Update-2024-June-en

LEGAL UPDATES

June 2024

1. RA LAW ON AMENDMENT TO RA CIVIL CODE

2. RA LAW ON MAKING ADDITIONS AND CHANGES IN RA TAX CODE

3. RA LAW ON AMENDMENTS TO THE TAX CODE OF THE REPUBLIC OF ARMENIA

4. DRAFT RA LAW "ON CRYPTOASSETS" AND DRAFT LAWS ON CHANGES IN
RELATED LAWS

LEGAL ACTS SUBJECT TO CHANGE

Name of the legislative act

RA LAW ON AMENDMENT TO RA CIVIL CODE

The status of the change

The law entered into force on June 8, 2024, the day after its official publication.

What are the changes related to?

With the amendment, it is proposed to amend the corporate governance code as a whole, in order to attract long-term investments to the economy, to ensure the stability of the business sector, to promote inclusive economic growth, as well as to ensure the involvement of the public in the economic decision-making process through the creation of an environment of transparency, trust, benevolence and accountability.

The code consists of five chapters..

- Rights of shareholders and equal treatment towards them, responsibilities of controlling
shareholders.
- Board (the board of directors), which defines the board's composition, functions and
responsibilities, criteria for independent members, committees and their main types, ethical
commitment of the board, nomination and evaluation principles, etc.;
- Internal control and risk management system, which describes the components of the system
and the responsible persons/units performing the functions;
- Disclosure and transparency of information, where the content of the organization's annual
report is presented, the role of external independent auditors in ensuring reliable and complete
financial reporting;
- The relationship of the organization with the stakeholders, where the recognition of the
importance of the rights and interests of the stakeholders in terms of ensuring the long-term
interests of the organization and its shareholders is presented.:

Article 76.1. The Code of Corporate Governance

1. The Code of Corporate Governance is a legal act approved by the authorized body that develops the policy of the Republic of Armenia in the field of investment promotion, which contains principles and guidelines aimed at increasing the efficiency of the management of an economic company, protecting the rights of participants, increasing transparency and accountability.

2. Adherence to the Code of Corporate Governance is voluntary by economic companies, unless otherwise provided by law.

3. The authority to adopt a decision on joining the corporate governance code belongs to the general meeting of participants of economic companies, unless otherwise provided by law or charter.

Name of legislative act

RA LAW ON MAKING ADDITIONS AND CHANGES IN RA TAX CODE

The status of the change

This law shall enter into force on the day of full implementation of the Law "On Regulation of Gaming Activities"

What do the changes involve?

With this amendment:
In Armenia, the gaming organizer must pay 10 percent income tax to the state budget in case of winnings of more than 5 million drams. As for all other winnings, an annual calculation methodology applies. In other words, if there is a positive difference between all the bets made during the year and the received winnings, the individual must reflect this positive difference in the annual declaration and pay the 5% income tax rate to the state budget.

That is, small winnings that will be during the year and the relevant authority will calculate the net profit will be taxed at 5 percent.

You can read the text of the law at the following link:
https://www.arlis.am/DocumentView.aspx?DocID=194600

80) big win: a one-time win of 5 million drams or more defined by the Law "On Regulation of Gaming Activities":

Article 145. Features of accounting of individual types of income

1. In order to determine the income tax base:

3) income from winnings obtained through a gaming account (except for large winnings, winnings from advertising lotteries, as well as from winnings obtained from a person who does not have a license to organize gaming activities in accordance with the Law "On Licensing") is calculated as winnings received during the reporting year (except for large winnings) and made a positive difference in bets or participation fees (except for a bet or participation fee directly related to a big win)

4) income from a big win received through a gaming account is calculated as a positive difference between the big win and the bet or participation fee directly related to its receipt.

Name of legislative act

RA LAW ON AMENDMENTS TO THE TAX CODE OF THE REPUBLIC OF ARMENIA

The status of the change

This law enters into force on January 1, 2025 and applies to relations arising after that.
The regulations established by this law are applicable to the costs and sales costs incurred after the entry into force of this law, directly related to the production of goods, the performance of works and (or) the provision of services, as well as to commercial (purchase and sale) acquired after the entry into force of this law. ) to the initial cost of the goods that are the subject of the activity.

What do the changes involve?

«With this amendment, the turnover tax rates established for the main types of activities
(commercial (buying and selling) activities, production activities, activities in the field of public
catering, other activities) were revised, while providing an opportunity to reduce the payable tax through documented expenses.
Expanded the range of types of activities prohibited from being taxed in micro-enterprise and
turnover tax systems. In particular, it was limited to:

a. the possibility to engage in activities of notary, lawyers and organization of lotteries in the sales tax system,

b. in the micro-enterprise taxation system, the activity of taxpayers engaged in the types of
activities of real estate buying and selling and/or leasing, hairdressing, body care, car
maintenance services, software development and construction works, real estate evaluation and measurement, organization of saunas, baths and saunas,:

Article 73. Procedure for reformulation of obligations and offsets (reductions).

