Upcoming Changes to Turnover Tax in Armenia
The parliamentary commission on economic issues has approved the government's proposed tax reform project in its second reading, which aims to modify turnover tax obligations across various sectors.
Under the new proposal, the turnover tax for trade activities will increase from 5% to 10%. Entrepreneurs will be eligible for a tax deduction of 9.5% on expenses, with a minimum deduction of 1% of turnover. In the food service sector, the tax will rise from 6% to 12%, allowing a deduction of 9% on documented expenses, with a minimum of 3.5% of turnover.
Manufacturing enterprises will see their tax rate double to 7%, with a possible deduction of 5% on expenses.
The annual turnover tax threshold remains at 120 million drams (approximately $300,000). Businesses exceeding this threshold will need to transition to Value Added Tax (VAT) and profit tax payments.
Deputy Finance Minister Arman Poghosyan indicated that while these changes may increase the overall tax burden, businesses making documented purchases could benefit from lower effective tax rates due to the ability to account for these purchases in their budget expenses. Additionally, all professional services, including those provided by notaries and lawyers, will shift from the turnover tax to the VAT system, requiring a 10% VAT payment starting January 1, 2025.
Under the new proposal, the turnover tax for trade activities will increase from 5% to 10%. Entrepreneurs will be eligible for a tax deduction of 9.5% on expenses, with a minimum deduction of 1% of turnover. In the food service sector, the tax will rise from 6% to 12%, allowing a deduction of 9% on documented expenses, with a minimum of 3.5% of turnover.
Manufacturing enterprises will see their tax rate double to 7%, with a possible deduction of 5% on expenses.
The annual turnover tax threshold remains at 120 million drams (approximately $300,000). Businesses exceeding this threshold will need to transition to Value Added Tax (VAT) and profit tax payments.
Deputy Finance Minister Arman Poghosyan indicated that while these changes may increase the overall tax burden, businesses making documented purchases could benefit from lower effective tax rates due to the ability to account for these purchases in their budget expenses. Additionally, all professional services, including those provided by notaries and lawyers, will shift from the turnover tax to the VAT system, requiring a 10% VAT payment starting January 1, 2025.