Top five financial laws and decisions that enter into force in 2020
13.01.2020,
10:19
Every year, the Armenian government makes decisions, and the parliament adopts laws, many of which come into force from the beginning of the next year. Below are some of them chosen by ARKA news agency.
YEREVAN, January 13. /ARKA/. Every year, the Armenian government makes decisions, and the parliament adopts laws, many of which come into force from the beginning of the next year. Below are some of them chosen by ARKA news agency.
Driver’s merit point scheme
One of the most controversial decisions was the introduction of the penalty point or merit point system under which a person’s driving license is cancelled or suspended based on the number of points he loses over a period of 12 months because of the traffic offences.
According to the revised Law on Administrative Responsibility and six related laws, which entered into force on January 1, 2020, each motorist is given 9 points at the beginning of a year. If a motorist loses all 9 points within 12 months, he/she will have their driver’s license cancelled for 6 months.
However, they can restore the license in a 3 month-period, but will have to pass an exam. In case of repeated lost of all 9 pints, the motorist will be deprived of his license for a period of 12 months. To restore the license he/she will have again to pass an exam. A motorist will lose from 3 to 4 points for speeding and drunk driving, 3 points for unauthorized transfer of license plates, driving against traffic on a one-way street.
The motorist will lose 2 points if at least one license plate digit is covered or poorly visible, for incorrect crossing of the dividing strips, exceeding the permissible speed by 11-30 km / h, creating an emergency situation. They will lose 1 point in case of violations of the dividing lines, incorrect turns, and violations of the rules of travel at the intersection, pedestrian crossings, smoking during driving, unfastened seat belts, and speaking on phone. Also, 0.5 points will be deducted for the use of non-standard or worn license plates, violation of the rules of stopping and parking.
Payroll tax
A new Tax Code, said to have been designed to help boost economic growth, improve the environment for micro and small businesses and solve some pressing problems, has entered into force on January 1, 2020. Parts of the law are about ordinary citizens' payroll taxes. Earlier, the size of payroll tax depended on the amount of the salary. The higher the salary, the higher payroll tax was. Starting January, 2020 the flat 23% payroll tax rate is applied to all salaries, regardless of their size. Within the next three years it will drop to 20%, one percent every year. Earlier, if a person’s salary was up to 150 thousand drams, he paid 23% payroll tax, if the salary was from 150 thousand drams to 2 million drams, the tax was 28%, and if the salary was over 2 million drams, the tax was 36%.
Other changes include an increase in the excise tax, which will be increasing annually by 3%, instead of the previously proposed 4%. Micro enterprises, self-employed persons, family enterprises with a turnover of up to 24 million drams will be exempted from taxes. The tax for companies, providing gambling services, will increase by 20%. In 2020 or 2021, depending on the results, these companies may be required to start paying profit tax. Also, pawnshops will pay state duties, while private taxi drivers will be exempted from it.
For public catering companies, the sale tax is reduced to 6% of the turnover minus 3% of expenses, but not less than 4% of the turnover. According to the changes, the tax on the purchase and sale of a car will be 1% of the price, but this cannot be lower than 150 drams for each horsepower. This tax liability arises if the sale is effected earlier than 365 days after the purchase. Real estate transactions made by individuals will be exempt from taxes too.
Expensive cars
One of the customs privileges enjoyed by Armenian citizens ceased to be effective on January 1, 2020. Unlike other members of the Eurasian Economic Union (EEU), Armenia enjoyed a preferential regime until December 31, 2019 due to which the customs rates for car imports were significantly lower than those in the Eurasian Economic Union. As of September 1, 2019, the customs rate for vehicles imported from third countries to Armenia was 10 euros per 1 cubic cm of engine capacity, while in Russia and other EEU countries it was 22 euros. In fact, from January 1, a similar rate applies to Armenia as well. Now and after 2020, the owners of vehicles will pay environmental tax
End to preferential imports
Since January 1, 2020, customs duties have increased on 900 items of goods imported to Armenia from third countries as part of the transitional arrangements that were reached after the country joined the EEU. According to the Ministry of Economy, the list includes 293 names of vehicles, as well as a number of essentials. According to the ministry, the impact of changes in customs rates on inflation will be 0.5 percentage points. The list of goods, on which the duty has changed include poultry meat (from 22% to 25%), frozen cattle meat (from 12.5% up to 15%), rice (from 3% to 6%), sunflower and butter (from 13% to 15%), dairy products (- from 13% to 15%).
Pensions, salaries and benefits will increase
The good news is the rise in pensions, benefits and public salaries, although the rise is less than anticipated by the population. Pensions will increase by 10%. The basic pension is 18 thousand drams up from the previous 16 thousand drams. For the first 10 years of service, the bonus for each year is 950 drams, up from the previous 800 drams, and for the military - 1600 drams instead of the 1500 drams.
