Answering tax questions of relocators in Armenia - article on Move2Armenia website

We answer the tax questions of relocators in Armenia

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We answer the tax questions of relocators in Armenia
26.09.2022
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In Telegram chats of migrants, in personal messages and on Move2Armenia mail, in conversations, hundreds of people are worried about the loss of tax residency in the Russian Federation; they don’t understand whether they will have to pay additional tax or not; they don’t know how to behave in the case of open legal entities in Armenia or not closed ones in Russia... There are many questions, there are few clear answers on the case. We spoke with tax experts from Armenia and Russia and collected answers to key questions in this article.

I relocated to Armenia in March 2022, what taxes will I have to pay after a six-month stay outside the Russian Federation?

First, let’s define what tax residency in the Russian Federation is? Resident status implies citizenship of any country and presence on the territory of the Russian Federation for a total of 183 calendar days within 12 months [1]; they don't have to be consecutive. Short-term border crossing, unfortunately, will not help.

[1] Or less than 183 days a year if you are undergoing treatment or studying, or are performing labor or other duties related to the performance of work (provision of services) in offshore hydrocarbon fields.

The day of departure is considered the day of stay in the Russian Federation, the days of arrival and departure are determined by the marks of border guards in the passport. That is, if you arrived in Armenia on February 28, 2022, and before that, starting from March 1, 2021, you were in Russia (the same 12-month period), you are a resident. In this particular case, you become a non-resident in 2022 on August 30, if you never returned to Russia.

Self-employed people and individual entrepreneurs remain in the same regime and continue to pay the same taxes, even if they lose their Russian residency.

So, you spent the ill-fated 184 days abroad in a 12-month span. At this moment, you lose the status of a tax resident of the Russian Federation and acquire new unpleasant duties. The non-resident tax rate goes up and you now have to pay 30% to your home state on the income listed below.

Are there exceptions?

Yes! For example, if an employment contract with a non-resident of the Russian Federation working for a Russian company states that the work is not performed in Russia, then the salary will not be taxed in the Russian Federation, since the source of income is labor activity abroad (clause 6, clause 3, art. 208 of the Tax Code of the Russian Federation). Here it is important to indicate in the employment contract the place of work outside the Russian Federation. In this case, it is necessary to pay the tax established in the host country on the salary (note: information about taxes in Armenia is below). Also, remunerations of directors and other payments to members of the management bodies of a Russian organization are not subject to tax 30%.

What is subjected to this new huge tax?

Everything is the same as before. Your salary, fees for services rendered, rental income, income from the sale of movable and immovable property, property received as a gift [2], income from investments and securities transactions, even winnings from the lottery and other gambling games.

And how, by the way, do vigilant comrades from the tax office find out that you have been in sunny Armenia for the 184th day and continue to safely receive income from Russia? Here you must show your best responsible qualities and until the end of the first month of absence in Russia inform the person who pays the tax for you (employer or broker) about the loss of tax residency status.

[2] Since 2019, non-residents may not pay tax on the sale of housing if the minimum period of ownership of the property has passed.

Is there any liability before the law if you withhold these important changes about your new status?

In general, liability for failure to report a new residence is not established, because the law does not directly stipulate the need to necessarily inform the tax office about a change in resident status. But when filing a 3-NDFL declaration, in the column “are you a tax resident of the Russian Federation”, you will have to answer “no” and pay an increased tax [3].

Now the Federal Tax Service can find out that you have lost your tax resident status in the following way:

– firstly, by sending a targeted request to the border service;

– secondly, thanks to notifications about an individual opening an account in a foreign bank [4];

– thirdly, from declarations submitted by the employer;

- and, fourthly, from banks, when you transfer money between your accounts, including foreign ones.

There is currently no automatic exchange of information between departments.

What liability do you face for failure to notify the Federal Tax Service?

  1. If you do not file a 3-NDFL tax return, you will have to pay a fine of 5% of unpaid tax for each month, but not more than 30% of the tax amount and not less than 1000 rubles (Article 119 of the Tax Code of the Russian Federation) [5]. You can be held accountable within three years from the date of the offense.
  2. The arrears will be recovered with penalties.
  3. Fine 20% from arrears, or 40% if intent can be proved.

The good news is that if the crime is committed for the first time, then you will be released from liability, but only subject to the payment of arrears and penalties.

Well, and besides, if you hide from the employer the fact of losing the status of a resident, you may be subject to a disciplinary sanction (as a rule, the obligation of such a notification is fixed by the local regulatory act of the employer).

