Economic entities must not get accustomed to "cottonwood existence" -  minister

ArmInfo.The Armenian authorities are consistently working to eliminate any types of tax  preferences. The Minister of Finance of the Republic of Armenia Vahe Hovhannisyan stated this on June 12 at a meeting of the National Assembly of the Republic of Armenia.

According to him, the government's recent steps to increase turnover  tax rates and return business entities to ordinary types of taxation  are clear confirmation of this. The main goal of these measures is to  bring everyone to a single form of taxation. "But this does not mean  that there will be no tax breaks, they will be in one form or  another. The question is that we establish some preferences, which we  then forget about, and this becomes the norm, which is wrong, since  the system gets used to working in greenhouses conditions," the  minister emphasized, adding that any preferences should be temporary.

On June 12, the National Assembly of the Republic of Armenia approved  amendments to the Tax Code of the country, according to which  turnover tax rates will be doubled.

From October 2024, the turnover tax system will be revised, and from  2025, the scope of beneficiaries of the micro-enterprise system will  be narrowed. In particular, today a 5% turnover tax rate has been  established for entrepreneurs in the field of trading activities,  with the possibility of deducting 4% of documented expenses from  liabilities, but not less than 1.5% of turnover. As part of the  initiative, it is proposed to set a rate of 10% of income with the  possibility of deducting 9.5% of expenses, but not less than 1.0% of  turnover. Then the effective tax will increase from 2.3% to 4.1%,  providing the state treasury with additional taxes in the amount of  4.9 billion drams.

Representatives of public catering at this stage work with a 6%  turnover tax with the possibility of a tax deduction of 3% of  documented expenses, but not less than 4% of turnover. As the  Ministry of Finance previously stated, Armenian restaurateurs  currently pay an average of 4.3% of sales turnover, which they assess  as a low tax burden. In this regard, it is proposed to establish a  12% turnover tax with the possibility of a tax deduction of 9% of  documented expenses, but not less than 3.5% of turnover. In this  case, the effective tax will increase from 4.3% to 6.6%, providing  the state treasury with additional taxes in the amount of 4.9 billion  drams.

Changes are also planned for representatives of production  activities. Currently the sales tax rate is 3.5%. It is proposed to  set a rate of 7% of income with the possibility of deducting 5% of  expenses, but not less than 3.5% of turnover. In this case, the  effective tax will increase from 3.0% to 5.3%, providing the state  treasury with additional taxes in the amount of 0.6 billion drams.  For other types of activities, the current sales tax rate is 5%. It  is proposed to set a rate of 10% of income with the possibility of  deducting 6% of expenses, but not less than 4.5% of turnover. In this  case, the effective tax will increase from 5% to 8.5%, providing the  state treasury with additional taxes in the amount of 8.7 billion  drams.

The authorities also plan to expand the range of activities  prohibited from taxation under the microenterprise tax and turnover  tax systems. In particular, from 2025 it is recommended to limit; A.  the opportunity to engage in notary, lawyering and organizing  lotteries in the value added tax system; b. in the micro-enterprise  taxation system, the activities of taxpayers engaged in the purchase  and sale and/or rental of real estate, hairdressing services, body  care, car maintenance services, software development and construction  work, assessment and measurement of real estate, organization  activities baths and saunas.  They will have to operate either under  the sales tax or VAT system. The adoption of the project promises the  state treasury an annual increase in turnover tax revenue of  approximately 17.8 billion drams.