Monday, December 16 2024 13:01
Naira Badalian

Armenia`s premier on objective of turnover tax revision 

Armenia`s premier on objective of turnover tax revision 

ArmInfo. The change in the  sales tax system is intended to reduce the shadow of big business,  including the return of what was stolen and plundered. This statement  was made by Prime Minister of Armenia Nikol Pashinyan on his Facebook  account. 

As a result of the June amendments to the Tax Code, accountants and  lawyers will be transferred to the general tax field from January  2025. The turnover tax rates set for the main types of activities  will also be doubled, with the possibility of reducing the tax  payable at the expense of documented expenses. In addition, it is  proposed to transfer accountants, lawyers and representatives of the  consulting sector to the VAT field from July 2025.

As the Prime Minister stated in his video address, among the issues  raised at his request, citizens quite often talk about changes  related to the turnover tax, which will come into force on January 1,  2025. The comments say that the authorities are putting pressure on  small businesses. Meanwhile, the Prime Minister believes that it is  necessary to understand what is really going on.

 

There is a fundamental problem with this regulation, earlier it  seemed that we were giving a person the opportunity to ensure legal  shadow circulation. We must change this policy, it is illogical and  anti-state.  But, on the other hand, we understand that we cannot  completely reverse the process that has been going on for many years  in one step>, he noted. 

In this regard, the head of the Cabinet explained, the authorities  propose the following: if the purchased goods are not documented,  then you need to pay a tax of 10%, and if they are documented, then  the tax is also reduced and becomes from 1.5% to 1%. ,  Pashinyan said. At the same time, the prime minister believes that  this creates a problem not for small, but for large businesses. 

 

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. 

Thus, today for entrepreneurs in the field of trade activities, a 5%  turnover tax rate has been established, 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.

Catering representatives currently 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. Currently, Armenian restaurateurs 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 manufacturing  activities. Currently, the turnover tax rate is 3.5%. It is proposed  to set the rate at 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 5% turnover tax rate will  increase to 10% from 2025 with the possibility of deducting 6% of  documented expenses from liabilities, 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 - ed.).

In general, the project adopted in June, as previously stated by the  Ministry of Finance, promises the state treasury an annual increase  in revenues from turnover tax of approximately 17.8 billion drams.  

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