Question Armenia - weird CGT

[backpacker]

Anybody who has practical experience with the Armenian tax system and its approach towards capital gains of private individuals (i.e. individual taxation)?
According to this Deloitte tax guide https://www2.deloitte.com/content/d...ments/Tax/dttl-tax-armeniahighlights-2021.pdf Armenia seems to have a rather weird approach towards certain capital gains. It says there "Where capital gains are subject to tax, the tax applies on the total sales proceeds, rather than on the net capital gains."
The Deloitte guide further notes that
Capital gains are exempt from tax if they are derived from sales of the following:

• Land (regardless of the purpose of the sale);
• Property sold by an individual (other than a property developer) to another individual;
• Bonds issued by the Armenian government or the Pan-Armenian Bank;
• Equity securities; and
• Securities representing an investment in an investment fund.

So, how does this work for options, futures, FX or simple bonds? If the aforementioned is taken at its word it would mean that anybody needs at least a gain of 11% on every transaction to offset the 10% tax which is due on the total sales proceeds . If somebody sells a bond with only an accumulated capital gain of 9% he would still make a loss due to the fact that his entire sales proceeds are being taxed.
Sounds weird

I would very much appreciate if anybody can enlighten me.

 

[Martin Everson]

So, how does this work for options, futures, FX or simple bonds? If the aforementioned is taken at its word it would mean that anybody needs at least a gain of 11% on every transaction to offset the 10% tax which is due on the total sales proceeds

Better start trading crypto instead

But seriously that is a weird CGT system if so. However with no CFC rules one would trade through an offshore company I guess .

 

[avalanche]

Anybody who has practical experience with the Armenian tax system and its approach towards capital gains of private individuals (i.e. individual taxation)?
According to this Deloitte tax guide https://www2.deloitte.com/content/d...ments/Tax/dttl-tax-armeniahighlights-2021.pdf Armenia seems to have a rather weird approach towards certain capital gains. It says there "Where capital gains are subject to tax, the tax applies on the total sales proceeds, rather than on the net capital gains."
The Deloitte guide further notes that
Capital gains are exempt from tax if they are derived from sales of the following:

• Land (regardless of the purpose of the sale);
• Property sold by an individual (other than a property developer) to another individual;
• Bonds issued by the Armenian government or the Pan-Armenian Bank;
• Equity securities; and
• Securities representing an investment in an investment fund.

So, how does this work for options, futures, FX or simple bonds? If the aforementioned is taken at its word it would mean that anybody needs at least a gain of 11% on every transaction to offset the 10% tax which is due on the total sales proceeds . If somebody sells a bond with only an accumulated capital gain of 9% he would still make a loss due to the fact that his entire sales proceeds are being taxed.
Sounds weird

I would very much appreciate if anybody can enlighten me.

Better go to tax advisor in Armenia. I had another source telling me that sale of securities is not subject to tax.

 

[backpacker]

Better start trading crypto instead

My blood pressure is still considered to be normal and I want to keep it that way. I definitely want to avoid having to switch to decaffeinated coffee

I had another source telling me that sale of securities is not subject to tax.

I received the very same answer. Then started digging and found the above mentioned Deloitte guide + other info which says that the system has changed about 2 years ago and now only very specific investments like equity securities remain tax free.
Perhaps the source you consulted simply forgot the word "equity" or assumed that securities can only be equities. Finding a knowledgable tax advisor in Armenia is as challenging as it is in Georgia

 

[avalanche]

My blood pressure is still considered to be normal and I want to keep it that way. I definitely want to avoid having to switch to decaffeinated coffee

I received the very same answer. Then started digging and found the above mentioned Deloitte guide + other info which says that the system has changed about 2 years ago and now only very specific investments like equity securities remain tax free.
Perhaps the source you consulted simply forgot the word "equity" or assumed that securities can only be equities. Finding a knowledgable tax advisor in Armenia is as challenging as it is in Georgia

even accountants have interactivebrokers account and they just dont declare anything.

you may end up being the only fool in the whole country who declares stuff.

 

[backpacker]

even accountants have interactivebrokers account and they just dont declare anything.

you may end up being the only fool in the whole country who declares stuff.

As a matter of fact, Armenia taxes its residents on their worldwide income. This includes stocks.

Taxation in Armenia is not exactly favourable. This and the relatively complicated process of getting residency (in case you are a non-native Armenian without roots to the country) is the reason why this country is not mentioned much by expats.

 

[avalanche]

As a matter of fact, Armenia taxes worldwide income. This includes stocks.

