Up to 1 January 2020 three tax brackets were applied to determine income tax rates in the Republic of Armenia. The lowest tier applicable was 23% for those who received a salary of up to AMD 150,000. 28% for those who received a salary ranging between AMD 150 000 AMD to AMD 2 million, and those who received more than AMD 2 million there was a rate of 36%.
A transitional flat rate was introduced from 1 January 2020, gradually reducing to 20%.
Thus the income tax from salaries and other equivalent fees, as well as from the incomes received under a civil (work) contract, shall be:
From 1 January 2021 to 31 December 2021 the income tax from salaries and other equivalent fees, as well as from the incomes received under a civil (work) contract, shall be calculated at a flat rate of 22%.
Social payments have a peculiarity of application in the Republic of Armenia due to the fact that the funded pension system was applied in Armenia in 2014.
Citizens born after 1 January 1974 must accumulate money from their salaries for their future pensions. This is via the employer in the form of social security payments. The state co-finances the participants of the mandatory funded system for their future pensions from the state budget. In parallel, the state pension system (Pay As You Go) continues to operate, but it will become less and less important, aiming to provide a certain subsistence minimum.
Up to 1 July 2020, transitional provisions set the maximum threshold for the calculation of social payments at AMD 500,000, and the social payment rate at 2.5%. From 1 July 2020 the maximum threshold is set at 15 times the minimum wage: AMD 1,020,000.
1 January to 31 December 2021, the following rates apply for social payments:
Moreover, the social payment rate will be gradually increased until 2023, and from 2023 the following rates will be applied:
The following calculation tables show the income tax and social payment calculations supplemented by the application of legal norms in force from 1 July 2020 to 31 December 2020 and 1 January 2021 to 31 December 2021.
Table 1. Calculation mechanism 1։ Applicable from July 1st, 2020 to December 31, 2020
|
Gross salary |
Income tax |
Social payment |
Stamp fee |
Net salary |
|---|---|---|---|---|
|
230 000 |
52 900 |
5750 |
1 000 |
170 350 |
|
900 000 |
207 000 |
52 500 |
1 000 |
639 500 |
|
1 020 000 |
234 600 |
64 500 |
1 000 |
719 900 |
|
1 500 000 |
345 000 |
64 500 |
1 000 |
1 089 500 |
Income tax rate: flat rate of 23%,
Social payment:
Stamp fee - AMD 1,000 - fixed fee. Note: The stamp fee is a fixed monthly amount of 1,000 AMD. It is withheld by the employer. The money is directed to the “Insurance Foundation for Servicemen”.
Table 2. Calculation mechanism 2։ Applicable from 1 January 2021 to 31 December 2021
|
Gross salary |
Income tax |
Social payment |
Stamp fee |
Net salary |
|---|---|---|---|---|
|
230 000 |
50 600 |
8050 |
1 000 |
170 350 |
|
900 000 |
198 000 |
57500 |
1 000 |
643 500 |
|
1 020 000 |
224 400 |
69 500 |
1 000 |
725 100 |
|
1 500 000 |
330 000 |
69 500 |
1 000 |
1 099 500 |
Income tax rate: flat rate of 22%
Social payment:
Stamp fee - AMD 1000 - fixed fee.
With the reduction of the real income tax rate for mandatory participants of the funded pension system, the portion they accumulate is gradually increasing and the portion co-financed by the state for their future pensions is reducing.
Aharon Chilingaryan
a.chilingaryan@bdoarmenia.am
Anahit Simonyan
a.simonyan@bdoarmenia.am