Crossing Armenia's turnover tax threshold: what happens next

If your turnover crosses the Armenia turnover tax threshold of AMD 115,000,000 during the year, you leave turnover tax at that moment, not next quarter or next year. From then until the end of the year you are on the general system: a VAT payer on the part of turnover above the threshold, with monthly VAT returns and profit tax on what you earn after the crossing. You also have to tell the State Revenue Committee (SRC) yourself, with a declaration within 20 days TT-05: Leaving turnover tax. Sources agree. Nothing that happened before the crossing is recalculated.

Crossing the micro business cap of AMD 24,000,000 works differently, and the deadline there matters more: you have 20 days to move to turnover tax, and if you miss them you are a VAT payer for the rest of the year, with no way to restore the deadline.

This post covers what happens at the crossing. For the rates themselves, see turnover tax rates by activity; for who can use micro business at all, see who qualifies for micro business.

Two caps, one way of counting

An individual entrepreneur (IE) can use a special regime only if last year's turnover stayed within its cap:

The turnover tax cap and the VAT threshold are the same figure, which is why crossing one means crossing the other.

The same caps also work during the year. Once this year's turnover goes over the cap, you are out for the rest of the year. Both tests count every activity of the IE together: micro business turnover counts towards the turnover tax cap, and turnover tax turnover counts towards the micro business cap. Turnover in the Tax Code is business income receivable from supplies of goods, works and services, without VAT. There is no carve-out for foreign clients or exports. A dollar invoice to a client in Texas counts exactly like a dram invoice to a shop in Gyumri.

Crossing the turnover tax cap during the year

Take a developer in Yerevan on the high-tech rate of turnover tax. Her turnover for the year is comfortably below AMD 115,000,000 until December, when a US client pays a large invoice for a finished project, and the year's total goes over the line.

Here is what the Tax Code does with that TT-06: Crossing the turnover tax cap mid-year. Sources agree:

1. She leaves turnover tax at the moment her turnover exceeds the cap. From then until the end of the year, the general rules apply to income earned after the exit. Her turnover tax for January to November stays as it was.
2. She becomes a VAT payer from the same moment, and VAT at 20% is calculated only on the part of turnover above the threshold, not on the whole year VAT-02: VAT in the year the threshold is crossed. Sources agree.
3. She files a declaration with the SRC stating the ground (turnover over the cap) and the day it happened, within 20 days after that day, inclusive TT-05: Leaving turnover tax. Sources agree. For a December crossing, that deadline usually falls in January.
4. She files VAT returns monthly for the rest of the year, each due in the following month VAT-02: VAT in the year the threshold is crossed. Sources agree.
5. Profit after the crossing is taxed under the general system. Sources disagree on the rate for an IE: some give 23%≈Open question: Sources disagree on, or do not settle, a rule behind this figure., others imply 20%≈Open question: Sources disagree on, or do not settle, a rule behind this figure. GS-01: General system: tax on IE profit. Sources disagree. We show both because we cannot settle it.

Her fixed charges, stamp duty and health insurance, do not change because of the switch. The yearly cost of an IE lists them.

Two points are still open. First, how a single invoice that straddles the line is split, with part of it under turnover tax and part under the general rules. The law says VAT applies to the part above the threshold, but we have not found SRC guidance on how the rest of that invoice is treated. Second, which SRC form serves the exit declaration. If you are near the cap, ask an accountant both questions before the invoice goes out, not after.

One more caution for exporters of services. VAT has its own rules on where a service counts as supplied, and some services to foreign clients may fall outside Armenian VAT even after you become a VAT payer. Our rule set does not cover those rules, so the calculator does not apply them. The turnover still counts towards the cap either way.

What other guides get wrong

Most guides on this are in Russian, and many get it wrong. You will find pages that give a different turnover tax cap from the one in the Tax Code, pages that quote the company profit tax rate as the rate for an IE, and pages that say the switch to VAT is automatic and needs no filing. One even claims the whole year is recalculated under the general system.

The Tax Code says otherwise. The cap is AMD 115,000,000. The exit applies from the moment of exceeding, to income formed after it. VAT falls on the excess only. And the declaration is your job: the SRC will not file it for you.

Crossing the micro business cap

Now take a woman who runs a small homeware shop as an IE on micro business. Spring is busy, and by March her turnover for the year has passed AMD 24,000,000.

Her micro business status ends at the moment of exceeding, and she cannot use it again for the rest of that year MB-04: Crossing the microbusiness cap mid-year. Sources agree. What happens next depends on what she files MB-05: After microbusiness: turnover tax or VAT. Sources agree:

• If she files the turnover tax declaration within 20 days after the day of exit, inclusive, she is a turnover taxpayer from that day. She then pays turnover tax quarterly at the trade rate of 10%, by day 20 of the month after each quarter.
• If she does not, she is a VAT payer from the day of exit and must file the VAT payer declaration within the same period. That is the general system, with VAT at 20%, even though her turnover is nowhere near the VAT threshold.

