The RA National Assembly adopted in the first reading the draft “On Making
Amendments to the Tax Code of the Republic of Armenia.”
The amendments aim to create an opportunity for commercial banks and credit organizations to forgive the debt obligations of individuals who have died or become disabled as a result of hostilities, as well as their spouse, cohabiting child or cohabiting parents, without incurring additional tax liabilities. The draft will also create an opportunity for commercial banks to forgive both unreliable and reliable credit liabilities.
The draft envisages considering the forgiveness of the loan as a deductible income for individuals, so that tax agents do not have to calculate for the forgiven amount and pay income tax to the budget. If fully adopted, these amendments will apply to loans received by persons defined by this law before the end of martial law after September 27, 2020, interest accrued on them, penalties and (or) fines.
The draft stipulates that the following shall not be considered income for profit taxpayers for the purpose of determining the profit tax base:
1. Assets deducted from gross income for tax purposes (including interest, penalties and / or penalties accrued before and after being declared unreliable) if forgiven, recognized as unreliable in respect of dead or disabled natural person, his / her spouse, cohabiting child or cohabiting parent as a result of military operations registered in banks and credit organizations and jointly approved by the Government authorized body and the Central Bank of the Republic of Armenia;
2. The amount of the forgivable loan and (or) fines, granted by the banks or credit organizations to a sole proprietor or notary, which has died or has become disabled as a result of hostilities during the state of martial law, his spouse, his cohabiting child or cohabiting parent.
In order to determine the tax base of resident banks, credit organizations, assets not yet recognized as unreliable in accordance with the procedure established by the Government and the Central Bank of the Republic of Armenia in respect of a natural person who died or became disabled as a result of hostilities during those martial law registered in those banks and credit organizations (including interest, penalties and / or fines) shall be deducted from gross income.
The amendments also stipulate that, in order to determine the tax base, deductible income is considered to be:
• Income of a natural person who has died or become disabled as a result of hostilities during hostilities in a state of martial law, his / her spouse, cohabiting child or cohabiting parent as a result of a loan forgiveness granted by a resident bank or credit organization.