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Starting from Jan 1, 2020, a new micro-business taxation system will be introduced in Armenia

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05.12.2018
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Starting from January 1, 2020, a new micro-business taxation system will be introduced in Armenia. At the same time, the republic will abandon two alternative tax systems - self-employed and family entrepreneurship. Armenian Deputy Minister of Finance Arman Poghosyan told reporters on December 4 at a press conference.

According to him, at this stage, there are 5 alternative taxation systems in Armenia - self-employed, family business entities, payers of sales tax and patent tax, as well as those in the general field of taxation - VAT and income taxpayers. As a result of the planned reforms, their number should be no more than 3 - the micro-enterprise taxation system, turnover taxpayers and those working in the general field of taxation.  According to the Ministry of Finance, as a result of the availability of alternative tax systems, difficulties discrepancies and corruption risks arise, a business becomes more vulnerable in relations with tax authorities. In addition, as  Poghosyan pointed out, against the background of the availability of such a "range" of alternative taxation systems, there is a complete discrepancy between business income and taxes paid by them. The  Ministry of Finance has repeatedly stated that as a result of various tax benefit, the annual tax loss of the state treasury is estimated at 442 billion drams.

Within the framework of this initiative, the Government of Armenia represented by the Ministry of Finance proposes to increase the non-taxable threshold for self-employed citizens from 9 million drams to 20 million drams from January 1, 2019. According to the current regulations, today certain activities with the annual turnover of up to 9  million drams are exempted from taxes, with the exception of import duties.  Starting from the next year family members with a turnover of up to 20 million drams will be considered entities of a family business, against the current 18 million drams. As a result, they only have to pay import duties.

At the same time, as of January 1, 2020, the Ministry of Finance will start a significant simplification of the taxation system for small businesses. In particular, instead of two alternative tax systems -  self-employed and family entrepreneurship, the government intends to introduce one micro-enterprise taxation system.  This system can be used by both legal entities and individual entrepreneurs and individuals who are not individual entrepreneurs if their annual turnover does not exceed 20 million drams.  Those organizations and individual entrepreneurs operating in shopping centers, retail outlets and at fairs within the administrative borders of Yerevan or outside the capital will not be considered micro-business entities.  In the course of their activities, they can attract individuals to work as employees, and income tax on them will be paid in the amount of 5 thousand drams per month.

In addition, from January 1, 2020, Armenia will also completely abandon the patent tax system (those carrying out certain types of activities pay a fixed tax, without restriction on turnover).  "The proposed document is aimed at improving the competitiveness of the national economy and investment attractiveness by changing the system of redistributing the tax burden, as well as simplifying the tax system of microbusiness and strengthening fiscal stability," Arman  Poghosyan said.  Earlier, ArmInfo reported that the Ministry of  Finance of Armenia submitted to the public a draft law "On amendments and additions to the Tax Code of the Republic of Armenia". The document was posted on the single portal of legal acts e-draft.am.

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