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US Expat Taxes Explained: Filing Taxes as an American Living in Armenia

US Expat Taxes in Armenia

If you are a citizen or permanent resident of the United States, then you are obligated to file US expat taxes with the federal government each yearregardless of the country in which you reside.

In addition to the regular income tax return, you could also be required to file an informational return on your assets held in foreign bank accounts with Foreign Bank and Other Account Reporting (FBAR) Form 114, in addition to Form 8938 Statement of Specified Foreign Financial Assets.

While the US is one of the few governments that tax the international income of their citizens and permanent residents who reside overseas, it does have special provisions to help protect them from double taxation including:

  • The foreign earned income exclusion allows you to decrease your taxable income on US expat taxes by the first $103,900 in 2018 earned as a result of your labors while a resident of a foreign country ($105,900 in 2019).
  • A foreign tax credit that could allow lower your tax bill for US expat taxes by certain amounts paid to a foreign government, and
  • A Foreign Housing Exclusion that allows an additional exclusion from income for certain amounts paid for household expenses that occur as a consequence of living abroad.

With proper planning and quality tax preparation, you should be able to take advantage of these and other strategies to minimize or even eliminate your tax bill. Please do note that even if you do not believe that you owe any US income taxes you will, most likely, still be required to file a return.

US Expat Taxes Explained: Filing Taxes as an American Living in Armenia

Residents are taxed on their worldwide income. Non-residents are taxed only on their Armenian-sourced income.

Tax rates vary according to the amount of income. The top income tax rate is 20 percent.

The official currency of Armenia is the Armenian Drams (AMD).

Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

15 April.

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in Armenia?

Residents

Employers are required to calculate income tax on a monthly basis from their employees’ salaries and transfer these amounts to the state budget, no later than the 20th day of the month following the month of calculation.

The employer must prepare and submit to the tax authorities a monthly report on the income paid to employees (individuals) and income taxes withheld and remitted. The monthly report should be submitted no later than by 20th of the second month..

Taxpayers (namely who were engaged in business activities) have to file an Annual Income Calculation of business income and expenses by 15 April in the following year.

Taxpayers in business activities are required to make quarterly advance tax payments on/before 15 March, 15 June, 15 September, and 15 December. Any balance payments must be made by 1 May.

Income tax on other income received from legal entities is normally withheld at the source.

The individual receiving the income from other sources than Armenian legal entities shall declare it to the tax authorities and shall pay the tax him/herself.

Amounts withheld (imposed) by a tax agent shall be considered as the final amount of the income tax for foreign citizens and persons without citizenship in Armenia, with the exception of the cases when such person is a resident or he/she implements entrepreneurial activity in the Republic of Armenia. In the mentioned cases, foreign citizens and persons without citizenship must apply to the tax authorities of the location of their activity or domicile, in order to perform a recalculation and submit Annual Income Calculation.

Non-residents

Income tax on income received by non-residents from tax agents is normally withheld at the source.

Amounts withheld (imposed) by a tax agent shall be considered as the final amount of the income tax for non-residents.

Non-residents will have an obligation to submit an Annual Income Calculation only in the event he/she receives an income from Armenian sources but not through tax agents.

Tax rates1

What are the current income tax rates for residents and non-residents in Armenia?

Residents

Income tax on wages and salaries of Armenian citizens, foreign citizens, and persons without citizenship are shown in Table A.

Table A

Monthly taxable income Tax rate
Up to AMD120,000 24.4% of taxable income
From AMD120,000 to AMD200,000 AMD29,280 plus 26% of the taxable income exceeding AMD120,000
Over AMD200,000 AMD518,080 plus 36% of the taxable income exceeding AMD2,000,000

Royalties, income from leasing (for sole entrepreneurs the annual income tax rates are applied), and interest received by Armenian citizens are subject to income tax at 10 percent.

Employers are required to calculate income tax on a monthly basis from their employees’ salaries and transfer these amounts to the state budget, no later than the 20th day of the month following the month of calculation.

Non-residents

The income tax on salaries and wages and the income deemed equal thereto shall be calculated and withheld (imposed) at the rates specified in Table A.

The following types of income of foreign citizens or persons without citizenship are subject to income tax, which should be withheld (imposed) at the source through a tax agent, the rates for which are shown in Table B:

Table B

Type of income Rate
Insurance reimbursements and income from transportation (freight) 5%
Royalties, interests, lease payments, increase in the value of property and other passive income, as well as other income received from Armenian sources 10%

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Armenia?

