Tax Changes for Gold Producers and Retailers: Draft Legislation

The National Assembly is discussing the legislative initiative proposed by the Government regarding amendments to the tax code of the Republic of Armenia in its first reading. Deputy Minister of Finance Arman Poghosyan stated that the aim of the draft is to improve the tax environment for the processing industries, particularly in gold and diamond production.

Preferential VAT regulations are proposed, which significantly differ from other sectors. According to the report, although the sale of gold and precious stones is exempt from VAT as raw materials, the sales of jewelry made from them are taxed. This leads to a financial burden on the consumer for the finished products that reach the market.

Additionally, due to the high cost of raw materials, businesses often exceed the turnover tax threshold, which affects their competitiveness and creates market inequalities. The amendments propose two preferential rules for producers and retailers. Given that gold only changes form during processing, multiple taxation is considered unjustified.

The draft establishes a new procedure for calculating the VAT tax base. For producers, the base will be defined as the positive difference between the sales value (or 80% of the actual value) and the acquisition price of the raw materials, but not less than 10% of the tax base. For retailers, the tax base will be viewed as the difference between the sales value and the acquisition price.

Simultaneously, it is intended to restrict the right to offset VAT amounts by traders to avoid the formation of sums subject to budget reimbursement. The adoption of this draft is expected to promote the development of the jewelry industry.