Thursday, 31 March 2016
New Tax Code to Provide for Stable, Predictable Business Environment
A regular Cabinet meeting was held today, chaired by Prime Minister Hovik Abrahamyan.
The Government approved the draft Tax Code of the Republic of Armenia. Deputy Head of State Revenue Committee by the Government Vakhtang Mirumyan noted in particular that the Tax Code should focus on long-term economic growth rather than on short-term benefits.
“Proceeding from this principle, we are proposing a number of fundamental amendments. In particular, after the adoption of the new tax code, not only will the exporters be able to obtain those VAT amount paid to suppliers, but also those economic entities which have made investments, but proved unable over six months to use the VAT amounts paid to their suppliers. That is, the VAT amounts will be reimbursed to economic entities within six months so that they could use them in investment.
Secondly, we are going to freeze the payment of VAT for those products and raw materials deemed as essential for the national economy. This means that after the adoption of the Code, VAT for industrial-use equipment and raw materials imported from third countries will not be paid to the customs authority within 10 days from the date of importation, but by the 20th day of the following month. Here, too, economic entities will enjoy some business opportunities.
Also, prioritized is the development of recycling and processing industries in our country. In this respect, those exporters engaged in processing activities in the Republic of Armenia will not have to pay VAT and wait for refund; VAT will neither be charged nor returned so that economic entities could use these amounts in their industries. By the way, note that the Prime Minister has suggested separating the latter measure from the draft so that it could be enforced before the adoption of the new Tax Code.
In general, in terms of VAT, we are going to liberalize the system of cross-payments that was banned for many years for practical considerations. We believe that the business community is well aware that such liberalization implies availability of extra resources for doing business in Armenia.
Our proposal is not limited to VAT. We are envisaging a similar approach in dealing with the income tax. In particular, we are planning to liberalize the spending-related regulations and apply specific reductions with regard to the amounts spent abroad for advertising, marketing, training and retraining purposes.
Of course, we are planning to ease the tax burden for individual entrepreneurs in order to make it equal in terms of profit tax rates,” Mr Mirumyan said, adding that the old regulations have been revised in an effort to ensure that the new tax code should provide for a stable and predictable business environment as it is seen as the main rationale behind the reform.
With reference to the question at hand, Prime Minister Hovik Abrahamyan noted that a large amount of work had been carried out: the draft Code had been subject to extensive discussions on various platforms. In view of the above, the Head of Government said it was necessary to finalize the draft within a week’s time and submit a bill to the National Assembly.
Marz administrations will be provided AMD 1,537,831.0 thousand under the State Support for Local Government program for re-distribution to local government authorities.
Hovik Abrahamyan noted that the issue was discussed at the time of the latest electricity price hike. As he said, subsidies proved insufficient to deal with the problems faced by communities. The Prime Minister stressed that these amounts are allocated in addition to government subsidies.
The Government approved a management plan and a program of activities for the territories of Ararat water basin in 2016-2021. This will be clarified interconnected relationships Ararat valley water users, including communities, in terms of energy, industry, agriculture and the environment.
The Government decided that Iranian Sanergy ompany will be given a permission to carry out activities subject to licensing under the gas distribution network construction project in Meghri and Agarak communities. According to the reference note, on December 23, 2011, a memorandum of understanding was signed between the Armenian and Iranian governments on the provision of development assistance by the Islamic Republic of Iran to the Republic of Armenia. The government of Iran has agreed to provide a grant of USD2 million under the memorandum for program implementation.
The Armenian side has assumed the costs associated with the delivery of goods and services through provision of funds in the framework of the memorandum and relief in local taxes, customs duties and other mandatory payments when importing goods.