If you work not under the Labor Code of the Russian Federation, but under a GPC agreement — study it, it usually also spells out the consequences of hiding this information. And they can be punished either with a fixed fine or a percentage of each day of delay. If, during an inspection, the Federal Tax Service identifies an unscrupulous non-resident employee, then the naive employer will have to pay. In this case, if, out of ignorance, tax was withheld at the resident rate, in addition to arrears and penalties, your deceived employer will have to pay a fine of 20% from the collected tax.

[3] If you wish, you can confirm the loss of residence by submitting an application to the Federal Tax Service in any form, because there is no single model.

[4] Residents of the Russian Federation are required to report the opening/closing of accounts (including brokerage ones) abroad and changes in account details. The message is sent to the Federal Tax Service at your place of residence within 1 month in person or online. For failure to report or late reporting, a fine for individuals starts from 1,000 rubles.

[5] The general period for bringing to justice is two years from the date of commission of the offense.

Now let's turn to the tax obligations of individuals in Armenia.

You are required to pay:

  1. Income tax regardless of status — 20% (reduced by 1% compared to 2022). [6]
  2. Social contribution, which is calculated from the monthly salary: up to 500,000 AMD - 4.5%. From 500,000 AMD - the difference is 10 % and 27,000 AMD.
  3. Stamp duty:
up to 100 000 AMD  1 500 AMD 
100 001 – 200 000 AMD  3 000 AMD 
200 001 – 500 000 AMD  5 500 AMD 
AMD 500,001 – 1,000,000  8 500 AMD 
AMD 1,000,001 or more  15 000 AMD 

So, you decided to stay in Armenia and become more attached to this country. At what point do you become a resident and become subject to local tax laws? To become a RA resident, you need:

  1. In fact, stay in the RA for 180 or more days.
  2. Have the center of your vital interests in Armenia (you have a house or other apartment, family, main place of professional or other activity here). 
  3. Or be in the civil service in the Republic of Armenia, while temporarily working outside the territory of the Republic of Armenia.

What other taxes exist for RA residents?

It all depends on the type of income:

  1. Interest, royalties, rent are taxed at 10%.
  2. Dividends are taxed at 5%.
  3. Profits from the sale and gift of property are taxed at 10%.

You have decided to become an individual entrepreneur in Armenia. What needs to be done, and what can happen if the situation is not controlled?

If you have not yet lost the status of a resident of the Russian Federation:

  1. Within three months you will have to notify the Federal Tax Service of the Russian Federation about participation in a foreign organization. Termination of participation or change in share of participation must also be reported. Failure to notify — will have to pay a fine of 50,000 rubles;
  2. You will have to report annually on your foreign organization by submitting a CFC form and a balance sheet or tax return (which you sent to your local tax office) by April 30 of the next year. Did not report - you will have to pay a fine of 500,000 rubles;
  3. By April 30 of the next year, submit a declaration on the received dividends and income of the IP to the Federal Tax Service of the Russian Federation and by July 15 of the next year pay tax 13% on income received from the activities of IP and LLC in Armenia.

[6] In the IT industry, the income tax rate is 18 % for an LLC, 23 % for an individual entrepreneur, VAT is 20% or 0%, depending on the place of sale of goods or services; Personal income tax – 10%; 5% tax on dividends.

If you have lost your status as a tax resident of the Russian Federation, then you also lose all obligations to pay taxes to your homeland on income abroad [7].

Below we consider private and not the most obvious situations using specific examples.

If you become the owner of real estate in Armenia, then you must pay an annual tax, which is calculated based on the cadastral value of the property. We wrote more about purchasing real estate in Armenia here.

If you decide to rent out an apartment, apartment, house or commercial space, you will need to pay tax 10% [8].

Let's say you opened a bar and want to sell Russian craft beer there. In this case, in addition to VAT [9], you will also have to pay excise tax (this applies not only to individual entrepreneurs, but also to individuals). Excise tax is imposed on goods brought even from the territory of the EAEU member states for the purpose of entrepreneurial activity [10]

[7] With the presidential decree of March 18, 2022, a nuance appeared about the contribution of money to the authorized capital of a foreign legal entity. Until December 31, 2022, it is prohibited to carry out, without obtaining permission from the Central Bank of the Russian Federation, transactions involving payment by a resident of a share, contribution, share in the property (authorized or share capital, cooperative share fund) of a non-resident legal entity. Permission can only be when executing a number of conditions.

[8] If the amount of rental payments received during a tax year exceeds 60,000,000 drams, an additional income tax is calculated for the excess portion by an individual at the rate of 10%.

[9] 20% rate for each import; regulated by Article 59 of the Tax Code of the Republic of Armenia.

