ArmInfo. Armenia will revise the minimum threshold for VAT refunds on goods purchased by foreign citizens on exports. The decision was made at a government meeting on September 3.
The rationale for the draft decision notes that, according to the current regulation, VAT refunds are currently possible if the value of purchases made within one calendar day exceeds the established minimum threshold of 50,000 drams. Currently, the process is organized through a public administration system involving customs and financial authorities, which requires paperwork, relatively long deadlines, and limited digitalization. At the same time, international experience shows that the effectiveness of duty-free systems largely depends on the minimum purchase threshold and the management model. Specifically, in Spain, there is no minimum threshold, while in Uruguay, It's 13 euros in Armenia, about 30 euros in Colombia, about 35 euros in Japan, about 40 euros in Denmark, about 50 euros in the Netherlands, Belgium, and Germany, about 70 euros in Singapore, about 75 euros in Austria, and about 100 euros in France. From the above, it's clear that the current threshold in Armenia, equivalent to 120 euros, is higher than the thresholds applied in many competing tourist destinations, significantly limiting the accessibility and effectiveness of the system. Research shows that a high threshold reduces the involvement of small and medium-sized businesses, limits sales to tourists, and reduces the number of transactions. For example, in the Netherlands, lowering the threshold from 150 euros to 50 euros led to a significant increase in the number of duty-free transactions, and in some countries, the number of sales doubled and even tripled. Furthermore, the existing system's sole management model for VAT refunds limits its effectiveness and attractiveness to tourists. Under these circumstances, the need has arisen to implement a more effective management model, including with the participation of the private sector (authorized operator), within which the minimum purchase value threshold for purchases made within one calendar day is being revised, thereby digitizing and accelerating the process.
At the same time, future discussions are planned on completely lifting the restrictions established by the current regulation on VAT refunds to foreign nationals leaving the Republic of Armenia by land transport no more than twice a year, as well as on the total amount of VAT refundable, not exceeding 350,000 drams. However, this will only happen if actual data demonstrates that such restrictions are no longer necessary.
The draft proposes to allow for the involvement of an authorized operator in the VAT refund process, revise the minimum purchase threshold established for VAT refunds through an authorized operator, bringing it into line with international best practices, and ensure the full digitalization and simplification of the system. It is envisaged that the VAT refund system operator will be an organization with international experience that undertakes to implement and operate a fully digital system at its own expense. International experience shows that this model is more effective, ensuring a quick and simple refund process, reducing the administrative burden on government agencies, and improving the quality and accessibility of services. At the same time, engaging a private operator will improve the system's efficiency compared to a fully state-run management model.
