On April 13, 2017, during the regular session of the Revenue Policy Improvement Council that was held in the Ministry of Finance of the Republic of Armenia, the European Business Association in Armenia requested to include 2 issues related to the taxation of dividends in the agenda:
- According to the Article 444, part 7 the provisions on dividend taxation of foreigners by income tax will enter into force since January 1, 2017 and the law will be applied to the dividends declared after January 1, 2017, and for the RA citizens dividends declared after January 1, 2018 which means that the dividends may be generated in the previous years but taxed if declared after January 2017. EBA presented its position that the Law cannot be applied retrospectively and to remove the distinction is done based on the citizenship criteria. The EBA suggested to apply the law on the dividends generated by the results of 2017 and the subsequent years. The suggestion has been agreed in the Council and the secretariat of the Council will prepare draft amendment in the Tax Code and present to the Government of Armenia.
- The income tax rate for dividends of foreigners decrease to 5% as in the case of RA citizens. The suggestion has been justified by the declared policy of the Government of the Republic of Armenia to attract FDI and to provide the foreign investors at least the same favorable conditions as defined for the RA citizens. EBA also presented the tax rates in some comparable CEE countries and Eurasian Economic Union. The Council discussed the proposal and argumented that the 45 double taxation treaties partially cover the issue and that the diversified and high rates are used in international practice, especially in the EEU.
The reference to the tax treaties: http://taxservice.am/Content.aspx?itn=TLInternationalTreaties