[10] According to the RA Law “On Customs Regulation”, you are obliged, in the manner, amount and terms established by the Code, to calculate and pay to the state budget the amounts of excise tax arising from this import. The rate depends on the type of imported goods, regulated by Article 83 of the RA Tax Code.

What is the algorithm of action when the time has finally come to pay taxes in a still new country?

All reports in Armenia are submitted only electronically through a special system of the State Revenue Committee of the Republic of Armenia. Individuals must provide the following reporting (this may seem complicated at first glance, so read carefully):

  1. Application for registration of personal data of an employee and an individual receiving contractual income. The reporting period is until the end of the day preceding the day of the actual start of work. And in the case of the actual start of work on the day of hiring - until 14:00 on the day of hiring. Tax agent report No. 79 is submitted.
  2. Income tax and social contribution. The reporting period is monthly, until the 20th day of the next month inclusive. Tax agent report No. 189 is submitted.
  3. Information about income and income tax of individuals. Reporting period - annually, until April 20 of the tax year following each tax year inclusive. Tax agent report No. 165 is submitted.
  4. Calculation of income tax and social payment - annually, until April 20 of the tax year following each tax year inclusive (if an individual needs to independently calculate and pay taxes). Report No. 163 is submitted.
  5. Simplified calculation of income tax and social security payments for the month. Reporting period — monthly, until the 20th day of the month following each month inclusive. Employees of the payer of income who are exempt from the duties of a tax agent must submit. Report No.  162.

Not only you can calculate and submit reports, it depends on the type of income.

  • The tax agent submits reports and pays taxes. If you are not an individual entrepreneur, an organization that pays you income, an individual entrepreneur or a notary takes care of all the tax red tape for you. They bear all the obligations to calculate, withhold and transfer income tax to the budget;
  • an individual submits reports and pays taxes. You do everything yourself, if the income received by you, as an individual, was not taxed through tax agents;
  • if you do everything yourself, then you need to be registered with the tax office. Individuals who are not individual entrepreneurs and notaries must provide the following set of documents to register with the tax authority:

1) a completed application for the provision of UNN;

2) copy of passport or ID card;

3) public service license plate, and if it is not there — a copy of the certificate provided by the authorized body about the absence of a public services license plate.

After you have registered with the tax authority, you will have access to your personal page and you can send report No. 163. Calculation of income tax and social payment, which shows income received not from tax agents (for example, rent - the other party must be an individual). 

In the declaration, you report for income received by you as an individual and not taxed through tax agents. For now, cash receipts to personal accounts are not considered income for income tax purposes. However, at the moment, a legislative proposal has been introduced to provide the State Revenue Committee with access to information about the personal accounts of citizens, as a result of which the Tax Service will have access to revenues and will be obligated to pay taxes on them.

If you decide to leave Armenia, you will have to pay tax if you stay in the country for more than 180 days. [11]

[11] In practice, this issue is not yet regulated and has no clear judicial practice.

This article was written with the help and support of:

  1. Lana Arzumanova – lawyer, mediator, doctor of legal sciences, professor at Moscow State Law Academy, chairman of the Commission on Financial Legislation of the Moscow Branch of the Russian Bar Association. instagram.
  2. Lilit Sahakyan – Master of Law of Moscow State Law Academy, practicing lawyer of our partner project Move2Business.
  3. Lawsuit LLC is an Armenian legal consulting company. www.lawsuit.am.

May be interesting: list of Armenian banks, notaries, business consulting.

Article author: Maria Goncharova

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We answer the tax questions of relocators in Armenia
  • Hope
    24.10.2023 в 11:40

    Hello! Is it possible to pay stamp duty (24,000 AMD) not in December, but in November? I am closing an individual entrepreneur due to maternity leave and wanted to close all the individual entrepreneur’s accounts, but first I need to pay stamp duty for the year from the individual entrepreneur’s dram account. (there have been no revenues for a long time, and other taxes have been paid during the working period). I wouldn’t like to delay it, since bills are charged every month, it turns out to be expensive

  • Gulnaz
    25.05.2023 в 15:53

    Good afternoon Tell me, please, if I have an individual entrepreneur with an IT certificate in Armenia (citizen of the Russian Federation, resident of Armenia). Can I, as an individual entrepreneur, hire an employee of a citizen of the Russian Federation (non-resident of Armenia)? Is it obligatory to pay salary to an account in an Armenian bank? Income tax per employee will be 10%?

  • Anton
    11.05.2023 в 12:57

    I work for an Armenian legal entity, I have a bank salary account, but I don’t live in Armenia, I don’t have registration, I don’t have a residence permit. He lived a total of a couple of weeks in a year.
    Do I have to pay personal income tax in Armenia? The company pays personal income tax for me, but should it? Can I get a deduction?

