ArmInfo.The Ministry of Finance of Armenia, in order to establish , proposes to transfer certain areas of professional activity to the value added tax system from July 2025.
, - said the Minister of Finance of the Republic of Armenia Vahe Hovhannisyan on November 7 at a meeting of the Cabinet of Ministers presenting the relevant amendments to the Tax Code. In particular, the head of the Ministry of Finance explained, the problem is that a teacher or doctor carrying out professional activities pays income tax in the amount of 20% from their salary, while representatives of other areas of professional activity or the same individual entrepreneurs either do not pay this type of tax at all, working in the sphere of micro- entrepreneurship, or pay a 5% turnover tax.
The next problem is that when operating in the micro-entrepreneurship system, business entities are exempt from business taxes, and the tax burden in the turnover tax system is significantly lower than the burden for businesses operating in the general tax field but engaged in the same type of activity. This leads to aggressive tax planning, underestimation of the real amount of taxes, believes the chief financier of Armenia. For this purpose, the financial authorities propose to remove certain areas of professional activity from the scope of application of special taxation systems.
The Minister reminded that in this context, amendments to the Tax Code have already been adopted, which will come into force on January 1, 2025. In particular, the turnover tax rates will be doubled. In addition, from 2025, representatives of notary, advocacy activities and the organization of lotteries from the turnover tax system will be transferred to the general tax field; in the microenterprise taxation system, the activities of taxpayers engaged in the purchase and sale and / or lease of real estate in the regions, hairdressing services, body care, car maintenance services, intermediary services, software development and construction work, assessment and measurement of real estate, activities for the organization of baths and saunas will be limited (the adoption of the project, as previously indicated in the Ministry of Finance, promises the state treasury an annual increase in revenues from the turnover tax of about 17.8 billion drams - ed.).
If the new initiative is approved, from July 2025, those taxpayers who carry out the following activities cannot be microentrepreneurs or payers of turnover tax: legal and accounting activities; head office activities; management consulting services; building construction, civil engineering, specialized construction activities; real estate transactions for a fee or on a contractual basis; architectural and engineering activities; technical testing and analysis; advertising activities and market research; scientific research and technical development, other professional, scientific and technical activities; activities to provide temporary labor; health care.
During discussions with stakeholders, according to Hovhannisyan, a number of areas of activity, such as veterinary activities, social services to the population with the provision of housing, activities to provide social services without the provision of housing, were excluded from the list. An early draft also proposed to limit the operation of interregional, intraregional transport routes or the organization of bus (minibus) passenger transportation in the micro-enterprise system. The entry into force of the amendments was also postponed - from January to July 2025. The possibilities for reducing the tax base were expanded, in particular, administrative costs were included in the composition of expenses, deductible revenues. If the amendments are adopted, the annual increase in state budget revenues from VAT and income tax is estimated at approximately 13 billion drams.
Currently the turnover tax (replaces VAT and income tax) is paid by business entities whose annual turnover does not exceed 115 million drams (from January 1, 2020, Armenia returned to a non-taxable annual turnover of up to 115 million drams). This group includes SMEs, individual entrepreneurs and notaries. In particular, we are talking about payments of 5% of the turnover of commercial activities and 3.5% of the turnover of production. As previously reported by the Ministry of Finance, studies show that instead of an alternative general taxation system, the turnover tax system has turned into a preferential taxation system. In particular, when comparing the tax burden of the general taxation system (VAT and income tax) and the turnover tax system in certain areas of economic activity, it turned out that in almost all industries (with the exception of those industries in which the main transactions are exempt from VAT), the tax burden of the general taxation system significantly exceeds the turnover tax burden. Thus, the total tax burden on VAT and income tax in the manufacturing industry exceeds the burden on turnover tax by 2 times, in construction - by 2.6 times, in trade - by 2.6 times, in the sphere of accommodation and public catering - by 3 times, in the sphere of real estate - by 2.1 times, in the sphere of professional, scientific and technical activity - by 2.8 times.
