Armenia`s authorities phasing out income tax reimbursement programme  for mortgage loans

ArmInfo.Armenia's authorities are phasing out the income tax reimbursement programme for mortgage  loans Armenia's Minister of Finance Vahe Hovhannisyan said the government  proposes narrowing the territorial and time frames. 

In particular, it is expected to establish that after January 1,  2027, income tax on mortgage loans on the primary market is not  refundable if the property is located in the regions adjacent to the  city of Yerevan - Aragatsotn, Ararat, Armavir and Kotayk. From  January 1, 2029, tax refunds will no longer apply in other areas.  Restrictions will not apply to border settlements.

In addition, for mortgage transactions from January 1, 2025, the  total amount of refundable income tax to the substitute or  co-borrower cannot exceed 750 thousand drams per quarter.

Prime Minister of Armenia Nikol Pashinyan, in turn, said that since  2018, thanks to this program, more than 35 thousand families have  purchased an apartment. In 2022, about 35 billion drams in taxes were  returned to citizens (90% for mortgage payments).

The program has been in effect since November 2014: citizens who  purchase housing using mortgage lending on the primary market  (apartments in new buildings or new private houses) receive an income  tax refund in the amount of mortgage interest. In 2017, the financial  authorities of Armenia stated that the legal norm was aimed at  creating stable and effective demand in the sector, as well as  solving social problems.

Meanwhile, the social component turned out to be insignificant, and  state treasury expenses increased sharply. As a result, from July 1,  2022, a gradual abolition of the income tax refund system on mortgage  loans began in Yerevan. It was noted that from this moment the income  tax will not be refunded to those citizens who decided to purchase an  apartment on a loan in the 1st zone of Yerevan (center) and received  a loan for it after this period. From January 1, 2023, income tax  refunds were canceled for those who purchased housing in the 2nd  zone, and from July 1, 2023 in the 3rd zone. Then a 1.5 year break is  offered.  For the rest of the city of Yerevan, a precondition for  obtaining a mortgage loan was established by January 1, 2025.

As the deputy head of the State Revenue Committee of the Republic  Artem Smbatyan reported on November 8, in January-September 2023 the  state returned income tax to "mortgage holders" in the amount of 37.5  billion drams (about $93 million). According to him, IT employees  received 22.3% of these payments or 8.3 billion drams, while civil  servants received about 3 billion or 8.2%.