I understand but thats the problem. Whenever you approach accountants they'll tell you they dont declare anything and they suggest you don't either. Unless you speak with big accounting firms from legal500

 

[backpacker]

I understand but thats the problem. Whenever you approach accountants they'll tell you they dont declare anything and they suggest you don't either. Unless you speak with big accounting firms from legal500

Well, an accountant who suggest to not declare something which officially needs to be declared should definitely be avoided. Why would somebody want to use the service of such an accountant?
Indeed, in developing nations it is better to rely on the expertise of law firms listed in the Legal500.

 

[zzzzzz]

Well, an accountant who suggest to not declare something which officially needs to be declared should definitely be avoided. Why would somebody want to use the service of such an accountant?
Indeed, in developing nations it is better to rely on the expertise of law firms listed in the Legal500.

Officially? Humans are not robots that follow rules 100%, that's why it's more important what works and what doesn't work in practice. Even courts are very irrational and subjective.

 

[avalanche]

Well, an accountant who suggest to not declare something which officially needs to be declared should definitely be avoided. Why would somebody want to use the service of such an accountant?
Indeed, in developing nations it is better to rely on the expertise of law firms listed in the Legal500.

In Philippines for example natural persons are supposed to declare and pay taxes by law. But when you actually go there, majority of people including some government officials dont declare.

People who act righteously do try to declare may get extorted with "extra" taxes by local tax officers and get into troublestory. Declaring or not, up to you. But some countries surely have big incentive for residents not to pop on the radar.

 

[backpacker]

In Philippines for example natural persons are supposed to declare and pay taxes by law. But when you actually go there, majority of people including some government officials dont declare.

People who act righteously do try to declare may get extorted with "extra" taxes by local tax officers and get into troublestory. Declaring or not, up to you. But some countries surely have big incentive for residents not to pop on the radar.

I am well aware of the situation in the Philippines.
But let's not mix and confuse things: In the Philippines there is a difference between resident citizens and resident aliens, the latter being tax free on foreign sourced income (with some exceptions).
Furthermore, what you describe is one of the reasons why the Philippine Retirement Authority and the Ministry of Tourism lobbied extensively to preserve the status of alien residents in the latest "Tax Reform for Acceleration and Inclusion Law reform" (TRAIN).

However, we are talking about Armenia. There is no justification for a foreigner (and this thread is about foreigners, not native Armenians) to not adhere to the laws of his/her host country. The foreigner can just leave this country and look for a less hostile jurisdiction - or not go there in the first place!

 

[avalanche]

I am well aware of the situation in the Philippines.
But let's not mix and confuse things: In the Philippines there is a difference between resident citizens and resident aliens, the latter being tax free on foreign sourced income (with some exceptions).
Furthermore, what you describe is one of the reasons why the Philippine Retirement Authority and the Ministry of Tourism lobbied extensively to preserve the status of alien residents in the latest "Tax Reform for Acceleration and Inclusion Law reform" (TRAIN).

However, we are talking about Armenia. There is no justification for a foreigner (and this thread is about foreigners, not native Armenians) to not adhere to the laws of his/her host country. The foreigner can just leave this country and look for a less hostile jurisdiction - or not go there in the first place!

Mate, both citizens and aliens residents and non residents are not declaring taxes in PH Out of 30 local citizens I met, nobody ever declared their income. Because of bank secrecy. Tax authorities need really big arguments in order to break into your bank account in the Philippines. Plus most people there work unofficially and some don't have even passport. They use some random IDs, sometimes fake ones. Nobody gets punished. Like at all.

I'm not even talking about criminals, the conversation is about common people. Thats why filipinos get issues with tax authorities in Europe when they migrate there. They are not used to following the laws.

The point Im trying to make is that some countries have specific laws in place, it doesn't necessarily mean these laws get applied.

For example the law in Armenia says that you must update your current address in the civil register every time you live in certain place more than 6 months. I spoke with a good lawyer who knows his stuff and he told me that the law exists but nobody enforces it. You are basically inventing headache for yourself by updating your address.

 

[backpacker]

Mate, both citizens and aliens residents and non residents are not declaring taxes in PH Out of 30 local citizens I met, nobody ever declared their income. Because of bank secrecy. Tax authorities need really big arguments in order to break into your bank account in the Philippines. Plus most people there work unofficially and some don't have even passport. They use some random IDs, sometimes fake ones. Nobody gets punished. Like at all.

I'm not even talking about criminals, the conversation is about common people. Thats why filipinos get issues with tax authorities in Europe when they migrate there. They are not used to following the laws.

The point Im trying to make is that some countries have specific laws in place, it doesn't necessarily mean these laws get applied.

For example the law in Armenia says that you must update your current address in the civil register every time you live in certain place more than 6 months. I spoke with a good lawyer who knows his stuff and he told me that the law exists but nobody enforces it. You are basically inventing headache for yourself by updating your address.

It's pointless to continue this discussion: You talk about hearsay, anecdotal stories and life outside the law.
I very much prefer to respect the law.