We answer the tax questions of relocators in Armenia

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.

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.

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.

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.

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]

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]

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