Microbusiness Employees to be Taxed at 20% Instead of Flat 5000 AMD

Starting July 1, 2023, 35,000 employees in microbusinesses will be taxed at a rate of 20% on income tax instead of a flat fee of 5000 AMD per month. This was announced by Armen Poghosyan, Deputy Minister of Finance of Armenia, during a meeting with journalists, as reported by Sputnik Armenia.

He recalled that the National Assembly of Armenia made this legislative change back on November 24, 2022. "Previously, employers paid 5000 AMD for each worker every month, regardless of salary amount, but now 20% income tax will be deducted from each employee's earnings monthly. We have talked about this at length, and it’s not like it was a surprise for employees and employers," said the deputy minister.

According to 2022 reports, there are 53,000 micro-entrepreneurs in Armenia who have not changed their tax system. Poghosyan also presented statistics on what percentage of micro-entrepreneurs are engaged in various activities. "36% are involved in retail and sometimes wholesale trade, 21% are in the service sector, and 16% are engaged in manufacturing," he noted.

Poghosyan informed that this preferential tax regime applies to micro-entrepreneurship and is designed for individuals engaged in simple activities. According to the deputy minister, these are people who have a small turnover in sales and may not even have employees, but provide certain services as a result of their small-scale operations.

He also mentioned that over the course of one year, 3000 micro-entrepreneurs have changed their tax systems; some have exceeded the maximum taxable turnover threshold of 24 million AMD, while others have lost their status as micro-entrepreneurs, moving to either the turnover tax or VAT systems.