Clarification from the State Revenue Committee on Car Donations

The State Revenue Committee (SRC) has provided clarifications regarding the issues of income tax calculation when vehicles are donated by individuals to other individuals.

The SRC, as the authority in charge of tax administration, has notified individuals who acquired and sold two or more vehicles during the tax year about their obligations to fulfill tax duties, based on relevant articles of the RA Tax Code.

Consequently, if an individual acquires and sells two or more vehicles during the same tax year, the sale (including by donation) of the second or more vehicles is considered a sale of assets related to entrepreneurial activities, as per subparagraph “a” of point 16 of part 1 of Article 147 of the Tax Code. This is subject to income taxation at a rate of 20%, with the tax base determined according to subparagraph “e” of point 16 of part 1 of Article 147 of the RA Tax Code.

Until July 1, 2018, no income tax obligation arose when a physical person donated vehicles to individual entrepreneurs and other individuals who were not notaries during the same tax year, because there was no income formed with the absence of grounds for applying the cash method of accounting.

The SRC reports that the resolution of this issue is possible only through legislative solutions, which are outside the SRC's authority.

Source: Department of Information and Public Relations of the State Revenue Committee