Also, disability pensions and the allowance for the loss of a breadwinner have been raised, and the minimum pension has been increased to 27 thousand drams from the previous 25.5 thousand drams. Also, under the government's decision, the size of a lump-sum allowance given for the birth of the first child, which is 50,000 drams today will be raised sixfold to 300,000 drams and the size of the benefit given for the birth of the second child will be raised from the current 150,000 drams to 300,000 drams.
The decision comes into force on July 1, 2020. For these purposes, the government has earmarked 3.7 billion drams in its 2020 budget. In the case of the birth of twins and triplets, the size of the benefit will be issued in accordance with the number of children. It will not be indexed until other calculation formats are proposed. The second major change refers to the monthly childcare benefit given to mothers until their child is two years of age. This applies only to mothers who are on maternity leave.
The current amount of 18,000 drams per month will be upped to 26,500 drams from July 1, 2020. In order to stimulate child birth rates in rural areas, mothers who do not work will also get the allowance until their children are 2 years old. If mothers of children under two years of age work, the amount of the allowance will double. In total, about 4.8 billion drams are earmarked for this purpose by the 2020 budget.
What we should not be afraid of
Last year the government raised the size of payment it makes to the employee's funded pension account to 7.5%, the rest, in the amount of 2.5% of a worker’s salary, who is born after 1974 is paid by the worker. However, according to the law, this ratio should be reduced. Fortunately, this will not happen in 2020, as many had expected.
In 2021, employee's share will grow to 3.5%, in 2022 the rate will rise to 4.5%, and from January 2023 it will reach 5%. Also, new restrictions on smoking in public places will be introduced starting May, 2020. A relevant bill has so far been adopted only in the first reading and if the process of its final approval is delayed, the deadlines for introducing restrictions may slightly move to later dates. The new legislation is expected to enter into force fully before January 1, 2024. The legislative package provides for a ban on tobacco use in enclosed spaces, public transport, hospitals, clinics and medical centers, in educational and cultural institutions, in playgrounds.
The fine for smoking motorists has been raised to 10 minimum wages. In addition, there are certain rules for the sale of tobacco, as well as restrictions on the advertising of tobacco products. Violation of the ban on the use or restriction of the use of tobacco products or their substitutes by officials will entail a fine of 100 to 200 minimum wages, and for an individual - 50 wages. Moreover, the same violation committed by an official within three months after the first violation entails a double fine. –0--
Driver’s merit point scheme
One of the most controversial decisions was the introduction of the penalty point or merit point system under which a person’s driving license is cancelled or suspended based on the number of points he loses over a period of 12 months because of the traffic offences.
According to the revised Law on Administrative Responsibility and six related laws, which entered into force on January 1, 2020, each motorist is given 9 points at the beginning of a year. If a motorist loses all 9 points within 12 months, he/she will have their driver’s license cancelled for 6 months.
However, they can restore the license in a 3 month-period, but will have to pass an exam. In case of repeated lost of all 9 pints, the motorist will be deprived of his license for a period of 12 months. To restore the license he/she will have again to pass an exam. A motorist will lose from 3 to 4 points for speeding and drunk driving, 3 points for unauthorized transfer of license plates, driving against traffic on a one-way street.
The motorist will lose 2 points if at least one license plate digit is covered or poorly visible, for incorrect crossing of the dividing strips, exceeding the permissible speed by 11-30 km / h, creating an emergency situation. They will lose 1 point in case of violations of the dividing lines, incorrect turns, and violations of the rules of travel at the intersection, pedestrian crossings, smoking during driving, unfastened seat belts, and speaking on phone. Also, 0.5 points will be deducted for the use of non-standard or worn license plates, violation of the rules of stopping and parking.
Payroll tax
A new Tax Code, said to have been designed to help boost economic growth, improve the environment for micro and small businesses and solve some pressing problems, has entered into force on January 1, 2020. Parts of the law are about ordinary citizens' payroll taxes. Earlier, the size of payroll tax depended on the amount of the salary. The higher the salary, the higher payroll tax was. Starting January, 2020 the flat 23% payroll tax rate is applied to all salaries, regardless of their size. Within the next three years it will drop to 20%, one percent every year. Earlier, if a person’s salary was up to 150 thousand drams, he paid 23% payroll tax, if the salary was from 150 thousand drams to 2 million drams, the tax was 28%, and if the salary was over 2 million drams, the tax was 36%.
