Major and Significant Changes Introduced in the Tax System

The threshold for the crime of tax evasion has been raised, new rules for reporting crimes have been introduced, and procedures for property seizure have been streamlined—reforms in tax administration in favor of taxpayers. At the initiative of the government, particularly the State Revenue Committee, several amendments have been made to the Tax Code, the Criminal Code, and the Code of Criminal Procedure.

The aim of these reforms is to ensure legal clarity, proportionate protection of business rights, and to reduce the criminalization of minor cases of tax evasion while ensuring effective tax oversight and predictable administration.

New Threshold for Tax Evasion Set at 30 Million Dram Instead of 10 Million Dram

With changes to the Criminal Code, the thresholds for the crime of tax evasion have been reviewed, establishing higher limits for both large and especially large amounts. Additionally, tax obligations arising from one or several consecutive tax years have been clarified. For example, an amount exceeding 30 million dram in a single tax year (or 45 million dram in two consecutive tax years) is considered a large amount of tax evasion—not the previous 10 million dram. An especially large amount is defined as exceeding 50 million dram in a single tax year (or 75 million dram over two consecutive years), increased from 20 million dram.

This means that cases of tax evasion below the established thresholds will no longer be considered a crime, and criminal proceedings related to them will be subject to termination under certain conditions.

New Rules for Reporting Crimes

The amendments clarify the procedure for reporting tax evasion, ensuring that the taxpayer's right to be heard is properly guaranteed before any report is made to the tax authority. Specifically, the procedure involves a chamber review based on existing or acquired information by the tax authority, during which the taxpayer will have the opportunity to express their position and present evidence regarding the results of the tax authority's review. If the taxpayer agrees with the tax authority’s review and submits a recalculated assessment, the tax authority will refrain from further actions. However, if the taxpayer fails to respond or provide adequate explanations, the tax authority may carry out a thematic review and assign tax obligations to the taxpayer.

A report on an apparent crime will be submitted only if the taxpayer fails to contest the administrative act of the tax authority within the established timeframe, and if the administrative act remains unchanged to the necessary extent after the challenge, meaning that judicial challenges will not suspend the submission of a report.

This indicates that the tax authority will not submit a crime report regarding tax evasion to the competent body as long as the matter concerning the taxpayer’s obligations has not been conclusively resolved within the tax authority. The only exceptions to this procedure are cases where immediate initiation of proceedings is necessary to preserve evidence, identify data, or conduct urgent evidentiary actions, and there is reasonable suspicion that delays could lead to loss, destruction, or concealment of evidence. This situation must be confirmed solely by an authorized official of the tax authority.

Moreover, in order to enhance the effectiveness of tax administration, the tools for tax oversight have also been improved, and processes have been simplified. Specifically, the scope of chamber (internal) reviews has been expanded to include information from other sources, removing the requirement of ‘definitively known transactions’ from regulatory provisions, thus eliminating legal uncertainty, and the previous annual limitation on thematic reviews has been removed, allowing for up to three thematic reviews instead of one, enabling quicker responses to risks.

Alternatives to Property Seizure

To streamline the procedural frameworks for property seizure in criminal proceedings, alternative mechanisms are being introduced aimed at ensuring the uninterrupted operation of businesses. Instead of property seizure in criminal proceedings, the option to present a bank guarantee will be established, meaning that property seizure will be replaced by a bank guarantee in legally stipulated cases.

The bank guarantee is a new feature, and its use in property seizure procedures was not previously foreseen. This means that in cases where there is a risk of non-fulfillment of tax obligations, the state, in legally prescribed cases, may lift the seizure of the taxpayer's property, replacing it with a bank guarantee. Additionally, the list of property subject to seizure will be clarified, allowing the taxpayer to use other instruments, including securities, such as bonds, as collateral, including short-term bonds classified as monetary market instruments.

Property seizure often disrupts the normal operations of taxpayers by restricting the use of that property, and alternative mechanisms will allow businesses to avoid unwarranted restrictions, lower financial risks, and ensure the smooth operation of their activities, while also improving the effectiveness of criminal proceedings.

Private sector entities and state bodies (Finance Ministry, Justice Ministry, Prosecutor General's Office, Investigative Committee, Central Bank, and the National Assembly's Economic Affairs Standing Committee led by Babken Tunyan) actively participated in the design of the tax administration reforms. The entire process was coordinated by the Deputy Prime Minister of Armenia, Tigran Khachatryan.