Double taxation is an important matter nowadays. The rapid pace of globalization in the modern world has led to an increase in cross-border trade, investment and mobility of individuals. In such conditions, there is a need to determine the form, amount and order of taxation of the income received as a result of this activity, taking into account that the taxation of the same income in several countries (double taxation) will have a negative impact on legal and natural persons conducting activities and receiving income outside the borders of their country. In other words, double taxation can be a significant obstacle to international business activities and economic cooperation between states. In this sense, double taxation agreements play a crucial role in promoting globalization.
Who conclude the double taxation agreement?
Double taxation agreements are concluded as a result of bilateral negotiations between two states, and each agreement is unique in its specific provisions and scope. In other words, the signed agreement extends to the residents of the two contracting states, and persons from third countries cannot enjoy the advantages provided for in the agreement.
With which countries has the Republic of Armenia concluded a double taxation agreement?
Currently, the Republic of Armenia has concluded a double taxation agreement with 51 states. The list of countries and the relevant agreements signed with them is available on the official website of the State Revenue Committee of the Republic of Armenia:
What is defined by the double taxation agreement?
The terms of a double taxation agreement may vary depending on the negotiating countries and their objectives. Usually, double taxation agreements (hereinafter referred to as “the Agreement”) include:
- the scope of the persons to whom the Agreement applies, establishing the criteria for considering the persons as residents of the contracting states;
- the types of taxes to which the Agreement applies (applies mainly to direct taxes existing in the Contracting States at the time of the conclusion of the Agreement);
- the types of income to which the Agreement is applicable in terms of taxation: the types of income include, inter alia, income from employment, profits from business activities, dividends, income from copyrights and patents (royalties), and other income that will be determined as a result of negotiations between the contracting states;
- The procedure for resolving disputes that arise during the application of the provisions of the Agreement.
Being one of the leaders in this field, our team can effectively and correctly structure these transactions and provide legal support in international taxation matters.
How is the double taxation regulated according to the legislation of the Republic of Armenia?
According to Article 20 of the Tax Code of the Republic of Armenia, incomes received or to be received outside the territory of the Republic of Armenia by resident legal entities and natural persons of the Republic of Armenia are subject to taxation in accordance with the procedure established by the Tax Code of the Republic of Armenia. However, if taxes were collected from the RA resident legal entities and individuals in a foreign state in accordance with the legislation of the given state, then the amount of these taxes paid, but not exceeding the amount of the corresponding taxes calculated at the rate determined by the RA Tax Code for the given type of tax, shall be reduced in accordance with the RA legislation.
As for taxes paid by non-residents in the Republic of Armenia, you can read one of our previous articles here.
For instance, one of the shareholders of a legal entity registered in the United Kingdom of Great Britain and Northern Ireland (hereinafter referred to as “UK”) is considered a resident natural person of the Republic of Armenia in accordance with the Double Taxation Agreement (hereinafter referred to as the “Agreement”) concluded between the Government of the Republic of Armenia and the Government of the United Kingdom of Great Britain and Northern Ireland (hereinafter referred to as the “Agreement”). Dividends received by a RA resident natural person may be taxed in the RA, as well as in Great Britain, but not more than 10 percent. If the dividend received by an RA natural person in Great Britain is taxed at 10 percent, it will no longer be taxed in RA, taking into account that the rate of taxation of dividends defined by the RA Tax Code is 5 percent. If the rate of dividend tax is less than 5% in Great Britain, the difference between the amount payable at the rate of 5% in the RA and the amount of tax paid in Great Britain would be paid in RA according to the RA Tax Code.
How are disputes arising during the application of the provisions of the double taxation agreement resolved?
Disputes on tax issues that arise between the tax authorities of the two contracting states during the application of the provisions of the double taxation agreement shall be resolved by a mutual agreement procedure. The procedure and deadlines for resolving disputes through the mutual agreement procedure are set by the Government of the Republic of Armenia.
Being one of the leaders in this field, our team can effectively and correctly structure these transactions and provide legal support in international taxation matters.
