On VAT Payment Process in the Republic of Armenia
Value-added tax is an indirect tax paid to the state budget for importation, exportation, and turnover of goods on the territory of the Republic of Armenia as well as providing services at all stages. VAT payers are legal entities carrying out entrepreneurial activity, foreign legal entities’ branches which are registered in the Republic of Armenia, public notaries, and individual entrepreneurs.
The objects of the VAT are agreements on:
- delivery of goods;
- rendering services;
- free consumption (with partial compensation); free provision of goods and services from VAT payers or delivery of goods or rendering services at an essentially lower price;
- importation of goods by customs regime “Release for domestic consumption”;
- delivery of goods and rendering services as an investment for carrying out a joint activity without forming a legal entity.
First of all value added tax is imposed on the turnover of goods and services in the Republic of Armenia. And it’s significant that fewer than all amounts are subject to taxation. So, VAT is not imposed:
- on state duties;
- on free warranty service of realized goods, transferring shares of legal entities as well as transactions on privatization;
- on reorganizing legal entities;
- turnover on the realization of ownerless values and treasure troves, or transferring subsidies, subventions, financial incentives, obtaining which one doesn’t cause a counter-obligation to deliver goods or render services;
- when importing personal effects by individuals;
- on the exportation of goods imported to Armenia in customs regime “Re-exportation”;
- on real estate lease contracts by individual entrepreneurs and individuals (except public notaries);
- and so on.
The rate of VAT shall be determined in the amount of 20 (twenty) percent of taxable turnover of goods and services. The amount of VAT within the amount of the total indemnity for the goods and services including 20 (twenty) percent rate shall be determined at the rate of 16.67 percent.
Tax legislation of the Republic of Armenia establishes an exemption and zero-rated taxation by VAT. Exemption from VAT is applied to transactions and operations on:
- the part of the fee for education at secondary schools, vocational schools for qualification and re-qualification, specialized- secondary and higher educational institutions;
- sales of copy-books and music books, albums for drawing, children’s and school literature, school educational publications; sales of scientific and educational editions published by higher educational institutions, specialized scientific organizations and the National Academy of Sciences of the RA;
- scientific and research works;
- sales of veterinary medicines, sales of poisonous chemicals used in agricultural production, fertilizers, agricultural plants and seeds of perennial plantations and planting material used by producers of agricultural production;
- sales of newspapers and magazines;
- provision of services by undertaker’s offices, cemeteries, as well as other ritual services and sales of respective accessories related to death and burial;
- insurance and reinsurance operations, including services related to them, which are rendered by insurance mediators and agents;
- operations related to pension insurance, including services related to them, which are rendered by mediators and agents;
- a number of financial operations and transactions;
- lease of state and municipal housing, service fees paid by the owners of privatized flats;
- delivery of goods and provision of services according to the procedure established by the Government of the RA for the preparation facilities of credit and grant programs of international financial organizations;
- and other types of activity.
Zero-rated VAT is applied to:
- exportation of goods from the Republic of Armenia;
- importation into the territory of the Republic of Armenia in customs regime “Processing on the customs territory” and exportation in the regime “Re-exportation” in terms established by the law;
- the taxable turnover of services whose place of provision is outside the domestic territory of the RA in accordance with this law;
- the transit transportation of foreign loads through the territory of the RA;
- to other types of transactions.
The Law “On turnover tax” established the new tax, replacing VAT and profit tax for legal entities. That law announces, that persons, whose annual turnover doesn’t exceed 115.000.000 drams, have the right to file an application for a transition from VAT and profit tax to turnover tax. Persons whose total revenue of prior year exceeds 115.000.000 drams are subject to taxation with VAT.
Each quarter (three months) is regarded as the reporting period of the value-added tax. VAT payers pay the tax to the state budget by the 20th date of the following first month of their reporting period. For some categories of VAT payers, tax legislation of the Republic of Armenia determines other terms of a reporting period. When importing goods into the Republic of Armenia VAT must be paid to customs bodies within ten days of the importation day. But as the Republic of Armenia joined the Eurasian Economic Union, the importers from the EAEU enjoy the right to pay VAT to tax bodies of the Republic of Armenia by the 20th date of the following month.