14. According to the Code, the amounts of VAT offset (reduced) in the procedure defined by the Code in the previous reporting periods regarding the acquisitions of the VAT payers as of the date of transfer from the general system of taxation to the special systems of taxation are subject to reformulation, to be deducted from the amounts of VAT subject to offset (reduction) in the reporting period with a single calculation of VAT and excise tax submitted to the tax authority for the last accounting period of being considered a VAT payer prior to the given day:

1) in relation to the relevant value of the product (except for the fixed asset or intangible asset), work or service, in the amount of the amount calculated at the rate of 20 percent of VAT.

2) in relation to the balance sheet value of a fixed asset or an intangible asset, in the amount calculated at the rate of 20 percent of VAT.

Article 258. Turnover tax rates

1. The turnover tax is calculated at the following rates, taking into account the provisions set forth in parts 2-8 of this article, in relation to the taxation base of transactions considered to be the object of taxation by turnover tax.

№	Type of income	Rate (Percentage)
1.	Incomes from commercial (buying and selling) activities, except for incomes from the types of activities provided for in points 2 and 9 of this table	10
2.	Revenues from trading (purchase and sale) of secondary raw materials included in the list defined by the government	5
3.	Revenues from disposal of newspapers by editorial offices	1.5
4.	Income from production activities	7
5.	Rent, interest, royalty	10
6.	Revenues from activities in the field of public catering	12
7.	Revenues received from the disposal of other assets, as well as other activities, not included in the "Organization of Public Catering" section of the economic activity classification used in the Republic of Armenia by the taxpayers of the turnover tax who have submitted a declaration in the form approved by the tax authority regarding being considered as a turnover tax payer for carrying out activities in the field of public catering	20
8.	Incomes received from the types of activities defined by Article 3, Part 1, Clause 2 of the Law "On State Support of the Information Technology Sector"	5
9.	Proceeds from disposal of other assets, including real estate	10
10.	Income from other activities	10

2. For the reporting period, the amount of turnover tax calculated at the rate defined in part 1 of this article, as part of the taxation base formed by commercial (buying and selling) activities defined in point 1 of the table in part 1 of this article, is reduced by the sum of expenses defined in part 6 of this article. in the amount of 9.5 percent. If, after the deductions specified in this part, the amount of
turnover tax is less than one percent of the tax base formed by commercial (purchase and sale) activity, then the deduction for expenses is made to the extent that the amount of turnover tax is equal to the tax base formed by commercial (purchase and sale) activity. one percent.

3. For the reporting period, the amount of turnover tax calculated at the rate determined by part 1 of this article, as determined by point 4 of the table of part 1 of this article, as part of the taxation base formed by production activity, is reduced by the amount of 5 percent of the sum of expenses determined by part 6 of this article. : If after the deductions specified in this part, the amount of turnover tax is less than 3 percent of the tax base formed by production activity, then the deduction for expenses is made to the extent that the amount of turnover tax is 3 percent of the tax base formed by production activity.

4. For the reporting period, the amount of turnover tax calculated at the rate specified in part 1 of this article for the tax base defined by point 6 of the table in part 1 of this article for the tax base formed by the activities carried out in the field of public catering is reduced by 9 percent of the sum of expenses defined in part 6 of this article. in the amount of If, after the deductions specified in this part, the amount of turnover tax is less than 3.5 percent of the taxation base formed by activities in the field of public catering, then the deduction for expenses is made to the extent that the amount of turnover tax constitutes 3.5 percent of the taxation base formed by activities in the field of public catering.

5. For the reporting period, the amount of turnover tax calculated at the rate specified in part 1 of this article, as determined by point 10 of the table of part 1 of this article, as part of the taxation base formed by other activities, is reduced by 6 percent of the sum of expenses determined by part 6 of this article. amount. If, after the deductions specified in this part, the amount of turnover tax is less than 4.5 percent of the tax base from other activities, as determined by point 10 of the table in part 1 of this article, then the deduction for expenses is made to the extent that the amount of turnover tax is from other activities 4.5 percent of the emerging tax base.

6. In terms of the application of parts 2-5 of this article:

1) Expenditures deducted from the amount of sales tax are considered to be incurred in the given reporting period, substantiated by the documents defined by the items 1-5 of part 2 of Article 55 of the Code, as well as by the documents defined by parts 12 and 13 of the same article, for the production of goods, the performance of works and (or) expenses directly related to the provision of services (except for the amortization deductions of fixed assets of production purpose in operation and intangible assets in operation, as well as expenses incurred on these fixed assets and intangible assets), the subject of commercial (buying and selling) activities the initial cost of the goods, as well as the costs of realization. For the purpose of applying this clause:

a. Expenses incurred in the accounting period are considered to be the expenses related to the goods purchased, services received, works accepted in the given accounting period,

b. Expenses directly related to the production of goods, the performance of works and/or the provision of services are considered to be the expenses defined by point 1 of the third paragraph of part 7 of Article 121 of the Code (except for fixed means of production in operation and intangible assets in operation amortization deductions, as well as costs incurred on these fixed assets and intangible assets), and the costs defined by point 3 of the third paragraph of part 7 of Article 121 of the Code are considered costs of realization;

2) expenses for assets, works and services received free of charge, as well as in the case of alienation of other assets that are not culinary products by taxpayers operating in the field of public catering, their initial cost are not considered expenses deductible from the amount of turnover tax.

