Proposed Tax Reforms for Wealthy Individuals in Armenia
The income tax on labor in Armenia is considerably higher than that on non-labor income, such as interest from deposits and rental income. To boost budget revenues, the Ministry of Finance is contemplating an increase in the capital gains tax. Deputy Minister of Finance Arman Poghosyan introduced this initiative in parliament, marking a new phase of tax reforms targeting affluent citizens.
Currently, the income tax rate on salaries stands at 21%, set to decrease to 20% next year, while taxes on rental income and bank deposits are only 10%. This results in non-labor income being taxed at half the rate of labor income, with the dividend tax even lower at 5%. The Ministry is evaluating potential new or increased taxes, focusing on capital gains tax, which is imposed on profits from selling securities or other assets at a higher price than their purchase price. The absence of this tax in Armenia leads to a loss of potential budget revenue, according to Ori Alaverdyan, head of the revenue policy and administration methodology department.
Tracking capital gains is easier with securities due to transaction records, but it is more complex for properties purchased years ago, as there was no requirement to retain transaction documents. Additionally, many countries allow taxpayers to deduct repair expenses when paying capital gains tax, a provision that is not yet established in Armenia. The Ministry has not yet estimated potential revenue from this tax, which is still in the early stages of consultation with the International Monetary Fund.
Other taxes under consideration include the dividend tax, currently at 5%, and the rental income tax, which is also 10%. There are concerns regarding the fairness of these rates, particularly for landlords with multiple properties. Increasing these taxes could impact investment attractiveness and the overall economic landscape. Discussions are ongoing regarding the taxation of vehicle sales and potential additional taxes on banks, alongside a reevaluation of agricultural taxation to address VAT calculation issues.
Currently, the income tax rate on salaries stands at 21%, set to decrease to 20% next year, while taxes on rental income and bank deposits are only 10%. This results in non-labor income being taxed at half the rate of labor income, with the dividend tax even lower at 5%. The Ministry is evaluating potential new or increased taxes, focusing on capital gains tax, which is imposed on profits from selling securities or other assets at a higher price than their purchase price. The absence of this tax in Armenia leads to a loss of potential budget revenue, according to Ori Alaverdyan, head of the revenue policy and administration methodology department.
Tracking capital gains is easier with securities due to transaction records, but it is more complex for properties purchased years ago, as there was no requirement to retain transaction documents. Additionally, many countries allow taxpayers to deduct repair expenses when paying capital gains tax, a provision that is not yet established in Armenia. The Ministry has not yet estimated potential revenue from this tax, which is still in the early stages of consultation with the International Monetary Fund.
Other taxes under consideration include the dividend tax, currently at 5%, and the rental income tax, which is also 10%. There are concerns regarding the fairness of these rates, particularly for landlords with multiple properties. Increasing these taxes could impact investment attractiveness and the overall economic landscape. Discussions are ongoing regarding the taxation of vehicle sales and potential additional taxes on banks, alongside a reevaluation of agricultural taxation to address VAT calculation issues.