Profit tax is a direct tax levied from taxable profits of organisations for the reporting period. In the Nagorno-Karabakh Republic, profit tax is paid by (taxpayers are) residents and non-residents of the Nagorno-Karabakh Republic, except for state administration institutions of the Nagorno-Karabakh Republic, local self-government bodies of the Nagorno-Karabakh Republic, and state non-commercial organisations, with regard to budget appropriations and revenues transferred to the budget in full.
Taxable profit generated within and outside the territory of the Nagorno-Karabakh Republic constitutes the taxable object for residents, and taxable profit generated from the Nagorno-Karabakh Republic sources constitutes the taxable object for non-residents.
Taxable profit = Gross revenue – Deductions (expenditures, losses and other deductions) > 0
Bookkeeping of revenues and expenditures is carried out by the accrual method; revenues and expenses are recorded upon the acquisition of the right to receive revenues or recognising those expenses with regard there to, irrespective of the time of actual generation of revenues or performing of payments.
The profit tax is charged at 10 percent rate over the taxable profit for reporting years including December 31, 2022, and at 5 percent rate since January 01, 2023, and at 18 percent rate over revenues received by credit organisations, banks, insurance companies, pawn shops, persons engaged in currency exchange and currency exchange dealer/broker activities, persons engaged in extraction of metallic minerals and(or) metal concentrate manufacturing (processing), extraction and (or) generation (processing) of raw materials for fuel and energy activities.
Profit tax privileges/benefits
Taxpayers except the ones engaged in energey generation, transmission of energy and natural gas, distribution and (or) supply and communcation (electronic communication) are exempt from profit tax at 10 percent rate for profit for reporting years including December 31, 2022.
Taxpayers engaged in agricultural production are exempt from profit tax with regard to revenues derived from sales of agricultural products manufactured by them, revenues derived from sales of fixed and other assets, as well as other revenues, provided the weight of the latter in the gross revenue does not exceed 10 percent;
When determining the taxable profit of a taxpayer, the gross revenue is reduced in the amount of 150 percent of salaries and other equivalent payments for each salaried disabled person employed by the taxpayer.
When determining the taxable profit of taxpayer, the gross revenue is reduced in the amount of 150 percent of salaries and other equivalent payments for each student studied in craft educational institution, employed by taxpayer (during the entire execution period of apprenticeship contract).
Incentives for investment
If the resident’s state registration (except for 18 percent rate of profit tax under Article 32 of this Code by persons engaged in extraction of metallic minerals and(or) metal concentrate manufacturing (processing), extraction and (or) generation (processing) of raw materials for fuel and energy activities ) and in the course of three years following the registration, the total value of actual investment by the founder (member) in the statutory capital makes up at least 100 million drams, the profit tax from the resident concerned is reduced in the amount of 100 percent during the first three years following the investment, and in the amount of 50 percent during further two years, but not more than 10 percent of the total value of the investment.
The taxation of revenues derived from the Nagorno-Karabakh Republic sources by non-residents who have no subdivision or establishment in the Nagorno-Karabakh Republic, is carried out by a tax agent in the following amounts:
The taxation of derived revenues is carried out by a tax agent in the following amounts:
| Type of revenue | Amount of profit tax in percentages |
| insurance indemnities, reinsurance payments, and revenue derived from transportation (freight) | 4 |
| dividends, interests, royalties, revenue from property lease, growth in value of property and other passive revenues (except for revenues from transportation (freight)) | 6 |
| other revenues received by a non-resident as well as revenues for services provided to a resident of the Republic of Artsakh abroad or a non-resident to a separate subdivision in the Republic of Artsakh | 10 |
For the acquisition of goods and fixed assets from offshore zones registered companies by the taxpayers for the advance payments to registered companies in those zones, and in case of within one year of advance payment not occurring the profit tax on advances is calculated at 10 percent rate. The list of offshore zones (countries) is defined by the government of the Nagorno Karabakh Republic.
Deadlines for submitting accounts and paying profit tax
Residents:
- submit accounting balance sheet, profit and loss account and calculation of income tax once a year, up to 20 April of the year following the reporting year, and pay the profit tax to the state budget on or before 20 April of the year following the reporting year;
- make prepayments, each month but no later than the 20th day of the current month, in the amount of 1/16 of the actual amount of profit tax for the previous year, if the amount for the previous year’s profit tax exceeds 100 thousand drams;
- submit concise calculation of earnings paid to non-residents, of profit tax withheld and paid to the budget once in a quarter, but not later than the 20th day of the second month of the following quarter, as well as pay the amount of the profit tax to the budget not later than the 20th day of the month following the payment of earnings to non-residents.
Non-residents (in case their separated subdivision is registered in the Nagorno-Karabakh Republic)
Submit a calculation on annual earnings to tax body, in the defined form no later than 20 April following the accountable year, also including total revenues derived from the Nagorno-Karabakh Republic sources,
non-resident having a subdivision or an establishment in the Nagorno-Karabakh Republic,
On its own calculates the profit tax, indicating a percent rate in annual earnings calculation (in the defined order for residents),
The amount of profit tax payable is determined by the difference of the activity derived from the annual profit and semi-annual prepayments (in certain cases the amount of income tax withheld in the Republic of Artsakh).
After the final settlement the additional profit tax subject for payment to the state budget is paid, or the overpayment is compensated on or before 20th April of the year following the reporting year, as defined by the Nagorno Karabakh Republic legislation,
In case of exceeding the amount of the profit tax of the previous year by 2 million AMD, prepayments are made in the amount of one quarter of the actual amount of the profit tax of the previous year, in equal parts, from July 1 to December 31 of the reporting year.