Part 1. Turnover Tax System in Armenia: What Changed from 2025
- 21.03.2026
- Posted by: admin
- Categories: Taxation, Legislation
Note: This material is for general informational purposes only and does not constitute individual tax or legal advice. In specific situations, a professional assessment based on individual facts and documents is required.
This article outlines the overall structure of the changes effective from 2025: who may apply the turnover tax regime, who may no longer do so, how the rates have changed, and why classification, accounting, and documentation have become more important. The calculation logic, the practical application of cost-based reductions, the minimum documentation package, and examples are presented in Part 2.
The Nature of Turnover Tax
Turnover tax is a special tax system that replaces value added tax and/or profit tax for resident commercial organizations, and only value added tax for individual entrepreneurs. For that reason, choosing or losing this regime is not merely a rate issue; it also changes the business’s overall tax structure.
Brief Summary
- The main threshold for remaining in the turnover tax regime is AMD 115 million in sales turnover across all types of activities during the previous tax year (Tax Code of the Republic of Armenia, Article 254(2)).
- If this threshold is exceeded, turnover taxpayer status generally terminates from the moment of exceedance until the end of the year; however, in the public catering sector, special exceptions related to the filing of a specific declaration may apply (Tax Code of the Republic of Armenia, Article 254(6)-(7), Article 255).
- From 2025, the rates are no longer uniform. Different activities are subject to different rates, and some groups are also subject to cost-based reductions and minimum thresholds (Tax Code of the Republic of Armenia, Article 258(1)-(5)).
- A number of activities may no longer apply this regime, including certain financial, professional, consulting, and labor-supply activities (Tax Code of the Republic of Armenia, Article 254(3)).
- For turnover taxpayers that have submitted the special declaration required to operate in the public catering sector, the 20% rate applies only to income derived from (a) the disposal of other assets and (b) other activities not included in the “Public Catering Organization” section of the economic activity classifier (Tax Code of the Republic of Armenia, Article 258(1), item 7 of the table).
- From 2025, accounting and documentation requirements have also become more stringent, including those related to inventory movement and supporting documents.
What Has Changed
From 2025, the turnover tax regime requires businesses to do more than simply check the threshold. It also requires more precise classification and more disciplined accounting. If many companies previously approached the issue primarily through a single criterion-total turnover-that is no longer sufficient. Different streams of income of the same taxpayer may now be subject to different rates, different deduction rules, and different risks.
In practical terms, this means that, for the regime to be applied correctly, a business must check at the same time:
- whether it is eligible to apply the regime,
- what activities and income streams exist within the same taxpayer,
- whether cost-based reduction is available,
- and whether any special exceptions or additional declaration requirements apply.
For that reason, the first question a business must answer is whether it can operate under this regime at all.
Who Can Qualify as a Turnover Taxpayer
General rule
Under the Tax Code of the Republic of Armenia, resident commercial organizations and individual entrepreneurs may qualify as turnover taxpayers if their sales turnover across all types of activities during the previous tax year did not exceed AMD 115 million and the relevant declaration in the form approved by the tax authority has been filed. The Code also provides for cases in which the declaration is filed at the beginning of the year, after state registration or tax registration, after exiting the micro-entrepreneurship regime, upon resumption of activity, or in certain situations of re-registration (Tax Code of the Republic of Armenia, Article 254(1)-(2)).
The 20-Day Declaration Requirement
If, due to exceeding the threshold, being recognized as a related party, or another legal ground, a taxpayer ceases to qualify as a turnover taxpayer, the taxpayer must submit the relevant declaration to the tax authority within the statutory deadline of 20 days (Tax Code of the Republic of Armenia, Article 255(2)). In practice, this is one of the points where a delayed response can lead to the application of the wrong tax regime, subsequent corrections, and additional risks.
Important Exception
This general rule does not operate in the same way in every case. Exceeding the threshold does not always have the same consequence for all taxpayers. This is where the public catering sector requires separate attention.
Special Regulation for the Public Catering Sector
For persons operating in the public catering sector, the Code provides a separate regulation under which, in certain cases, it remains possible to continue to be treated as a turnover taxpayer despite the general restrictions, provided the special declaration required for public catering activities is submitted.
Practical Conclusion
Before concluding that an organization or individual entrepreneur may remain in this regime, it is advisable to verify separately:
- sales turnover for the previous year across all activities,
- the correct classification of the activity,
- whether there is a need to submit a special declaration.
Who Cannot Qualify as a Turnover Taxpayer
If, at the first stage, the business determines that the threshold condition may be satisfied, the next key question is whether it falls within the categories of taxpayers or activities excluded by law.
Financial and Related Sectors
In particular, the Code excludes the following from the turnover tax regime:
- banks,
- credit organizations,
- insurance companies, insurance agents, and insurance brokers,
- investment companies, specialized participants in the securities market, investment funds, and fund managers,
- pawnshops, persons engaged in foreign exchange trading, and payment and settlement organizations,
persons providing services involving crypto-assets as defined by the Law on Crypto-Assets (Tax Code of the Republic of Armenia, Article 254(3), point 3).
Gaming Activities
The turnover tax regime also may not be applied to casino operations, prize games, totalizators, internet totalizators, and lottery organization activities (Tax Code of the Republic of Armenia, Article 254(3)).
Certain Professional, Consulting, and Labor-Supply Activities
The Code also excludes:
- notaries,
- audit organizations,
- providers of legal services,
- activities included in groups 69 and 70 of section M, as well as groups 78.2 and 78.3 of section N of the classifier of economic activities (Tax Code of the Republic of Armenia, Article 254(3), points 3 and 3.1).
In practical terms, these classifier references may include, for example, legal and accounting activities, management consulting, and the provision of temporary labor.
