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.
