Why Did Armenia Stop Levying VAT on Cars Imported from EEU?
16.03.2016
11:00
Though Deputy Finance Minister Armen Alaverdyan stated that Armenia would continue to charge value added tax from individuals who import cars from the Eurasian Economic Union countries, on March 16 the National Assembly adopted in the second reading and completely the legislative amendments to end this practice.

“The bill approved by the National Assembly relates to the removal of VAT threshold on the import of cars by individuals for personal use only," announced Mariam Avetisyan, Expert of National Assembly Standing Committee on Economic Affairs, on March 16 at" Media Center" meeting and added that the bill defined the following procedures and restrictions: “An individual may import only one car a year without VAT payment. The alienation of more than one vehicle in a year is considered an entrepreneurial activity”.

Levy of 20% VAT is a threshold for importing cars from the EEU countries by natural persons, which according to the EEU agreement is “clearly prohibited”. Tatiana Valovaya, Member of the Eurasian Economic Commission (Minister) announced it weeks ago at the press-conference. Afterwards Armen Alaverdyan, Deputy Minister of Finance issued a sharp statement saying that Armenia does not violate any rule, by charging VAT, since it is prescribed in transitional provisions under the Eurasian Economic Union Treaty, and charges were levied "for the benefit of the budget".

Thus, according to approximate calculations of experts, during the last year around 1.7 billion drams of VAT was charged from the import of cars from the EEU countries. According to Mariam Avetisyan, this amendment to the law doesn’t solve this problem since the law has no retroactive effect. She added, “This is a matter the executive body should deal with, since serious calculations should be made. No one has addressed us with such a suggestion”.     

Earlier a response has been received to our inquiry to the Ministry of International Economic Integration and Reforms stating that the problem should be viewed from the general perspective of the policy of levying the VAT. Here is an excerpt from the letter, “For applying zero VAT rate to alienation deals for products exported to the EEU member countries, it is necessary for the exporter to submit to the taxation office of his/her residence the declaration of import and payment of indirect taxes by the importer approved by the taxation office of the importing country.”

Karen Vardanyan, public administration specialist, referred to the EEU Treaty, and then added: “Parties are obligated not to levy VAT from individuals, but every country has set the quota for each product so that it won’t be turned into a business. In the case of vehicles the collection of VAT contradicts the EAEU Treaty.”

“If such privilege is given in terms of the Eurasian Economic Union, then why it is not given, for instance, to individuals from the US who import vehicles not for commercial purposes,” said economist Vahagn Ghazaryan.

Tigran Hovhannisyan, Chairman of the Automobile Importers Union, spoke about the problems of his colleagues, “Any of them can be punished every moment, because all are criminals. Car importers, having no status and seeking to avoid paying VAT, again will implement import using a power of attorney and other citizens' passports.” Responding to this statement, Mariam Avetisyan said that the new legislative regulation refers to individuals who import cars for their personal use. 

Arshaluys Mghdesyan

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