37th Session of the SME Development Sub-Council Led by RA Minister of Economy Gevorg Papoyan

Tax Code

Sub-Council

On November 26, the 37th meeting of the SME Development Sub-Council was held under the chairmanship of RA Minister of Economy Gevorg Papoyan.

The agenda included the following items:

1. Allowing taxpayers who have transitioned from the alternative taxation system to the general taxation system, but failed to submit an application for VAT registration, to use their VAT debit amounts.

Issue: In practice, there are many cases when taxpayers, by the force of law (due to exceeding the turnover threshold, affiliation, or other grounds), transition from the alternative taxation system to the general taxation system but do not submit the application required for VAT registration. As a result, they incur an obligation to pay VAT—along with corresponding penalties and fines—yet they are deprived of the opportunity to use their VAT debit amounts. It should be noted that in practice, when applying to the SRC Appeals Commission, taxpayers are allowed to use VAT debit amounts formed during the same tax year.It is proposed to allow the use of VAT debit amounts regardless of when the taxpayer submitted the application for VAT registration.

2. Simplifying the administrative procedures related to reducing previously over-declared tax amounts as a result of transaction adjustments.

Issue: According to the RA Tax Code, in the case of a transaction adjustment, the results of the adjustment for taxes (except for VAT and excise tax) and environmental fees are reflected in the tax returns of the reporting periods that include the date of the original transaction.For example, if a turnover tax payer in November returns goods that were delivered in January and adjusts the invoice, it is very likely that the taxpayer will need to adjust the tax returns of the previous three quarters, as recalculation of deductible (transferable) tax amounts often becomes necessary. This creates additional work as well as extra load on the SRC electronic system.It is proposed to allow taxpayers to reduce the current reporting period’s tax amount by the amount of previously over-declared tax, instead of adjusting returns for prior periods—similar to the VAT mechanism. The proposal applies to turnover tax, profit tax, and environmental tax.

Members of the SME Development Council presented their positions on the issues listed above. Speeches were delivered by Arthur Hakobyan, representative of the Republican Union of Employers of Armenia; Vladimer Shatverov and Hovhannes Melkonyan, representatives of the 2B Business Support Foundation; and Hermine Tovmasyan, President of the “Association of Accountants of Armenia” NGO. Representatives of the RA SRC and the RA Ministry of Finance also delivered remarks.

As a result of joint discussions, it was decided that in the near future, working-format meetings will be held between the EBRD Investment Council’s expert team, SRC representatives, SME Development Council members, and members of the working group attached to the Council to discuss the anticipated legislative amendments in detail.