Freelancers need to declare income received via Solar Staff on their own, because the service is not a tax agent and does not pay their tax on such income.
To carry on tax accounting in Armenia for your Solar Staff income, you need to:
Determine your tax residency;
Choose the tax status and regime.
Tax residence in Armenia
Armenia taxes its residents on their worldwide income, while non-residents are taxed on Armenian-source earnings only (Clause 6, Article 107 and Clause 1, Article 141 of the Tax Code of the Republic of Armenia).
An individual is considered an Armenian tax resident if they meet at least one of the following conditions:
They are physically present in the country for 183 days or more (including the arrival and departure days) during the tax year.
Their center of vital interests is in Armenia (for example, they have real estate, family, and/or primary place of professional or other activity in the country).
They are in the civil service of Armenia, but are temporarily working outside the country.
Taxpayer registration
To pay taxes in the Republic of Armenia, you need to obtain an 8-digit tax identification number (TIN). More details on taxpayer registration.
You can register online or do it in person by handing in an application and a passport scan to the tax office at the place of your temporary or permanent registration in Armenia. The registration date shall be the date the respective entry is made in the unified electronic register.
To pay taxes and social contributions, open bank accounts, and interact with Armenian government bodies, individuals also need a social security card. To get it, go to any passport and visa office in Armenia, fill out the application, and provide the following documents:
Your passport, its scanned copy, and its notarized translation into Armenian;
A document certifying you're staying in Armenia legally (like a stamp confirming entry to the country);
A copy of the birth certificate (may be requested);
The address of registration or temporary stay in Armenia (hotel address is acceptable);
The social security card is issued within 7 days (except when applying with a Russian citizen's foreign passport, in which case the card is issued on the same day).
Republic of Armenia: Freelancer tax statuses
Tax liabilities in Armenia depend on the freelancer's status and/or fulfillment of certain conditions. In the Republic of Armenia, there are two statuses a freelancer can have in terms of income taxation:
IMPORTANT! Solar Staff does not have the option to choose a tax status for freelancers based in the Republic of Armenia, but you can fill in your tax ID in your account.
Read on for more details.
Individual
Depending on their residency status, individuals are liable for a 20% income tax on their worldwide and/or Armenian-sourced income. The tax rate is the same for both tax residents and non-residents.
Tax reporting and payment. Individuals have an obligation to submit an Annual Income Tax Return before April 15 of the year following the reporting one, and the tax must be paid before April 20 (inclusive) of the year following the reporting one.
If the taxpayer is eligible for tax deductions under Article 147 of Armenia's Tax Code, they can reduce the amount of tax they owe. They must still declare the income.
Individuals can also participate in the micro-entrepreneurship system, wherein they register as sole entrepreneurs, but can also act as a business entity. This requires submitting a special application to the tax office (details).
Individual entrepreneur
Individual entrepreneurship needs to be registered in one of the following forms:
To set up as an individual entrepreneur in Armenia, you need to:
Apply to the State Register Agency of Legal Entities of Armenia.
Provide your passport and its notarized translation into Armenian (foreign citizens don't have to obtain a residence permit or an Armenian passport).
Provide the individual entrepreneur's registered address for correspondence, as well as an Armenian mobile phone number.
Pay the AMD 3,200 fee (in cash).
Individual entrepreneur: General taxation system
The general taxation system (GTS) does not require any additional registration on the part of the taxpayer and entails the following taxes:
Profit tax (corporate profit tax), which is levied at 18%. Individual entrepreneurs under GTS can also be considered income tax payers, but only in respect of their personal income (for example, as part of labour relations or dividends) in accordance with Clause 2 of Article 140 of the Armenian Tax Code. Profit tax returns are submitted annually before April 20 of the year following the reporting one, and the deadline for paying the tax (in the form of advance payments) is the 20th day of the last month of the quarter. You can find a blank return with instructions here.
Value-added tax (VAT) is levied at the standard rate of 20% or at 0% for works/services provided outside of Armenia. Individual entrepreneurs must register as VAT payers if their taxable turnover in the previous calendar year exceeds AMD 115 million (Clause 2, Article 59 of the Armenian Tax Code). The VAT reporting period is a calendar month (or a quarter for non-resident organizations). Individual entrepreneurs must submit monthly reporting in the form of a single VAT return and pay the tax before the 20th day of the month following the reporting period. You can find a blank return with instructions here.