Related Parties and Certain Contractual Structures
The turnover tax regime may also be unavailable to:
- organizations and individual entrepreneurs considered related parties within the meaning of Article 30(1) of the Code, except in the special cases provided by law,
- organizations and individual entrepreneurs considered related parties within the meaning of Article 30(2) of the Code, if the aggregate relevant sales turnover exceeds AMD 115 million,
- parties to certain contractual structures provided for by Article 31 of the Code, including joint activity arrangements, commission arrangements, or agency arrangements under which the agent acts in its own name (Tax Code of the Republic of Armenia, Article 254(3)).
This is often where the practical mistake occurs: a business assesses only its separate legal entity or individual entrepreneur status, but does not check how related-party rules or the contractual structure affect eligibility for the regime as a whole.
Rate Structure: A Practical Map
If a business can operate under the turnover tax regime, the next key issue is the calculation logic. And here, the main meaning of the 2025 change is that the rates are no longer treated as a single flat rule. The applicable rate now depends on the nature of the income or activity.
| Type of Income or Activity | Base rate | Maximum reduction percentage | Minimum threshold |
|---|---|---|---|
| Trading activity | 10% | 9.5% | 1% |
| Trade in recyclable materials included in the list approved by the Government | 5% | — | — |
| Income from disposal of newspapers by editorial offices | 1.5% | — | — |
| Manufacturing activity | 7% | 5% | 3% |
| Rent, interest, royalties | 10% | — | — |
| Public catering activity | 12% | 9% | 3.5% |
| Income of taxpayers that have submitted the special declaration for public catering, derived from disposal of other assets and from other activities not included in the “Public Catering Organization” section of the classifier | 20% | — | — |
| Certain activities in the high-tech sector | 1% | — | — |
| Income from disposal of other assets, including real estate | 10% | — | — |
| Income from other activities | 10% | 6% | 4.5% |
Source: Tax Code of the Republic of Armenia, Art. 258, current edition as of 01.01.2025.
The Cost-Based Reduction Mechanism: Why It Matters
The differentiated rate structure does not by itself present the full picture. For a number of activities, the tax is determined not only by the base rate, but also by the ability to reduce it by documented costs and by the minimum threshold that still applies.
In practical terms, this means the following: even if a business has high allowable costs, the tax payable cannot fall below the statutory minimum level. Therefore, the actual tax burden under the turnover tax regime depends not only on turnover, but also on:
- correct classification,
- proper documentation,
- controlled cost accounting,
- and, where multiple activities are carried on, separate accounting.
Accordingly, the change is not merely an amendment to the statutory text. It also changes the requirements for a business’s internal accounting, control, and documentation.
Practical Impact on Businesses
- Incorrect classification of an activity may lead to the application of the wrong rate or the loss of the right to a cost-based reduction.
- Delayed control over the moment when the regime must be exited or a special declaration must be filed is particularly dangerous for businesses operating close to the threshold.
- Misreading the exceptions is especially sensitive in the areas of public catering, related parties, and professional services.
- Incomplete documentation also weakens the practical ability to apply cost-based reductions.
What Should Be Reviewed Now
If a business wants not only to understand the change but also to reduce practical risk, it is advisable to review at least the following:
- the legal classification of all lines of activity,
- whether the organization or individual entrepreneur falls within categories excluded by the Code,
- the income map by applicable rate and the availability of cost-based reductions,
- internal procedures for threshold monitoring, declaration deadlines, quarterly calculations, and document completeness.
Risks if the Changes Are Ignored
If a business continues to operate under the old logic, the following risks may arise:
- application of the wrong tax regime,
- calculation at the wrong rate,
- loss of the right to reduce tax by costs,
- late response to the moment of exit from the regime or the need for a special declaration,
- risk of subsequent tax adjustments or disputes.
From 2025, the main danger of incorrectly applying the turnover tax regime is not only higher tax. The risk also lies in misclassification, incomplete documentation, and late control over the point at which the tax treatment should change.
Transition to Part 2
Part 2 provides a detailed explanation of how the tax is calculated in practice and what documentation is required to apply the deductions.
- how turnover tax is calculated from 2025,
- which costs may reduce the tax,
- when the minimum threshold applies,
- and what documentation package is required to reduce risk
Legal basis and notice
This article has been prepared on the basis of the provisions of the Tax Code of the Republic of Armenia relating to turnover tax, in particular Articles 253-262 and the provisions directly connected with them, as applicable as of 01.03.2026.
Frequently asked questions
What is the main threshold for remaining under the turnover tax regime in 2025?
The main threshold for remaining under the turnover tax regime is AMD 115 million in sales turnover across all types of activity during the previous tax year.
What happens if the threshold is exceeded during the year?
If the threshold is exceeded, the taxpayer will generally cease to qualify as a turnover tax payer, and a declaration must be submitted to the tax authority within 20 days. In practice, delayed action at this stage may create the risk of applying the wrong tax regime.
Can a public catering business continue operating under turnover tax after exceeding the threshold?
Yes. A special regulation applies to the public catering sector, under which, in certain cases, the business may continue operating under the turnover tax regime if the relevant special declaration is filed within the statutory deadline.
Which services can no longer operate under this regime?
From 2025, the turnover tax regime no longer applies to certain professional, consulting, and labor-supply activities, in particular within groups M 69, 70 and N 78.2, 78.3. In practice, this may include legal services, accounting services, management consulting, and certain staffing-related services.
How does related-party status affect the tax regime?
If the tax authority recognizes persons as related parties and their combined sales turnover exceeds AMD 115 million, they may lose access to the turnover tax regime. In practice, it is important to distinguish between automatic related-party status and related-party status recognized by decision of the tax authority.