Value added tax (VAT) is an indirect tax paid for the imported products, for the supplied goods and services provided by the supplier, and VAT is applied at each stage of production, distribution, or sale to the end consumer. The difference between the amounts of VAT paid from the supply of goods or the provision of services to the suppliers (in case of import of goods to the customs authorities) for their purchase shall be transferred to the state budget within the appropriate accounting period.
VAT payers are physical, legal persons, and enterprises without the status of a legal entity undertaking independent economic activities (hereinafter referred to as persons).
VAT taxable transactions are:
- supply of goods,
- provision of services,
- gratuitous consumption,
- Imported goods.
Individuals who are not sole proprietors are liable to pay VAT in the current year,
– if the revenue from alienation transactions of a person’s share in the ownership of the property or industrial, other commercial, public buildings and structures (including unfinished (partially built unfinished)), manufacturing, mining and other industrial land or capital property exceeds the 40 000 000 as it is defined by Article 6 (1) (a) of the Law and
– if the revenue from the alienation of property that is the subject of business activity and the amount of revenue from service transactions exceeds 12.000.000 as it is defined accordingly by Article 6 (1) (a) and 6 (2) of the Law.
Non-taxable 40 000 000 12 000 000 AMD thresholds do not apply for one calendar year during two and more number of times of the expropriation compensation in any form of individual’s ‘s property or the common property of the similar type : apartment, private house (including unfinished (partially in construction, personal use of the automobile, including properties with agricultural purposes and land area, garage,, unless the disposal is done on the property acquisition period before the beginning of the year of assessment. In this case, the alienation of the second or more property of the same type during that period is subject to taxation. Physical persons, considered not a sole proprietor and acting as a developer (owner), are liable to pay VAT for the revenue received from the sales of apartment (including multifunctional) building, subdivision building, its ten percent of the total area of apartments or other areas (but not more than 500 m2), and in residential areas (or complexes) received from the sale of areas exceeding the number of 4 individual houses.
If there are more than one physical persons, not being sole proprietors, act as developers, they bear joint and several liability for VAT. There are 2 VAT rates:
– 20% (if the tax amount is included in the price of the goods or services, the VAT is calculated by applying rate of 16.67% of the total cost of goods and services);
– zero rate (this rate is usually applied in the case of export of goods or services, for those goods and services obtained in the diplomatic corps of Artsakh, for official use by their equivalent organizations, etc.).
According to the NKR Law on Value Added Tax, a number of transactions (operations) are exempt from VAT. This means that VAT is not calculated or charged on the sale of those goods or services, and the amount of VAT on the purchase price of those goods or services cannot be deducted from the VAT calculations.
The following transactions are exempt from VAT:
– Provision of educational services by secondary educational institutions, children’s creative-aesthetic centers, music, painting, art and fine art educational institutions, sports schools, vocational schools, qualification-retraining, secondary professional-higher educational institutions.
– sale of study (school) notebooks, sketchbooks, children’s and school literature, school educational publications, sale of scientific, methodological literature and textbooks published by universities, specialized scientific organizations,
– Implementation of programs aimed at basic research and general education,
– Sale of agricultural products produced in Artsakh by the producer (valid until January 1, 2021),
– Sale of newspapers and magazines,
– the provision of funeral services, cemeteries, as well as other ritual services related to death and burial;
– insurance and insurance renewal operations,
– certain financial operations and services by banks, Securities trading participants and credit organizations,
– sale of prosthetic and orthopedic accessories, medical equipment, accessories, medical care, medical services, service related to treatment in medical-preventive type of organizations,
– gratuitous consumption by NGOs (including charities) and religious organizations,
– Sale of precious and semi-precious stones mentioned in the list defined by the Government of the Republic of Artsakh,
– Adoption of technologies for sustainable farming options on the basis of raw materials obtained from agricultural producers in the Artsakh Republic and Sale by the processor in accordance with the list established by the Government of the Artsakh Republic,
– alienation of apartments of a multi-apartment (including multifunctional) or subdivided building under construction on the territory of the Artsakh Republic until January 1, 2021,
– Irrigation water supply until January 1, 2021
– Operations carried out within the framework of qualified charitable programs in the manner prescribed by law,
– Sale of handmade carpets produced in the Republic of Artsakh by the direct producer (code according to FEZ FO 570110, FEZ FO 570210),
– Mechanization of works/activities carried out during the cultivation of perennial plantations of agricultural crops until January 1, 2021, according to the list established by the Government of the Artsakh Republic,
– Provision of advocacy services,
– other transactions.
Procedures for filling in the settlement documents
The VAT payers are required to write off tax invoices in case of supply of goods that are subject to VAT, performance of works and (or) provision of services. The tax invoice is the electronic settlement document filled in and written off in accordance with the procedure defined by the Article 20 of this Law. The tax invoice is an electronic document having force with an electronic digital signature.
The tax account or adjusting tax account must include:
1) Tax account series and number;
2) the date of writing off the tax account;
3) the date of delivery of the goods, the date of completion of the work (including according to the stages/periods provided by the contract) and (or) the date of completion of the service (including according to the stages/periods provided by the contract);
4) VAT rate and amount in a separate column or row.
5) the amount of excise tax in a separate column or row (in case of supply of goods subject to excise tax);
6) the amount of the environmental fee, in a separate column or row (only in case of issuance of tax invoices by the importers-sellers, producers-sellers of environmentally friendly goods defined by the Law of the Nagorno Karabakh Republic “On Environmental Use Fees”);
7) the list and quantity of the goods that are the subject of the transaction and (or) the type and volume of work, service;
8) The unit price of the goods subject to the transaction, the trade discount, if any (including the public trade discount), the total cost of labour and (or) the service, service tariff, the trade discount, if any (including the public trade discount) and the total cost.
9)the following data on suppliers of goods, performers of work and (or) contractors:
a. Taxpayer registration number,
b. The full name of the organization, location and the addresses of the place where the activity is actually carried out, and in case of delivery of goods, the address of the place of delivery or the data of the delivery point, the name of the official and the signature,
c. Name, surname, address of residence of the natural person, passport and (or) number of the passport (or other identity document), and in case of being a sole proprietor, the address of the actual place of activity, marking “individual entrepreneur” or “Private Entrepreneur”, place of delivery Address or data of the delivery point, name of the official, surname and signature.
10) acquiring goods, receiving employment and (or) receiving services:
a. Taxpayer registration number,
b. The full name of the organization, location and the addresses of the place where the activity is actually carried out, and in case of delivery of goods, the address of the place of destination of the goods, name, surname and signature of the official,
c. Name, surname, address of residence of the natural person, passport and (or) number of the passport (or other identity document), and in case of being a sole proprietor, the address of the actual place of activity, address of the place (except when the goods are delivered to the buyer at the place of delivery), name of the official, surname and signature.
VAT calculation procedure
During the reporting period the VAT payers make payments to the budget for the amount of VAT calculated on the taxable period from turnover of taxable transactions (operations), from which the VAT allocated in the tax accounts of all transactions for the purchase of goods or services (including customs declarations) is reduced (offset).Moreover, according to the law, in order to offset the VAT amounts allocated in the tax accounts of suppliers, it is necessary to:
- the gains achieved for production and other commercial purposes,
- The tax invoices received on the acquisitions shall be filled in accordance with the regulations of the Law on Value Added Tax .
- Payments for these gains must be made by bank transfer,