ArmInfo. The Armenian government is withdrawing from the mortgage loan income tax refund program, but in return, similar tools will be introduced as part of the income declaration mechanism. Armenian Minister of Economy Vahan Kerobyan told reporters during a briefing on November 22.
In addition, he noted that the Ministry also intends to help reduce mortgage rates. "We are cooperating with the Central Bank and other government partners so that citizens of Armenia can have the same mortgage rates as citizens of developed countries, so that as a result there is no need to use instruments to subsidize them," the minister noted.
According to Kerobyan, the income tax refund program for mortgage loans was launched, among other things, to stimulate the development of the construction sector. Now that results have already been achieved, the state intends to maintain activity in the industry through other tools. As the head of the department noted, the saved funds will be used to implement social programs that will become necessary.
On November 17, the Armenian government decided to gradually cancel the income tax refund program for mortgage borrowers. As Armenian Finance Minister Vahe Hovhannisyan noted, the government proposes to gradually narrow the scope of the system both in time and territorially.
In particular, it is expected to establish that after January 1, 2027, the mechanism of tax deduction for mortgage loans for the purchase of housing on the primary market will be abolished in Yerevan and in the nearby regions adjacent to Yerevan: Aragatsotn, Ararat, Armavir and Kotayk. From January 1, 2029, the deduction will not be effective in other regions of the republic as well. The tax deduction for mortgages will only apply to border settlements.
In addition, from January 1, 2025, in the case of mortgage transactions, the total amount of income tax returned to the borrower or co-borrower will not exceed AMD 750,000 per quarter.
The tax deduction 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 interest on the mortgage.
From July 1, 2022, Yerevan has already begun the gradual abolition of this incentive measure. 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 small center (1st zone) of Yerevan 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 First Deputy Chairman of the State Revenue Committee of the Republic Artyom 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%.
According to the Financial Rating of banks and credit companies in Armenia as of December 31, 2022, prepared by ArmInfo IC, mortgage lending slowed down the y-o-y growth rate from 28% to 18%, ensuring a volume of 1.1 trillion drams ($2.8 billion). This is the total volume of mortgage lending from all 17 banks and four mortgage companies - the National Mortgage Company, Affordable Housing for Yong Families, First Mortgage Company and Fides.
