Armenian Government to Revise Property Taxation Framework
During a recent meeting led by Prime Minister Nikol Pashinyan, the Armenian government approved several legislative proposals aimed at revising the taxation of properties on state and community-owned lands. These proposals include amendments to the Tax Code, changes to local fees and payments, and updates to the law regarding cadastral assessments for taxation purposes.
The primary aim of these legislative changes is to enhance the taxation framework for buildings on state and community land, including unauthorized constructions. The government seeks to reassess the tax burden on unfinished buildings to incentivize their completion. The proposals stipulate that unauthorized buildings will also be subject to property taxes. Additionally, if a construction permit expires or is extended based on the level of completion, tax base reduction coefficients will not be applicable. Extensions of construction permits will incur significantly higher local fees to deter developers from unnecessarily prolonging construction timelines. Furthermore, the proposals suggest increasing local tax rates for the issuance of construction permits.
Prime Minister Pashinyan emphasized the importance of these legislative measures, particularly those concerning regulations that take effect after construction permits expire. He stated, “Property taxes must be paid. To extend a construction permit for a second time, various fees must be paid. This is the first regulation. We will observe its impact on the situation. I do not rule out implementing stricter methods in the future. This is a crucial regulation. Ultimately, even if construction does not proceed, the community budget should receive some compensation, and property taxes must be paid.”
The government also approved a framework for providing state support to commercial entities and individual entrepreneurs in the information technology sector, aimed at fostering the development of the IT industry in Armenia and maintaining competitive viability against other countries. The justification for this initiative notes that various countries implement tax incentives to stimulate businesses in the IT sector. Many IT organizations generate revenue in foreign currency, and the recent depreciation of the US dollar and euro has negatively impacted the financial performance of local companies, hindering their growth. The proposed support is expected to enhance these organizations while preserving existing jobs and maintaining employee wages.
The government allocated 1,342,950.9 thousand drams to the regional administrations of Aragatsotn, Ararat, Armavir, Gegharkunik, Lori, Kotayk, Vayots Dzor, and Tavush for subsidy program implementation. Additionally, 959,827.5 thousand drams will be allocated to the regional administrations of Aragatsotn, Gegharkunik, Lori, and Shirak for subsidy provision.
During the meeting, Prime Minister Pashinyan addressed the 2021 poverty index published by the Statistical Committee, reporting that poverty in Armenia was at 26.5%. Compared to 2020, there was a slight decrease in poverty, while a 0.1 percentage point increase was noted compared to 2019. He emphasized that since 2019, the poverty index has been calculated using a new methodology, making comparisons with prior years invalid. Additionally, he noted a 0.1% increase in extreme poverty since 2019 and a 0.8% increase compared to 2020, indicating the effectiveness of anti-crisis measures during the COVID-19 pandemic. “As a result of our COVID measures in 2020, we halved extreme poverty, but since the end of the pandemic and the conclusion of crisis programs, it has slightly increased,” he stated.
The Prime Minister instructed the Minister of Labor and Social Affairs to conduct a thorough analysis of the poverty structure and develop a strategy for poverty alleviation. “This must be done within our ideology. My belief is that poverty can only be overcome through labor. There is no other way to address poverty. In this context, we need to seriously reconsider our social policy. Currently, there is a labor shortage in the job market. Unemployment has reached a historically low level, and we are receiving ongoing signals from the private sector about difficulties in finding employees,” Pashinyan concluded.
The primary aim of these legislative changes is to enhance the taxation framework for buildings on state and community land, including unauthorized constructions. The government seeks to reassess the tax burden on unfinished buildings to incentivize their completion. The proposals stipulate that unauthorized buildings will also be subject to property taxes. Additionally, if a construction permit expires or is extended based on the level of completion, tax base reduction coefficients will not be applicable. Extensions of construction permits will incur significantly higher local fees to deter developers from unnecessarily prolonging construction timelines. Furthermore, the proposals suggest increasing local tax rates for the issuance of construction permits.
Prime Minister Pashinyan emphasized the importance of these legislative measures, particularly those concerning regulations that take effect after construction permits expire. He stated, “Property taxes must be paid. To extend a construction permit for a second time, various fees must be paid. This is the first regulation. We will observe its impact on the situation. I do not rule out implementing stricter methods in the future. This is a crucial regulation. Ultimately, even if construction does not proceed, the community budget should receive some compensation, and property taxes must be paid.”
The government also approved a framework for providing state support to commercial entities and individual entrepreneurs in the information technology sector, aimed at fostering the development of the IT industry in Armenia and maintaining competitive viability against other countries. The justification for this initiative notes that various countries implement tax incentives to stimulate businesses in the IT sector. Many IT organizations generate revenue in foreign currency, and the recent depreciation of the US dollar and euro has negatively impacted the financial performance of local companies, hindering their growth. The proposed support is expected to enhance these organizations while preserving existing jobs and maintaining employee wages.
The government allocated 1,342,950.9 thousand drams to the regional administrations of Aragatsotn, Ararat, Armavir, Gegharkunik, Lori, Kotayk, Vayots Dzor, and Tavush for subsidy program implementation. Additionally, 959,827.5 thousand drams will be allocated to the regional administrations of Aragatsotn, Gegharkunik, Lori, and Shirak for subsidy provision.
During the meeting, Prime Minister Pashinyan addressed the 2021 poverty index published by the Statistical Committee, reporting that poverty in Armenia was at 26.5%. Compared to 2020, there was a slight decrease in poverty, while a 0.1 percentage point increase was noted compared to 2019. He emphasized that since 2019, the poverty index has been calculated using a new methodology, making comparisons with prior years invalid. Additionally, he noted a 0.1% increase in extreme poverty since 2019 and a 0.8% increase compared to 2020, indicating the effectiveness of anti-crisis measures during the COVID-19 pandemic. “As a result of our COVID measures in 2020, we halved extreme poverty, but since the end of the pandemic and the conclusion of crisis programs, it has slightly increased,” he stated.
The Prime Minister instructed the Minister of Labor and Social Affairs to conduct a thorough analysis of the poverty structure and develop a strategy for poverty alleviation. “This must be done within our ideology. My belief is that poverty can only be overcome through labor. There is no other way to address poverty. In this context, we need to seriously reconsider our social policy. Currently, there is a labor shortage in the job market. Unemployment has reached a historically low level, and we are receiving ongoing signals from the private sector about difficulties in finding employees,” Pashinyan concluded.