The law on income tax provides that the following persons shall be deemed to be tax residents.

  • Individuals, who, during any 12-month period starting or ending in a tax year (from 1 January to 31 December, inclusive), totally has spent 183 days or more in the Republic of Armenia (RA).
  • Individuals, whose center of vital interests are in the RA.2
  • Individuals, who are in the civil service of the RA, but are temporarily working outside Armenia.

For taxation purposes, non-resident is an individual who does not comply with the requirements mentioned above.

Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.

No.

What if the assignee enters the country before their assignment begins?

No special implications. The residency of the assignee does not depend on the beginning of the assignment.

Termination of residence

Are there any tax compliance requirements when leaving Armenia?

There are no special requirements upon leaving the country. In case of residency, the Annual Income Calculation should be submitted for the tax year.

What if the assignee comes back for a trip after residency has terminated?

No special implications.

Communication between immigration and taxation authorities

Do the immigration authorities in Armenia provide information to the local taxation authorities regarding when a person enters or leaves Armenia?

Yes (on a case-to-case basis).

Filing requirements

Will an assignee have a filing requirement in the host country after they leave the country and repatriate?

Being treated as tax resident in Armenia, the assignee will have an obligation to submit Annual Income Calculation in host country (Armenia) for tax year.

Economic employer approach

Do the taxation authorities in Armenia adopt the economic employer approach to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Armenia considering the adoption of this interpretation of economic employer in the future?

In general, yes. Although the Armenian legislation does not directly address the provisions and/or interpretations of the Article 15 of the OECD model treaty, the general approach is generally the same, as compared with the Economic Employer approach, adopted by the United Kingdom, Australian, and Canadian revenue authorities.

De minimus number of days4

Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

No.

Types of taxable compensation

What categories are subject to income tax in general situations?

As a general rule, all types of remuneration and benefits received by an employee for services rendered constitute taxable income. These include, but are not limited to, the following:

  • wages and salaries
  • interests
  • income from donations and assistance (unless specifically exempt)
  • royalties
  • income from any business or profession
  • income from leasing
  • benefits-in-kind.

Tax-exempt income

Are there any areas of income that are exempt from taxation in Armenia? If so, please provide a general definition of these areas.

The following are several types of income that are exempted from the income tax:

  • income from securities, such as:
    1. dividends
    2. interest or discount received from government bonds and other government securities as well as bonds issued by the All-Armenian Bank
    3. income from trading in government securities and bonds issued by the All-Armenian Bank.
  • the property and monetary means which have been inherited or received as a gift, received from individuals
  • money and food aid provided to individuals by non-profit organizations in the process of their ordinary activities
  • property and cash provided by foreign as well as intergovernmental organizations without compensation
  • insurance compensation
  • scholarships and stipends.

Expatriate concessions

Are there any concessions made for expatriates in Armenia?

There are no concessions for expatriates in Armenia.

Salary earned from working abroad

Is salary earned from working abroad taxed in Armenia? If so, how?

Residents are taxed on worldwide income. Non-residents are taxed only on Armenian-sourced employment income.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in Armenia? If so, how?

There is no capital gains tax in Armenia. However, the increase in the value of property considered as income received from Armenian sources is subject to income tax for foreign citizens.

Dividends, interest, and rental income

Dividends are not subject to income tax.

Interest and rental income are subject to income tax at the rate of 10 percent.

Gains from stock option exercises

Residency status Taxable at:
Grant Vest Exercise
Resident N Y N
Non-resident (foreign citizen) N Y Y
Other (if applicable) N/A N/A N/A

Foreign exchange gains and losses

Not applicable.

Principal residence gains and losses

Not applicable.

Capital losses

Not applicable.

Personal use items

Not applicable.

Gifts

Not applicable.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Armenia? If so, please discuss?

There is no capital gains tax in Armenia.

Are there capital gains tax exceptions in Armenia? If so, please discuss?

No.

Pre-CGT assets

Not applicable.

Deemed disposal and acquisition

Not applicable.

General deductions from income

What are the general deductions from income allowed in Armenia?

Voluntary cumulative pension contributions performed by the individual and (or) a third party (including employer) are deducted from the gross income in the amount not exceeding 5 % of the gross income of the individual (this provision is effective from 1 January 2017).

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Armenia?

Employers are required to calculate income tax on a monthly basis from their employees’ salaries and transfer these amounts to the state budget. There is no reimbursement method used in Armenia.

