts to pay taxes, personal income tax deduction takes effect from the first day of work.
Types of taxable income
Generally, all types of income are subject to tax except specifically exempted ones.
| Types of income | Taxable |
| employment income | Yes |
| interest income | Yes |
| income from other economic activity | Yes |
| dividends | Yes |
| income-based on civil contracts | Yes |
| rental income | Yes |
| royalty | Yes |
| capital gains from the sale of property | Yes |
Personal income tax (wages and salaries)
A flat rate for income tax on salaries was set at 23% in 2020. However, this has gradually reduced to 21% and is estimated to decrease by a further one percent.
Interest income
The income tax on interest has a fixed rate of 10 percent.
Dividends
When ex-pats receive dividends, they are liable to a 10 percent Income tax and while native citizens are charged a 5 percent tax rate. dividends with Armenian sources owned by residents are levied at a 5 percent income tax.
Royalty
A 10% tax rate is imposed on the income made from royalties payments.
Capital gains from the sale of property
Money gotten from tax agents after the sale of a property is subject to a 10% Income tax, except for income from the alienation of a building, its apartments, or other areas. Income made after the sale of a car within 365 days after its purchase attracts a 1 percent income tax, but no lesser than 150 Armenian Dram (AMD) for the horsepower of an engine.
Rental income
Rentals attract an income tax at a 10 percent rate. When the gross amount of the income realized during the tax year surpasses AMD60 million, another income tax of 10 percent is imposed on the additional income.
Withholding tax
Employers must estimate and withhold income tax and social payments monthly from their employees and transfer these amounts to the state budget, no later than the 20th day of the month.
Double Taxation
Armenia is in double-tax treaties with 48 countries to avoid double taxation for non-residents.
Value Added Tax
Value-added tax (VAT) is applied at 20 percent for taxable turnover.
Stamp Fee
A stamp fee is withheld by an employer/tax agent monthly from their employees’ salaries and transferred to the specified bank account.
N.B
Note that a permanent establishment (PE) of a non-resident business is deemed to be any place where activities are carried out in the RA and registered with the tax authorities. According to the tax regulation, the branch office or representative office of a foreign company is considered to be a PE.
