EY Armenia Tax Alert | Memos on Transfer Pricing regulations

Facts

Notification on controlled transactions

Armenian resident taxpayers should file a notification on controlled transactions annually by 20 April. On 12 December 2022, the State Revenue Committee of Armenia introduced amendments to the form and procedure for filling the notification on controlled transactions that came into force on 1 January 2023 and applied going forward. These amendments were driven by the need to eliminate inconsistencies in the notification form and enhance transparency.

The amendments introduced separate subsections for information on certain types of controlled transactions for resident and non-resident entities, as well domestic controlled transactions. These subsections are relevant for the following types of controlled transactions:

• Sale of goods,
• Borrowing,
• Licensing of an intangible asset,
• Cession (transfer) of monetary claims.

Other key changes include:

1. Specifying a reporting period for which a notification form is submitted.
2. Defining a type of  relationship with resident and non-resident parties.
3. Selecting a transaction type (i.e., sale or purchase of goods, delivery or receipt of services, sale or purchase of intangible assets, etc.).
4. Selecting a transaction object (i.e., raw materials, devices, and equipment, building materials, financial services, administrative services, licensing, etc.).
5. Indicating a taxpayer’s classification codes of economic activities and their proportions (specific weight) as a percentage of a total income tax base.

Tax self-assessments

On 4 October 2022, the State Revenue Committee of Armenia introduced the form and procedure for performing self-assessment of tax by taxpayers based on the transfer pricing legislation.

A self-assessment of tax is possible when a taxpayer recalculates its taxable income prior to receiving a notification from the tax authorities. In this case, no fines apply in respect of additional tax assessed by a taxpayer.

If the tax authorities identify inconsistency with the arm's length principle, they can issue a letter suggesting a taxpayer to self-assess tax and submit an adjusted tax calculation to the tax authorities within a month. In this case, the interest fine applies to a period from the date of receipt of a tax authorities’ written proposal to the date of self-assessed tax payment.

The interest fine in respect of additional tax resulting from a transfer pricing audit applies to a period from the date when the extra tax was due to the date of the actual additional tax payment.

Who’s affected?

All taxpayers in Armenia that have controlled transactions over AMD 200 million during a tax year, in particular:

• Companies belonging to multinational enterprises;
• Companies having transactions with low tax (offshore) jurisdictions;
• Companies transacting with permanent establishments of non-residents,
  
• Companes submitting transfer pricing notifications and documentation.

How EY can help?

Assistance in complying with the new and existing transfer pricing requirements:

• Preparing notifications on controlled transactions and transfer pricing documentation.
• Identifying and mitigating transfer pricing risks, developing internal policies and procedures and training in-house specialists.
• Defending clients during transfer pricing tax inspections, resolving disputes in courts and responses to tax authorities’ inquiries.
• Designing or improving the efficiency of supply chains and business operating models.

Contacts

For additional information, please contact:

Kamo Karapetyan | Partner | Head of Tax Practice at EY in Armenia
EY Armenia
Office: +374 (10) 50 07 90
Kamo.Karapetyan@am.ey.com

Narek Nersisyan | Manager | Transfer Pricing
EY Armenia
Office: +374 (10) 50 07 90
Mobile: +374 (91) 88 37 01
Narek.Nersisyan@am.ey.com