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in Armenia? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

Employers are required to calculate income tax on a monthly basis from their employees’ salaries and transfer these amounts to the state budget.

Pay-as-you-go (PAYG) withholding

Not applicable.

PAYG installments

Not applicable.

When are estimates/prepayments/withholding of tax due in Armenia? For example: monthly, annually, both, and so on.

Income tax withholdings are made for each payment.

Individual entrepreneurs are required to make quarterly advance tax payments on/before 15 March, 15 June, 15 September, and 15 December.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in Armenia? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

Income tax payable by residents of the RA shall be reduced by the amount of tax withheld from them in foreign countries, pursuant to the legislation thereof (with the exception of the amount of tax withheld in foreign countries from income subject to deduction from gross income, pursuant to the legislation of the RA). Besides, the amount of the deducted (credited) tax should not exceed the amount of the tax payable in Armenia on income received in foreign countries, in accordance with the provisions of RA Law on Income Tax.

 

In addition to above domestic arrangements that provide foreign tax credit, Armenia has entered into double tax treaties with 37 countries to prevent double taxation and allow cooperation between Armenia and other tax authorities in enforcing their respective tax laws.

General tax credits

What are the general tax credits that may be claimed in Armenia? Please list below.

Not applicable.

Social security tax

Are there social security/social insurance taxes in Armenia? If so, what are the rates for employers and employees?

Employer and employee

Type of insurance

Paid by employer

Paid by employee

Total

Social security

Rates vary: See below*

Rates vary: See below**

See below

Employers, employees, and individual entrepreneurs are liable to obligatory social security payments on income paid/received for works performed at the following rates:

* Paid by employer

Gross income (AMD per month) Obligatory social security payments
Up to 20,000 AMD7,000 flat
20,000 to 100,000 AMD7,000 + 15% of the amount exceeding AMD20,000
Over 100,000 AMD19,000 + 5% of the amount exceeding AMD100,000

* Paid by employee

Gross income (AMD per month) Obligatory social security payments
Up to 2,000,000 3%
Over 2,000,000 AMD60,000 + 8% of the amount exceeding AMD2,000,000

* Paid by individual entrepreneurs

Self-employed persons who are not considered as VAT payers and who are payers of Presumptive Fees, shall make social security payments at the rate of 3 percent of the annual amount of social security payment object, but no less than AMD60,000.

For other self-employed persons, the following rates should be applied.

Gross income (AMD per month) Obligatory social security payments
Up to 1,200,000 15%, but not less than AMD60,000
Over 1,200,000 AMD180,000 + 5% of the amount exceeding AMD1,200,000

Individual entrepreneurs have to file an annual declaration of business income and expenses by 15 April in the following year.

 

Started from 1 January 2017 the RA law “On unified income tax” will enter into force, which will replaces the RA laws “On income tax” and “On Mandatory Social Security Payments”. The new Law defines “unified income tax” instead of income tax and SSP.

Gift, wealth, estate, and/or inheritance tax

Are there any gift, wealth, estate, and/or inheritance taxes in Armenia?

No.

Real estate tax

Are there real estate taxes in Armenia?

The buildings are subject to property tax. The tax base is the value of the property, based on which the relevant rate of the property tax is applied.

The tax base for buildings is determined by original cost and by subsequent revaluation, carried out once in each three years by the State Cadastre of Real Estate. The tax rate on public and industrial buildings is 0.3 percent annually on the tax base, which is considered to be the property value. For dwellings and other buildings, progressive tax rate from 0.1 percent to 1.0 percent is applied.

Sales/VAT tax

Are there sales and/or value-added taxes in Armenia?

There are no sales or VAT taxes relevant to assignees.

Unemployment tax

Are there unemployment taxes in Armenia?

No.

Other taxes

Are there additional taxes in Armenia that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.

Local taxes

Property tax and land tax are levied in Armenia from owners of property and land. For agricultural land, the rate of land tax is 15 percent of the estimated net cadastral income. For non-agricultural lands, the land tax shall be determined at the following rates:

  • inside the settlements – 1 percent
  • outside the settlements – 0.5 percent.

The transportation means are subject to property tax. The tax base for motor vehicles is their engine power.

Import duty

Import duties by the rate of 10 percent are established by customs code for transportation of goods through the customs border of RA. However, without any customs duties individuals may transport through the customs border of the RA as accompanying cargo goods not exceeding the equivalent of AMD150,000 in their total value and 50 kilograms in their total weight

Also individuals arriving in the RA for permanent residence may import duty-free property for their personal use.

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