Nonresident providers of electronic services subject to VAT
Armenia has extended the scope of its VAT rules to nonresidents; as from 1 January 2022, nonresident suppliers of electronic (digital) services to Armenian recipients have VAT obligations. The president signed a bill on 25 November 2021 that revises the tax code to bring nonresident suppliers within the Armenian VAT net by including rules to determine when services will be considered to be provided in Armenia, the type of services that will be deemed to be electronic services, and the methods for calculating and paying the VAT due. The rules differ, depending on whether electronic services are provided to an individual or a legal entity, and whether or not the recipient is VAT-registered. Where services are deemed to be provided in Armenia, the VAT rate is 20%.
Nonresident service providers that do not have a permanent establishment in Armenia are required to register for VAT purposes via the website of the Armenian tax authorities, collect the 20% VAT and pay it over to the state budget. There is no minimum turnover or other threshold for registration—VAT registration is required when the relevant conditions are fulfilled.
Electronic services for these purposes are services delivered via information and telecommunications networks, including the internet, the provision of which would be impossible without the use of information technology. Examples of such services include software, use of databases, provision of domain names, hosting services, etc. The government will develop the list of electronic services, which will be published on the tax authorities’ website.
Electronic services provided to individuals
Electronic services provided by a nonresident to a private consumer (i.e., an individual) in Armenia are caught by the new rules, with specific criteria used to determine whether the place of supply of electronic services is in Armenia. At least three of the following conditions must be fulfilled simultaneously for the service to be deemed to be provided in Armenia (but if an equal number of the conditions are fulfilled, the service provider determines the location of the electronic services):
- The recipient is resident in Armenia;
- The bank or electronic wallet used by the recipient to pay for the services is located in Armenia;
- The recipient’s IP address is in Armenia; and
- The recipient’s telephone country code is in Armenia.
Where digital services are provided to an individual, the nonresident supplier is responsible for accounting for the VAT and paying it to the state budget. The tax base is equal to the payments received in the relevant quarter, which are converted into Armenian currency at the exchange rate published by the Central Bank of Armenia on the last day of the quarter. VAT due must be paid by the 20th of the month following the quarterly reporting period.
Electronic services provided to a legal entity
The tax treatment of electronic services supplied to a legal entity in Armenia depends on whether the recipient is VAT-registered:
- Services supplied to a VAT-registered legal entity: The place of supply is deemed to be Armenia where digital services are received by a VAT-registered legal entity located in Armenia. In this case, the reverse charge applies, and the recipient of the services calculates the VAT due and pays it to the state budget. The tax base is equal to the cost of the services received in the relevant month at the exchange rate published by the Central Bank on the day of receipt. VAT due must be paid by the 20th of the month following the reporting period.
- Services supplied to a non-VAT-registered legal entity: The place of supply is the same as in the case of electronic services provided to a VAT-registered legal entity. However, in this case, the nonresident supplier is responsible for collecting the VAT due and paying it to the state budget. The tax base is equal to the cost of the services provided in the relevant month at the exchange rate published by the Central Bank on the day the services are provided. VAT due must be paid by the 20th of the month following the reporting period.