Wednesday, 11 June 2014
Turnover tax due down to 1 percent from 3.5
Chaired by Prime Minister Hovik Abrahamyan, the SME Development Council met in the Office of Government to review the outcome of extensive discussions held between the Ministry of Finance and SME representatives.
In particular, it was reported that as of this October 1 turnover tax shall be reduced to 1 percent from 3.5 percent for those entities engaged in trading activities. According to Deputy Minister of Finance V. Mirumyan, this will considerably ease the tax burden for over 39.500 business entities, while the State will lose AMD8bn in annual revenue.
In addition, the status of a family business is expected to be introduced in Armenia: those entities with annual turnover below AMD 12 million will enjoy the status of family business and will be exempted from taxes.
With the next step, documentation will be a mandatory requirement for SMEs. Meanwhile, the tax authority shall abide by a simplified procedure to verify the existence of properly stated documentation, namely it will be given only one working day to carry out checks with SMEs. A series of phased procedures are proposed in the absence of documentation.
In particular, there will be separation of responsibility by January 1, 2015. Business entities will first be given an advance notice, after which they will be fined to the amount of AMD 20 thousand. In case of a third violation, they will be required to pay 5 percent turnover tax as calculated from the beginning of the year and, in case of a fourth violation, the affected entity will appear in the field of value added tax. Mr. Mirumyan noted that the separation has been made to facilitate the anticipated impact on SMEs.
The practice of advance notices and fines will be given up starting 2015 and 2016 respectively. This means that starting January 1, 2016, SMEs will have to pay 5 percent turnover tax in case of a first irregularity and VAT – after the second violation.
The system of “law-abiding tax-payer” will be introduced in parallel to the above measures, which means that SMEs will be entitled to make records about other entities’ failure to provide them with the necessary documentation. In such an event, they will be supposed to have complied with the mandatory requirement and the tax authority will have to deal with larger businesses. Stricter rules will be applicable to larger businesses in terms of documentation.
A quick-responsive single board is to be set up involving SMEs and the Ministry of Finance to deal with any issue of subjective nature.
After an interested exchange of views between the representatives of SMEs and public agencies, the Prime Minister took the floor to welcome the debate and suggest looking into the recommendations voiced during the meeting in order to submit a finalized package to the National Assembly.
“SMEs and major businesses should propel economic development, while the government should be supportive so that you could pay taxes. Our discussions, meetings will be continued. Economy is going to be a primary focus, and the government will be thoughtful about each SME,” the Prime Minister said summarizing the meeting.
