Citizens Can Sell Their Property and Land Without Paying Income Tax: Ombudsman

During the years 2017-2018, complaints were addressed to the Human Rights Defender regarding the requirement for individuals to pay income tax when selling personal property. The issue lies in the fact that, according to the RA Tax Code, the sale of property considered as a subject of entrepreneurial activity was deemed to be, for instance, the second and subsequent sales of personal, family, or household items of the same type in a year, provided that their acquisition and sale occurred within the same year, as well as the sale of production, other commercial, and public significance property, including buildings, constructions (including unfinished ones), and the sale of shares belonging to individuals in property or lands used for industrial, mineral extraction, and other production purposes.

The aim of the aforementioned regulation was to establish a tax obligation for all those who were actually engaged in profit-seeking activities, even though they were not legally required to pay taxes. However, under these regulations, individuals who sold property out of personal necessity, meaning they did not pursue profit, were adversely affected.

In the annual report on the activity of the Human Rights Defender and the state of protection of human rights and freedoms in 2018, the Human Rights Defender addressed the issue of the income tax obligation for individuals selling personal property. Specifically, in the annual report, the Defender suggested, among other things, to redefine the concept of entrepreneurial activity as provided in the tax code and to qualify the sale of personal, family, or household items as entrepreneurial only when it is done on a periodic basis. Furthermore, it was recommended to exclude the differentiated approach to taxation based on the types of property significance (production, other commercial and public significance property, including buildings, constructions, unfinished constructions, industrial, mineral extraction, and other production-related lands or property) from the tax code.

These suggestions were also addressed to the Prime Minister's Office of the RA. The Defender welcomes the fact that the necessary regulations have been included in the package of amendments to the RA Tax Code submitted to the National Assembly by the Government of the RA and subsequently adopted by the National Assembly.

Thus, henceforth, the sale of property owned by individuals, as well as lands (regardless of the intended use of the land), will not be considered as the sale of property subjected to entrepreneurial activity, and when determining the tax base for income tax, the income gained from the sale of such property by individuals will be considered diminished. Additionally, the income from the sale of lands will be considered diminished for transactions carried out after January 1, 2020.