  • Iraida
    14.04.2023 в 11:43

    Good afternoon, please guide me - in May I become a tax non-resident in the Russian Federation, the company I work for offers to conclude an addendum since May that I work in the Russian Federation. The question is, do I understand correctly that for 2023 I then need to pay 21% taxes in Armenia and 30% taxes from January to March in Russia?

  • Evgeniy
    12.04.2023 в 12:09

    Hello!
    He opened an account and a card as a non-resident of the Republic of Armenia and left there, having lived less than 183 days. Soon I will become a tax resident of Spain, but for now, in fact, a resident of the Russian Federation. Do I need to pay something to the RA from the income that will be credited to the account in the RA?

  • Lilith
    12.04.2023 в 07:59

    Please specify where exactly in the Armenian legislative documents one can see the justification that personal income tax is set at 10% for employees (for residents and non-residents) of companies on an IT certificate.

  • Maria1234
    07.04.2023 в 09:51

    Please tell me, I am a citizen of Armenia and Russia, I have been outside the Russian Federation for 90 days.
    I crossed the border with a Russian passport, will I have to pay a fine when entering the territory of the Russian Federation?

    • Dmitry
      07.04.2023 в 14:53

      Maria, hello! Can you please clarify what the penalty is?
      If you mean do you need to pay a fine if you stay in Armenia for more than 180 days, then no, you will not need to pay

  • Yuri
    22.03.2023 в 11:19

    I left Russia more than 183 days ago. But since that moment I have not lived in any country for more than six months. I lived in Armenia for the longest time (5 months), I have an individual entrepreneur and registration, bank accounts there. Which country do I end up as a resident?

    • Dmitry
      07.04.2023 в 14:57

      Yuri, if you have an individual entrepreneur, registration and a bank account in Armenia, then your sphere of vital interests is connected with Armenia. And under local law, you are considered a resident of the country.

  • Gleb
    31.01.2023 в 09:37

    I didn’t quite understand from the article - if I am a Russian IP on the simplified tax system, then I continue to pay 6% to the Russian tax. And if I lived in Armenia for half a year, then what taxes should I pay as an individual entrepreneur and (or) an individual, if I continue to be a Russian individual entrepreneur, but do not receive any income in Armenia? Thank you

    • Gleb
      31.01.2023 в 09:45

      I mean what taxes do I have to pay to the Armenian tax office.

      • Stanislav
        02.03.2023 в 06:26

        I'm also very interested in the answer to this question! If you have already found it, please share!

        • Vitalii
          05.03.2023 в 01:01

          There are two options here:
          1. Or 20% income from income received in the Russian Federation from individual entrepreneurs.
          2. Or at the rate of the Armenian IP. If there was a tax residence in the Russian Federation, then from the income of the Armenian IP it would be possible to pay 6% according to the simplified tax system in the Russian Federation, and not 13% personal income tax. In this regard, there was an explanation from the Ministry of Finance of the Russian Federation. However, I have not yet found such an explanation in Armenia.

          • Nelly
            03.04.2023 в 15:26

            For non-resident individuals of the Republic of Armenia, the object of income tax is the gross income received from the sources of the Republic of Armenia;

            For resident individuals, the object of income tax is the gross income received from the sources of the Republic of Armenia and (or) sources located outside the Republic of Armenia

  • NikitaKapish
    24.01.2023 в 14:31

    He opened an LLC in Armenia in his own name, himself a citizen of the Russian Federation, registered in a rented apartment and received a social card.
    I am going to work in the field of IT, namely, to provide access to the online learning platform of the university from the Russian Federation. The second type of activity is the development, implementation and adaptation of software and Web services/resources, as well as CRM systems for business automation.
    Do I understand correctly that I would conduct several types of activities, albeit in one area, hire employees and cooperate with investors, and not only did I open the LLC correctly?

    • 25.01.2023 в 09:19

      In general, your actions are correct and correct, but with these inputs, you could open both an LLC and an individual entrepreneur. If you have hired employees, we advise you to take a closer look at obtaining an IT certificate. If you have any questions, you can contact us on Instagram: instagram.com/forza.business.am

  • Nina
    01.12.2022 в 13:38

    Good afternoon! Tell me please.
    Received the Citizenship of the Republic of Armenia. I am a tax resident. I have an American brokerage account. How do I determine the tax rate from a US broker (who is not a withholding agent) on gain stocks, gain stock and bond dividends, and coupon payments? Shares of American corporations. Armenia does not have a double tax treaty with the US. That is, how much do we pay in the States and how much in Armenia from all the transferred income?

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