7. In accordance with parts 2-5 of this article, the unreduced part from the amount of turnover tax in terms of expenses (including for the reporting period commercial (purchase and sale), manufacturing, public catering activities and defined by point 10 of the table of part 1 of this article) (in the absence of taxation bases formed from other activities) by complying with the requirements of parts 2-5 of this article, it is reduced for subsequent accounting periods, respectively, in the commercial (purchase and sale), manufacturing, public catering sector from the amount of the turnover tax calculated in relation to the taxation bases formed by other activities, defined by point 10 of the table of part 1 of this article.:

8. The turnover tax payers who have submitted a statement on being considered a turnover tax payer in order to carry out activities in the field of public catering in the form approved by the tax authority shall calculate the turnover tax only at the relevant rates specified in points 6 and 7 of the table in part 1 of this article.

LEGISLATIVE DRAFTS

Name of the legislative draft

Draft RA Law "On Crypto Assets" and draft laws on amendments to related laws

The status of the change

This amendment entered into force on 08.05.2024.

What does the change refer to?

Along with the increase in the volume of circulation of crypto-assets in many countries, including Armenia, public involvement in this field has increased significantly. In addition, many individuals have appeared who have started business activities in this area, being involved in both the creation of blockchain and other distributed ledger technologies (DLT), ensuring and developing their applicability in various fields (including the financial system). programs, as well as providing various services with crypto-assets to residents and non-residents of RA, including trading, exchange, transfer, consulting of crypto-assets.
However, the lack of an adequate regulatory framework is a barrier to engaging in innovative
activities in the field of crypto-assets.

The lack of regulation of the field of crypto-assets creates a number of problems for the
development of the field, namely:

- the lack of a legal framework (including the legal definition of the terms of crypto-assets
and their underlying technologies, types of activities, rights and responsibilities of persons
engaged in activities) does not allow persons engaged in business activities in the field to
plan long-term activities in RA, to attract local and international partners and customers.

- the unregulated nature of the sector hinders the cooperation of the crypto-ecosystem and
the financial system, which negatively affects both the smooth process of providing
services with crypto-assets and the use of AGTs in various projects in the financial
system.

The main provisions of the regulation are as follows:

- Financial instruments (securities, deposits, etc.), which are created in the form of
crypto-assets, are regulated by applicable laws, regardless of the underlying
technologies;
- Other types of cryptoassets and their services are regulated by the new law "On
Cryptoassets";
- Cryptoassets considered electronic money (electronic money tokens) are regulated
both by the current legislation on the regulation of electronic money and by the law
"On Cryptoassets";
- Non-fungible tokens (NFTs), non-transferable crypto-assets and central bank digital
currencies (CBDC) are outside the scope of regulation;
- Activities (including mining) aimed at maintaining a decentralized ledger or validating
transactions for the purpose of receiving crypto-assets as a reward are outside the
scope of regulation;
- It is prohibited to use crypto-assets in RA territory for the purpose of making
payments, with the exception of crypto-assets considered electronic money;.
transactions with crypto-assets and payments for the provision of services with crypto-assets will be allowed exclusively in cashless form;
- There is a requirement to publish an offer document for a public offering of crypto-
assets in the territory of the Republic of Armenia. Requirements for advertising are
also defined.
- It is allowed to provide the following services with crypto-assets in the RA territory:
- Launch of trading platform
- Custody of crypto-assets
- Trading (exchange) of crypto-assets on own account
- Trading of crypto-assets on the client's account
- Acceptance and reporting of instructions for execution of transactions with crypto-assets
- Allocation of cryptoassets
- Management of a portfolio of cryptoassets
- Consultation
- Transfer of crypto-assets
- Offering of tokens (stablecoins) attached to the asset.
- Services can be provided only by those legal entities that will receive an appropriate
license from the RA Central Bank.
- Services (partially or fully) can also be provided by existing financial organizations, in
particular, banks, investment companies, investment fund managers, regulated
market operators and the Central Depository, upon receiving the appropriate
permission from the RA Central Bank;
- A number of requirements are set for the provision of services, including protection of
client funds, managers and significant participants, internal and external audit,
publication of reports, prevention of conflicts of interest and other requirements.
Requirements are also defined according to each type of service.
- Requirements are defined in order to prevent abuses (price abuse, unfair use of inside
information) in the crypto-assets market;
- A requirement to meet the regulations aimed at combating ML/AF by persons
providing services with crypto-assets;
- The regulation provides an opportunity for clients to contact a financial mediator.
In order to solve the existing problems, it is proposed to introduce a model of comprehensive
regulation of the field of crypto-assets, for which purpose the draft law "On Crypto-assets"
has been developed. At the same time, it is proposed to make amendments and additions to
a number of existing laws.

You can read the full version of the legislative project at the link below:
https://www.e-draft.am/projects/7292/about