Other changes include an increase in the excise tax, which will be increasing annually by 3%, instead of the previously proposed 4%. Micro enterprises, self-employed persons, family enterprises with a turnover of up to 24 million drams will be exempted from taxes. The tax for companies, providing gambling services, will increase by 20%. In 2020 or 2021, depending on the results, these companies may be required to start paying profit tax. Also, pawnshops will pay state duties, while private taxi drivers will be exempted from it.
For public catering companies, the sale tax is reduced to 6% of the turnover minus 3% of expenses, but not less than 4% of the turnover. According to the changes, the tax on the purchase and sale of a car will be 1% of the price, but this cannot be lower than 150 drams for each horsepower. This tax liability arises if the sale is effected earlier than 365 days after the purchase. Real estate transactions made by individuals will be exempt from taxes too.
Expensive cars
One of the customs privileges enjoyed by Armenian citizens ceased to be effective on January 1, 2020. Unlike other members of the Eurasian Economic Union (EEU), Armenia enjoyed a preferential regime until December 31, 2019 due to which the customs rates for car imports were significantly lower than those in the Eurasian Economic Union. As of September 1, 2019, the customs rate for vehicles imported from third countries to Armenia was 10 euros per 1 cubic cm of engine capacity, while in Russia and other EEU countries it was 22 euros. In fact, from January 1, a similar rate applies to Armenia as well. Now and after 2020, the owners of vehicles will pay environmental tax
End to preferential imports
Since January 1, 2020, customs duties have increased on 900 items of goods imported to Armenia from third countries as part of the transitional arrangements that were reached after the country joined the EEU. According to the Ministry of Economy, the list includes 293 names of vehicles, as well as a number of essentials. According to the ministry, the impact of changes in customs rates on inflation will be 0.5 percentage points. The list of goods, on which the duty has changed include poultry meat (from 22% to 25%), frozen cattle meat (from 12.5% up to 15%), rice (from 3% to 6%), sunflower and butter (from 13% to 15%), dairy products (- from 13% to 15%).
Pensions, salaries and benefits will increase
The good news is the rise in pensions, benefits and public salaries, although the rise is less than anticipated by the population. Pensions will increase by 10%. The basic pension is 18 thousand drams up from the previous 16 thousand drams. For the first 10 years of service, the bonus for each year is 950 drams, up from the previous 800 drams, and for the military - 1600 drams instead of the 1500 drams.
Also, disability pensions and the allowance for the loss of a breadwinner have been raised, and the minimum pension has been increased to 27 thousand drams from the previous 25.5 thousand drams. Also, under the government's decision, the size of a lump-sum allowance given for the birth of the first child, which is 50,000 drams today will be raised sixfold to 300,000 drams and the size of the benefit given for the birth of the second child will be raised from the current 150,000 drams to 300,000 drams.
The decision comes into force on July 1, 2020. For these purposes, the government has earmarked 3.7 billion drams in its 2020 budget. In the case of the birth of twins and triplets, the size of the benefit will be issued in accordance with the number of children. It will not be indexed until other calculation formats are proposed. The second major change refers to the monthly childcare benefit given to mothers until their child is two years of age. This applies only to mothers who are on maternity leave.
The current amount of 18,000 drams per month will be upped to 26,500 drams from July 1, 2020. In order to stimulate child birth rates in rural areas, mothers who do not work will also get the allowance until their children are 2 years old. If mothers of children under two years of age work, the amount of the allowance will double. In total, about 4.8 billion drams are earmarked for this purpose by the 2020 budget.
What we should not be afraid of
Last year the government raised the size of payment it makes to the employee's funded pension account to 7.5%, the rest, in the amount of 2.5% of a worker’s salary, who is born after 1974 is paid by the worker. However, according to the law, this ratio should be reduced. Fortunately, this will not happen in 2020, as many had expected.
In 2021, employee's share will grow to 3.5%, in 2022 the rate will rise to 4.5%, and from January 2023 it will reach 5%. Also, new restrictions on smoking in public places will be introduced starting May, 2020. A relevant bill has so far been adopted only in the first reading and if the process of its final approval is delayed, the deadlines for introducing restrictions may slightly move to later dates. The new legislation is expected to enter into force fully before January 1, 2024. The legislative package provides for a ban on tobacco use in enclosed spaces, public transport, hospitals, clinics and medical centers, in educational and cultural institutions, in playgrounds.
The fine for smoking motorists has been raised to 10 minimum wages. In addition, there are certain rules for the sale of tobacco, as well as restrictions on the advertising of tobacco products. Violation of the ban on the use or restriction of the use of tobacco products or their substitutes by officials will entail a fine of 100 to 200 minimum wages, and for an individual - 50 wages. Moreover, the same violation committed by an official within three months after the first violation entails a double fine. –0--
