Wednesday, March 4 2015 10:26

At the March 4 session, the National Assembly of Armenia amended the Law on Turnover Tax in the first reading. The National Assembly also amended a number of related laws, including the ones "On taxes" and "On inspections". 

According to Armenian Economy Minister Karen Chshmarityan, the Government of Armenia took into account the demands of the small and medium enterprises protesting against application of the provision on compulsory document flow in the field of trade. To recall, according to the law, the turnover tax for economic entities engaged in the field of trade is reduced from 3.5% to 1%. However, the law has a provision on compulsory document flow of the deals, which has prompted the protests.  The medium and small importers, mostly, importers of clothes, think that they have no enough resources to hire accountants to compulsorily submit a document on inventory to the tax bodies. To note, the following types of responsibility shall be applied to SMEs: a warning for violation of the law; a 20,000 AMD fine for repeated violation; and a 5% turnover tax for a third case of violation. The economic entities violating the Law on Turnover Tax for the 4th time will occur in the field of VAT.

The amendments suggest increasing the tax threshold from 58.35 to 113.4 mln AMD. Earlier the tax turnover for the trade entities was 1% with a compulsory document flow, and now the rate is 1% for the documented goods and 5% for the undocumented ones. Nevertheless, the tax on the total turnover (extra change inclusive) can be no lower than 1.5%. Chshmarityan stressed that the amendments aim to reduce the shadow economy and increase the tax revenues. The minister does not share the opinion that a lot of enterprises are being closed in Armenia. The minister said that as of March 2, 2015, a total of 2475 new companies have been registered in Armenia and 1608 have been closed. In 2014, a total of 8680 private entrepreneurs stopped their activities in Armenia and 9292 launched activities. 383 LLCs were closed and 314 were opened. Over Jan-Feb 2015, 62 LLCs were closed and 598 were opened. To note, there are around 70,000 SMEs in Armenia, including 58 thsd micro and small enterprises and 10 thsd medium-sized enterprises. The share of SMEs in Armenia's GDP is 43%, and the given sector ensures only 5-6% of tax revenues. The SMEs in Armenia held regular actions of protests and demanded an alternative - paying a higher rate or enjoying privileges and paying a lower rate but showing a document flow.