There is no grace period, and the deadline cannot be restored. In a decision published by the SRC Appeals Commission in May 2024, an IE had crossed the micro business cap in March, missed the deadline to elect turnover tax, and was treated as a VAT payer from the day of exit. The IE appealed and lost. The commission relied on a Court of Cassation ruling that treats the election deadline as substantive: once it passes, the right to choose is gone.

One question the law does not answer: how the sale that pushes the shop over the micro business cap is taxed. Unlike the VAT rule, the micro business rules say nothing about an "excess part". Ask an accountant what to do with that payment.

If you miss the deadline

We found no specific penalty in the Tax Code for the exit declaration itself. That does not mean nothing happens. The general sanctions apply to the VAT that follows: interest on late payment, penalties for late or missing returns, and penalties for understated tax. Their amounts are not in our rule set, so we do not quote them.

In practice the cost builds up quietly: you keep invoicing without VAT, file nothing monthly, and when the SRC notices, every month since the crossing is late at once.

Getting back on a special regime

Going back is possible, but not straight away.

Turnover tax. You can elect it again for any later year whose previous year's turnover was within AMD 115,000,000, by February 20 of that year TT-07: Returning to turnover tax. Sources agree. The crossing year's turnover is above the cap by definition, so the next year is closed. The earliest return is the year after a year within the cap. There is no other waiting period.

So the developer who crossed in December stays on the general system for the whole of the next year, because her test year is the crossing year. If that next year's turnover stays within the cap, she can elect turnover tax again by February 20 of the year after.

Micro business. Same logic, with its own cap MB-06: Returning to microbusiness. Sources agree. For the rest of the crossing year the right is lost. Turnover tax stays open that year through the declaration within 20 days described above, as long as the previous year's turnover was within the turnover tax cap, which it was if you were on micro business. For the next year, micro business is closed for the same reason as turnover tax above, but you can elect turnover tax by February 20 if the crossing year's turnover stayed within AMD 115,000,000 TT-07: Returning to turnover tax. Sources agree.

The government has announced an increase in the micro business cap for a future year. It has not been enacted, and our figures use the law in force now.

Watching your turnover before you get close

The crossing happens at a moment, so the useful habit is to know where you are every month, not every quarter.

• Count in drams, by the moment of supply. Turnover is income receivable, so the date you supply the service or goods matters, not only the date the money lands. That is our reading of the definition; we have not found the SRC saying otherwise.
• Convert foreign currency carefully. Which exchange rate and which date apply is still open in our rule set FXR-01: Currency conversion. Unclear. A weaker dram pushes a foreign-currency income closer to the cap without a single new client. Getting paid from abroad covers the payment side.
• Plan large invoices. A big project paid in one go is the usual way people cross. Know your running total before you send it.

The turnover tax calculator shows which regimes you appear eligible for at a given income and what each would cost, so you can see how the picture changes on either side of the cap. For every regime side by side, see IE regimes compared.

Questions people ask

Do I pay VAT on everything I earned this year?

No. When you cross the turnover tax cap, VAT applies from the moment of exceeding and only to the part of turnover above AMD 115,000,000 VAT-02: VAT in the year the threshold is crossed. Sources agree. Turnover before the crossing stays under turnover tax. The exception is the micro business exit without a timely election: then you are a VAT payer from the day of exit, whatever your turnover.

Do I have to tell the tax office myself?

Yes. After crossing the turnover tax cap you file a declaration stating the ground and the day within 20 days TT-05: Leaving turnover tax. Sources agree. After leaving micro business you file either the turnover tax declaration or the VAT payer declaration within 20 days MB-05: After microbusiness: turnover tax or VAT. Sources agree. The switch is not automatic in the sense that someone files for you.

Can I go back next year?

Not to the regime you left. Eligibility depends on the previous year's turnover, and in the crossing year it was above that regime's cap. You can return for the year after a year within the cap, by February 20 TT-07: Returning to turnover tax. Sources agree. If you left micro business but the year's turnover stayed within AMD 115,000,000, you can still elect turnover tax for the next year.

Does income from foreign clients count?

Yes. Turnover has no carve-out for foreign clients or exports TT-06: Crossing the turnover tax cap mid-year. Sources agree. What is still open is the exchange rate used to convert it FXR-01: Currency conversion. Unclear.

What if I cross in December?

The exit still applies from the moment of crossing, so only the rest of December falls under the general system and VAT on the excess. Your declaration is likely due in January. The bigger effect is on the next year: because the crossing year was over the cap, you cannot use turnover tax in the year that follows.