Starting from July 1, 2022, the RA Law on “Non-cash transactions” (hereinafter, “the Law”) came into effect, which establishes a mandatory requirement to make payments for a number of transactions in non-cash form. Such transactions are alienation of goods, property acquisition, use of goods/property, the performance of works and rendering services, as well as payment of salaries, scholarships, pensions, benefits, loans, and representative expenses.
Which payment is considered a non-cash payment?
The payment is considered non-cash if it is transferred to the bank account of the beneficiary in cash or non-cash form, or by making a transfer from the bank or electronic money account of the payer to the electronic money account of the beneficiary.
Does this requirement apply to payments for transactions between individuals?
Yes. According to the current regulations, granting and receiving of loans between individuals exceeding 300,000 AMD, as well as the payment exceeding 500,000 AMD for transactions, the rights arising from which are subject to state registration must be carried out in a non-cash form. Such transactions are, for example, the contracts for the sale of a car or real estate, the contract for the sale of shares, etc.
Are there any additional restrictions on transactions between individuals?
Yes. In the territory of the Republic of Armenia, individual entrepreneurs and organizations for transactions exceeding AMD 300,000 of the sale of goods, sale of property, use of goods, use of property, performance of works and provision of services, payment of passive income, provision and receipt of loans, if one party to them is a natural person shall be carried out in a non-cash form.
Do these requirements apply in all regions of Armenia?
No. The provisions of the Law have not yet fully entered into effect and will come into effect in stages in different regions in Armenia.
Currently, the requirement for non-cash payment is extended to the payments made by entities, individual entrepreneurs, attorneys, and notaries for the purposes of salaries, scholarships, representative expenses, business trips, payments related to state purchases, to services provided by medical organizations and educational institutions operating in Yerevan.
The requirement to make non-cash payments for the above-mentioned transactions will be effective for persons operating in the administrative centers of the marzes of Armenia from July 1, 2023, and in other regions of Armenia from July 1, 2024.
In which cases the payment must be made exclusively in a non-cash form, regardless of the amount of money and the place of execution of the transaction?
Regardless of the amount, from July 1, 2022, payments related to the following transactions are made in the non-cash form:
- Provision of legal, accounting, auditing, financial, information technology, and other consulting services,
- Provision of notary services,
- Any transaction between individual entrepreneurs, notaries, attorneys, and entities in the RA territory, as well as any transaction between foreign entities and RA individual entrepreneurs, notaries, lawyers, entities, individuals,
- Credits and loans provided by banks, credit organizations,
- Insurance compensations,
- Payments to and from state and municipal budgets,
- All operations related to the activities of state and local self-government bodies.
What countermeasures are in place to prevent circumvention of the above requirements?
The fragmentation of transactions for the purpose of avoiding the above requirements will be considered as a single transaction within the meaning of the Law, and all the provisions of the Law will apply to it, including the liability arising from their violation.
At the same time, the Law prohibits entities, individual entrepreneurs, notaries, and lawyers from offering and (or) receiving a higher price for non-cash payments than the offer and /or receipt in case of cash payment.
Which bodies supervise compliance with the requirements of the Law?
The RA State Revenue Committee is the supervisory authority for compliance with the requirements of the law. However, there are some exceptions: the Central Bank of Armenia supervises the persons licensed, registered, and/or controlled by the Central Bank of RA for the compliance of the above-mentioned requirements, and for the compliance with the requirements set in the field of labor relations, the supervisory authority is the RA Health and Labour Inspection Authority.
What is the liability for violating the provisions of the Law?
In the case of violating the requirements of making payment in a non-cash form for transactions between entities, individual entrepreneurs, notaries, and attorneys, responsibility arises for all parties to the transaction. However, it is noteworthy that in the case of a natural person on one side of the transaction, responsibility arises only for the entity, individual entrepreneur, attorney, and notary, which is provided by the Tax Code of the Republic of Armenia.
And in case of violation of the requirements of the Law by individuals, the responsibility arises according to the Code On Administrative Offenses.