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Our interview with Armen Alaverdyan, Deputy Head of State Tax Service.

- What has changed in the tax legislation in the field of advertisement, in particular connected with the simplified tax and value-added tax?

- Alterations and additions have been made in the law “On the simplified tax”, which concerns the frames, bounds of the field of levying of simplified tax. In particular, as regards external advertisement services the advertisers cannot become simplified taxpayers. It is conditioned with the circumstance that the simplified tax is envisaged for small business and small turnovers, and as a rule, here we deal with larger circulations. It should be noted that the law envisages 50 million dram limit for the simplified taxpayers. The business manager cannot be considered as a simplified taxpayer in case of exceeding the limit.

- In this case do they become VAT payer, especially when we take into consideration that in tax inspections they comment so on the legislative amendment?

- Yes, on the external advertisement business managers fall within the taxation general field. Hence they, proceeding from the result of the activities, will pay simple taxes and a value-added tax. It should be noted that another change has been made by the 2nd article of the law on “Simplified tax”, according to which those, who pay state duties amounting to 1 million drams also cannot be simplified taxpayers.

- Does the amendment concern only the external advertisement or the whole advertisement field?

- It is read in the law: “advertisers – on the external advertisement services”.

- And what taxes or duties are the participants of the advertisement market obliged to pay?

- Any organization that produces and provides an advertisement, of course, must pay a profit tax from his received profit, from its turnover – value-added tax, and from the wages of its employees – as a tax agent, as well as an income tax. As before, now as well, if the organizers of advertisements have buildings, land, then they must make the payments to the community budget – land tax, tax on property.

- We have received a call, according to which when submitting reports in several tax inspection the inspectors require “a prepayment” from the business managers, motivating so that they can ensure necessary tax allocations, and the tax load of the taxpayers will be decreased. How will you comment on that?

- The law defines prepayments (“On profit tax”- article 47, “On income tax” – article 27). By the results of the financial year the taxpayer submits its annual reports. If it turns out that during the year the prepayment made by the taxpayer, exceeds the size of the received profit (income), then in the tax service an overpayment is registered next to the name of the taxpayer, through which he can pay off his coming tax duties. And if the tax body grounds that the incomes of the transactor unit have been larger during the year than the prepayments, then the taxpayer must make additional payments besides the prepayment. I call for the taxpayers to observe the law. It is necessary to submit the report once a quarter, but, according to the Armenian habit, often the taxpayer makes the payment the last day, whereas the tax body must enter the information during the whole quarter. So the tax bodies resort to various methods in order the payments were entered into the budget not the last day if possible. And, for example, they call the taxpayer for he made the payment not the 89th or the 90th day, but earlier.
In 2006 the tax authority provided 220 billion drams of income, where the mount of simplified tax made up in total 7.8 billion drams. In such conditions when the tax authority proposes the taxpayer to make payments, they immediately complain that they are forced to make a prepayment.

- There are rumors that the threshold of the simplified tax will be reduced from the 50 million drams. Are similar developments possible within the next year? What is it conditioned with and what will it give?

- Today the threshold of simplified tax is 50 million drams. The threshold cannot be reviewed during the financial year of 2007, because there is not such a draft today, and if there is, at best it may be considered only in the autumn. And in case of discussion in the autumn, the project may get a force of law and function only in 2008. I shall repeat that there is no such an urgent issue on the agenda, but as a tax servant, I can say that the issue on the increase of the threshold should also be considered, of course, along with the issues on the frames of simplified taxpayers, registration and non-registration of their expenditures.