Israel – Armenia Tax Treaty

Business Activity in Armenia

Armenia has become a preferred investment option for foreign entrepreneurs and investors given the successful economic reforms, high level of stability, access, and liberty. In general, no restrictions are imposed on the foreign ownership of companies, real estate, or other assets. Furthermore, medium and large businesses in Armenia are paying standard tax rates, while small businesses benefit from special tax rules that make tax returns easier and reduce the number of forms to be filled out.

Armenia’s economy consists of a couple major sectors including mining, information technology, construction, and electricity. Its current GDP is $25.41 billion. Moreover, the country joined the World Trade Organization back in 2003. The World Trade Organization helps raise living standards in countries by building trade capacity, negotiate trade agreements, and resolve trade problems.

Bilateral Agreements Between Armenia and Israel

1. Double Taxation Agreement
2. Reciprocal Promotion and Protection of Investments

Convention on the Prevention of Double Taxation

The agreement between the governments of Israel and Armenia regarding the avoidance of double taxation was signed on July 24, 2017 and entered into force on December 31, 2018.

To read the agreement in English, click here.

Reciprocal Promotion and Protection of Investments

The international investment agreement was signed on January 18, 2000 and was effective starting June 24, 2003. The purpose of the agreement is to encourage foreign investment by increasing stability and security in each country. Secondly, it is meant to protect investors who are investing outside of their domestic country. Protecting the rights of foreign investors from changes in the legal system and economic policies are a crucial factor of the agreement.

Applicability of the MLI

Armenia and Israel have both signed the multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting (MLI), which means that there is an automatic exchange of information between the two countries. Armenia and Israel signed the MLI on June 7, 2017. Armenia ratified the MLI on September 25, 2023 while Israel ratified it on September 13, 2018.

Residency for Tax Purposes in Armenia

Residence of an Individual

An individual is considered a tax resident of Armenia if one of the following three conditions apply:

1. An individual is physically present in Armenia for at least 183 days during the tax year;
2. They have vital interest in staying in Armenia;
3. They are in the civil service of Armenia.

To read about how an individual is considered a resident of Israel, click here.

Residency of a Company

For a company to be considered tax resident, it must be registered in the Republic of Armenia.

To learn about how a company is considered a resident of Israel, click here.

The Tax System in Armenia

The Armenian tax authority is called the State Revenue Committee.

Income taxation: 20%

Taxation of companies: 18%

VAT: 20%

Capital gains tax: Corporate: 18%, Individual: 0%/10%/20%

Withholding Tax

Relocation to Armenia

Armenia’s global diaspora accounts for approximately ten million people. The authentic image of Armenia is found in its hospitable people who cherish their vibrant traditions and guide their traditional commerce. This is possible due to the flexible regulations of the country, which allows everyone, including foreigners, to conduct business, live and work in the country while enjoying same freedoms as those given to the natives.

One of the most positive aspects of Armenia’s tax system is the transparency, which is also considered to be quite efficient and at the same time to be business-friendly. There are a few other aspects as well, including the low tax rates which combine with a variety of different incentives. Almost all of the taxes are state taxes and they go into the state budget. All the above reasons and more make Armenia a great place to live and conduct business.

Armenia has approximately 500 – 1000 Jews with a majority of them living in Yerevan, the capital of Armenia. The Jewish community is represented by the Armenian affiliate of the World Jewish Congress and the Jewish community of Armenia (JCA) ensuring their needs are met. A large portion of the Jewish Armenian population is Ashkenazi, with some Mizrahi and Georgian Jews.

Real Estate Taxation in Armenia

Agricultural land is taxed at 15%. For non-agricultural land, a rate of 0.25% – 1.0% of the property’s value is taxed. The value of the property is based on the market value. Property taxes should be paid annually be December 1^st of the tax year. For public buildings, tax is calculated at a rate of 0.3%, 0.25% for industrial buildings, and 0.2% for buildings that are considered a garage. Real property tax for residential buildings is taxed at a rate of 0.05% – 1.5%.

Transfer of Funds from Israel to Armenia

According to section 170(a) of the Israeli Income Tax Ordinance, any transfer of payment to a non-Israeli resident is subject to a 25% withholding tax. The tax authority may allow, under certain circumstances, a reduction or dismissal of the withholding tax. Our firm handles withholding tax matters with the Israeli Tax Authority.

Since both countries have a tax treaty, one can submit a declaration form (statement regarding a payment to a foreign resident that is exempt from withholding tax), and under certain circumstances, it is possible to transfer the payment without the withholding tax and the approval of the Tax Authority.

In providing advice regarding the transfer of money abroad, in addition to the issue of withholding tax, our firm handles the requirements of foreign banks, such as an accountant’s approval regarding the payment of taxes, and examines additional actions required in light of the uniform standard of CRS between the countries –automatic exchange of information between countries which is carried out first through the banks and then between the tax authorities of each two countries.

Banks raise many difficulties and charge high fees for converting shekels into other currencies, so it is important to consult before transferring the funds – Contact us.

For more information on money transfers abroad click here.

Types of Business Entities in Armenia

Main types of business entities in Armenia include:

Individual Entrepreneurship – This type of business entity is owned and managed by a single person. Private owners are personally responsible for the obligations and liabilities of the business. The advantages of having an individual entrepreneurship are the potential financial rewards, the ability to be your own boss, flexibility etc. On the other hand, it may require long hours and increased risk.

Limited Liability Company – Limited liabilities are the most common business entity in Armenia. They can be founded and run by one or more people. The shares are divided within the founders depending on the amount of capital invested. Individuals in a limited liability company are not liable for their obligations. The profits are split between the founders depending on their equity in the company. Owners bear the risk of losses based on the amount they invested into the company.

Join-Stock Company – A join-stock company is when the capital is divided into a set number of shares of stock. Liabilities are limited to the value of shares owned. An open join-stock company is available for sale for the public while the closed join-stock company has the same functions with capital divided among the shareholders. The benefits of this type of entity includes limited liability, transfer of interest, efficient management etc. The company can become very complex during formation.

Partnership – A partnership can be an independent legal entity or have an agreement between partners. The company can be managed by more than one individual. General partners are liable for the business’s liabilities, while limited partners can only lose the amount they invested into the company. Partnerships are less regulated and provide increased flexibility.

Incentive Laws in Armenia

Armenia is promoting economic development in the border regions by providing several tax breaks, such as Value Added Tax (VAT), profit tax and turnover tax. Apart from that, investment projects over 2 billion AMD (around $5 million) in Dilijan and nearby Tavush also receive additional VAT and profit tax exemptions.

For export-focused projects, the government exempts customs duties on equipment and raw materials imported from non-EAEU countries and applies 0% VAT to most production equipment and raw materials. Armenia’s free economic zones provide a business-friendly environment with tax incentives and streamlined regulations, attracting investors and strengthening the economy. Furthermore, the government also offers customs duty exemptions to encourage export-oriented projects. Some other incentives include 10% reduction on income tax for the IT sector and additional tax benefits for the medical sector.

Armenia Double Tax Treaties