ArmInfo. The Ministry of Finance of Armenia proposes to leave the non-taxable VAT threshold of turnover tax unchanged at the level of 115 million drams ($ 200,000). Meanwhile, the Tax Code of 2016 from January 1, 2019 set a return to the previous norm in the amount of 58.35 million ($ 120 thousand). The draft law, which provides for the relevant amendments to the Tax Code of the Republic of Armenia, is presented by the Ministry of Finance on the single portal of legal acts e-draft.am.
In 2015, the government made a package of amendments and additions to the RA Law "On Value Added Tax" and related laws, thereby raising the maximum threshold for annual turnover from 58.35 million to 115 million drams. The proposed solution was associated with the requirement of the mandatory documentation of transactions for the purchase of goods, which became the main reason for dissatisfaction of representatives of small and medium businesses. As reported, if under the current law there is a requirement to document the transaction for the purchase of goods, in terms of which the turnover tax on commercial activities is estimated at 1%, then the requirement of documenting becomes optional. Instead, it was proposed to calculate the 5% tax rate on the total turnover, which can be reduced by 4% of the total volume of documented transactions on the acquisition of goods for the purpose of direct sale / resale. In this case, the law established that the calculated turnover tax for persons engaged in commercial activities cannot be less than 1.5% of the taxable object. The former head of the Ministry of Economy Karen Chshmaritian then explained that this is an updated version of a simplified tax, in which the tax amount is calculated at a rate of 5% of the total turnover. The tax code of 2016 established a return to the previous norm.
As a result, in February of this year. Commenting on the reduction of the free threshold for ArmInfo, former Deputy Minister of Finance, and now head of the State Revenue Committee of Armenia David Ananyan said that the annual lost revenue of the state treasury on VAT is estimated at 400 billion drams. As the representative of the Ministry of Finance noted, in 2015 the government went on increasing the maximum non-taxable threshold for annual turnover in an experimental manner in the hope of changing the tax behavior of business entities. However, in practice, as Ananyan pointed out, the business remained committed to the old policy of not showing its real turnover. As a result, the financial authorities considered it illogical to leave the preferential threshold, and on June 15, the Armenian government rejected a legislative initiative to raise the threshold to 115 million drams.
Observations of the State Revenue Committee based on the analysis of tax reporting of taxpayers from the sales tax showed that the annual turnover of more than 90% of taxpayers is less than 10 million drams (that is, their daily turnover is about 27 thousand drams, ed.). This means that even in the conditions of preserving the practice of economic entities, the business is split into parts, they fit into the established framework.
As stated in the Armenian Ministry of Finance, reducing the free threshold, limited the ability of business to split it into parts. In the case of raising the threshold to 115 million, according to the most modest estimates of the Ministry of Finance, the annual budget losses in terms of tax revenues can be about 11.7 billion drams.