2021.08.17,

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The Income Tax Return Program Will Be Terminated Only In Yerevan

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Ophelia Simonyan

Journalist

On August 12, the website Armlur.am wrote that the income tax return program will be stopped. The news outlet referred to the proposal of the Minister of Finance Tigran Khachatryan, which had been voiced at the Government sitting on the same day. This is how Iravaban.net titled the government bill: “Repayment of mortgage income tax amounts will gradually cease to operate from January 1: The decision of the government.”

The Facebook page Digital News wrote on August 12 that Nikol Pashinyan is gradually terminating the income tax return program․

“There was one opportunity to buy a house under normal conditions in this country, but now Nikol-ers want to stop it too. If the changes proposed during the government session are approved, the income tax return program will be gradually terminated,” the page wrote. The post has 210 likes, 45 shares. Mushroom websites also wrote about the abolition of the refundable income tax.

The draft is not fully presented in the articles

The news about the termination of the income tax refund was presented in a distorted way, as the news, mushroom websites, as well as the Digital News Facebook page did not mention that the program refers only to the city of Yerevan, it will continue to work for the regions. Moreover, the Minister of Finance Tigran Khachatryan, presenting the project, said that one of their goals is to promote the balanced development of the territories of the republic in terms of urban development and economy.

The draft, in particular, proposed to terminate the income tax refund system:

  • From July 1, 2022, if the property is located in the first zone of the city of Yerevan (Small Center),
  • From January 1, 2023, if the property is located in the second zone of the city of Yerevan (other areas of Central administrative district and a part of Arabkir administrative district),
  • From July 1, 2023, if the property is located in the third zone of the city of Yerevan (Arabkir, a part of Kanaker-Zeytun administrative district, the part of Erebuni administrative district adjacent to the Center),
  • From January 1, 2025, if the property is located in other areas of Yerevan.

The program for the regions will continue. By the way, this is a draft law that has yet to be approved by the National Assembly. Which means that it can still be changed.

The real problem

The income tax refund process started in June 2015, in accordance with the procedure established by the RA Government Decision 205-N. According to it, the person who wants to buy an apartment is released from the obligation to pay interest to the bank or credit organization through a mortgage loan, and all this is at the expense of taxes paid to the state budget from salaries and other incomes. This privilege granted by the state applies only to mortgage loans received after November 1, 2014.

From 2018 it became obvious that the program is a huge burden for the state. In particular, the State Revenue Committee reported that after summarizing the data for each quarter, there was a marked increase in the number of mortgage loans and refunded income tax amounts. Thus, in the 4th quarter of 2018, the amount of income tax returned to borrowers amounted to 1,392.1 million AMD, which exceeded the index of the same period of the previous year (719.2 million AMD) by 672.9 million AMD: or by 94%.

In January 2018, restrictions proposed by the Government came into force for this program. In particular, the value of the apartment or house should not exceed 55 million AMD. The same taxpayer can use the opportunity to return the income tax only once. This means that it is not possible to buy several apartments under this scheme.

Thus, the income tax program does not cease to operate for the regions of Armenia, therefore the assertion that a decision has been made to abolish it gradually is manipulative. At the same time, the aim of the proposed change is not only balanced urban development and economic development but also the fact that such a budget flow has become a big problem for the government.

Ofelia Simonyan


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