Individual entrepreneur: Turnover tax
The turnover tax can only be applied by individual entrepreneurs who do not cross the income threshold of AMD 115 million for the previous year (the excess is taxed under GTS). This regime sees a single income tax charged at a fixed rate of 1.5% to 25% depending on the type of activity (Clause 1 of Article 258 of the Armenian Tax Code). For example, income from trading activities and from other activities is taxed at 5%.
To register for the turnover tax, the taxpayer needs to apply to the tax authority within 20 days from the date of their actual registration as an individual entrepreneur, or after the registration before February 20 of the current year (in this case, the turnover tax will apply from January 1 to December 31) in accordance with subclauses 1 and 2, Clause 1, Article 254 of the Armenian Tax Code. After the application is filed, the tax authority issues the respective confirmation. Turnover tax payers are required to submit tax calculation on a quarterly basis and make tax payment within 20 days (inclusive) following the end of the reporting month. You can find a blank return with instructions here.
Individual entrepreneur: Micro-entrepreneurship system
Sole entrepreneurs can make use of this system if their annual turnover doesn't exceed AMD 24 million and they comply with the applicable activity type requirements (for the full list, see Clause 5, Article 267 of the Armenian Tax Code). For example, persons who provide advisory, legal, accounting, audit, engineering, advertising, design, marketing, or translation services cannot be part of the micro-entrepreneurship regime. To register for the micro-entrepreneurship system, the taxpayer needs to apply to the tax authority within 20 days from the date of their actual registration as an individual entrepreneur, or after the registration before February 20 of the current year (subclauses 1 and 2, Clause 1, Article 267 of the Armenian Tax Code). There are no deadlines or restrictions regarding the filing of the application. Within one workday following the day the application was submitted, the tax authority issues a license certifying the taxpayer's status as a micro-entrepreneurship entity (Clause 3, Article 267 of the Armenian Tax Code).
Micro-entrepreneurs in the Republic of Armenia are exempted from all the main taxes (except for the cases specified in Clause 2, Article 269 of the Armenian Tax Code). Before February 1 following the end of the reporting year, the taxpayer must submit to the tax authority a turnover report for all types of activities (in some cases, other reports need to be filed in accordance with clauses 2 and 3, Article 270 of the Armenian Tax Code).
You can find the application and report forms here.
Mandatory contributions
There are several kinds of social contributions in Armenia:
Social security payment is calculated based on the taxpayer's status and their income, and amounts to 5% for individuals whose monthly income is less than AMD 500,000 and individual entrepreneurs whose annual income is less than AMD 6 million (if the annual income of the individual entrepreneur exceeds AMD 6 million, the social security payment is calculated as the difference of 10% of the income and AMD 300,000). Individual entrepreneurs participating in the turnover tax scheme pay AMD 5,000 per month for the activities subject to such turnover tax. Social contributions are payable by the following groups: citizens of Armenia, foreigners with or without a residence permit, and individual entrepreneurs in Armenia. The contributions are paid together with the income tax (based on the tax regime and taxpayer status).
Stamp duty, which is paid by both individuals and individual entrepreneurs. It's a fixed amount that depends on the income received. For more details on stamp duty amounts, see Article 12 of the Law. Stamp duty is paid monthly before the 20th day following the end of the reporting month (for example, the payment for May is due before June 20).
Additional info
Armenia has double taxation treaties with a number of countries.
In Solar Staff, freelancers based in Armenia can only make payments to cards. For individual entrepreneurs, payment success is guaranteed only with business cards issued by Ameriabank CJSC (the first 6 digits of the card number: 552655) and INDUSTRIAL CONSTRUCTION BANK (ARDSHINBANK) (the first 6 digits of the card number: 552858).
Income received in foreign currency must be converted into drams at the exchange rate of the Central Bank of the Republic of Armenia as at the date of the payment document (Subclause 2, Clause 1, Article 16 of the Armenian Tax Code) or the day considered to be the date when the electronic service was rendered (Subclause 2.1, Clause 1, Article 16 of the Armenian Tax Code).
Tax returns are to be submitted only electronically via the electronic reporting system. It is possible to pay taxes and duties through the post office.
Income received via Solar Staff is declared based on certificates and invoices, and as per the offer agreement.
If you have any questions, get in touch via the chat in your Solar Staff account or email us at [email protected].