After registering a company in Armenia, businesses benefit from a structured choice between the general tax system (VAT + CIT) and the simplified turnover tax regime (replaces the VAT and CIT for LLCs and JSCs; and replaces VAT for individual entrepreneurs). Choosing the most suitable tax regime can profoundly optimize the company’s tax liability. This article will help you understand how the election is carried out, and how to navigate it with clarity.
Tax Regime Options: General vs. Turnover Tax
| General system | Turnover Tax |
| Value-Added Tax (VAT) – 20% for taxable goods and servicesCorporate Income Tax (CIT) – 18% for taxable goods and services | Turnover Tax – varies between 1.5% and 20%For individual entrepreneurs: AMD 5000 monthly |
Eligibility Requirements and Application Deadline
To apply for the turnover tax:
- Companies must have an annual turnover of no more than AMD 115 million (~USD 301,362). Once the turnover exceeds this threshold, the tax regime needs to be changed.
- An application to the tax authorities must be submitted within 20 days of registration. Missing this window would automatically make you a VAT payer.Â
- The taxpayer should file an application to the tax authorities annually before 20 February of the calendar year to become a turnover taxpayer.Â
How much is the turnover tax in Armenia?
The turnover tax rate varies depending on the company’s activities:
| Type of income | Tax rate (%) |
| Trading activities | 10.0 |
| Production activities | 7.0 |
| Newspaper sales by publishing companies | 1.5 |
| Rental income, interest, royalties, and assets’ disposal (including estate property) | 10.0 |
| Income from activities included in the list of high-tech activities established by the government | 1.0 |
| Income on public food organisation | 12.0 |
| Other revenues from the activities not included in the public food organisation section of the economic activity classifier of the turnover taxpayers operating in the public catering sector | 20.0 |
| Income from the disposal of other assets, including real estate | 10.0 |
| Income on other type of activities | 10.0 |
Example
Let’s say you open a small software development company in Yerevan, with an expected annual turnover of AMD 80 million and AMD 20 million in expenses.
- General tax regime: Because your profit is AMD 60 million, you’d owe 10.8 million CIT, plus VAT collected from clients.
- Turnover tax regime: Since software development is considered a high-tech activity, your turnover tax rate is 1%. That means you would only pay AMD 800,000 in tax, with no VAT obligations and no separate corporate income tax.
Clearly, for this type of business, the turnover tax regime provides a huge tax advantage, but if the company’s turnover grows above AMD 115 million, it will need to switch to the general system.
Armenia’s tax regime offers businesses substantial flexibility. By carefully evaluating eligibility, meeting election deadlines, and maintaining compliance throughout the fiscal year, companies can optimize their tax burden substantively. If you need any help related to your specific case, or guidance relating to whether your company is eligible for the turnover tax, our team at Retrieve Legal and Tax will be glad to be of service in case of any inquiries. You can contact us via email: info@retrieve.am; or telephone: +374 41 777 332.
FAQs
- Can I choose my taxation regime in Armenia?
Yes, if eligible, you can choose between the general tax regime, and the turnover tax regime.
- Is it possible not to choose a tax regime in Armenia?
Yes, in that case you will automatically be considered a part of the general tax regime.
- Why should I choose the turnover tax regime in Armenia?
If you are a part of the general tax regime, you need to pay a VAT (20%), and a CIT (18%). If you are eligible to be a turnover taxpayer, you can pay a tax of as low as 1% (depending on your activity), which can replace your VAT and/or CIT.