In Armenia, a tax controversy arises when a taxpayer and the tax authority disagree on how taxes should be calculated or paid, or on whether the requirements of the Tax Code have been properly followed. In most cases, such disputes emerge during tax control activities. In practice, they are typically triggered by a range of formal oversight and enforcement actions carried out by the State Revenue Committee (SRC). 

Risk-Based Tax Audits

Taxpayers are selected for audit on the basis of risk assessment criteria centrally applied by the SRC, the substance of which is not publicly disclosed. These audits fall into three categories: complex, thematic or transfer pricing. An audit officially begins with the issuance of an audit assignment. Depending on the findings, an audit may result in the assessment of additional tax liabilities, penalties and fines, all of which the taxpayer may challenge through the available administrative and judicial remedies.

Tax Examinations

Disputes also frequently arise from tax examinations, which are separate from audits, but equally important in practice. Tax examinations are conducted in two main forms.

• Desk (internal) – a desk-based review carried out within the SRC, to verify whether the taxpayer has complied with the requirements of the relevant legal acts. If inconsistencies are identified, the SRC issues a violation protocol, which may lead to a dispute.
• Field (on-site) – a review carried out at the taxpayer’s premises, to assess compliance with the same legal requirements in practice. Field examinations can take several forms:
1. measurement;
2. cross-check;
3. examination of the substantiation of amounts subject to credit to the unified account;
4. examination related to tax refunds for non-residents (or to respond to requests from foreign tax authorities under international treaties); and/or
5. thematic examination.

It is notable that thematic examination does not always require a visit to the taxpayer. If the tax authority already has enough information, the review may be carried out internally. However, if additional documents are needed and the taxpayer does not provide them within two working days after being notified, the tax authority may conduct the on-site thematic examination to review documents directly or take extracts.

Tax controversies in Armenia most commonly arise in relation to taxes that are both fiscally significant and transaction-intensive. They are also more frequent in areas subject to intensive audit activity and where assessments concern material amounts. In practice, the majority of disputes relate to value added tax (VAT), profit tax and, increasingly, to withholding taxes.

VAT-Related Tax Disputes

VAT is the most frequently disputed tax, reflecting both its importance as a key source of state budget revenues (33.6% of total tax revenues as of 2025) and its inherently transactional nature. As VAT constitutes the largest share of tax revenues, it remains a primary focus of tax authority enforcement. 

VAT-related disputes most commonly concern input VAT deductibility, the application of zero-rated and exempt supplies (in particular in the context of exports and cross-border transactions), the legal qualification of transactions (including the distinction between supplies of goods and services and the determination of the place of supply), as well as VAT refund procedures, including eligibility, substantiation requirements and timing of refunds. Although Armenia operates a relatively well-developed and largely automated electronic VAT reporting and refund system, VAT audits remain frequent and intensive in practice.

Profit Tax-Related Tax Disputes

Profit tax represents the second most significant area of tax controversy (14.7% of total tax revenues as of 2025), particularly for medium and large taxpayers. Disputes typically arise in relation to the deductibility of expenses, including issues of business purpose, supporting documentation and arm’s length pricing. Profit tax audits are generally more complex and document-intensive than VAT audits, often involving a broader review of the taxpayer’s business model and accounting treatment. 

Increasing Importance of International Tax Matters

International tax matters, including withholding taxes and transfer pricing, have also become increasingly important sources of controversy in recent years. This trend is driven by heightened scrutiny of cross-border payments, increased reliance on double tax treaty benefits, the implementation of OECD BEPS-related standards and enhanced exchange of information and cooperation between tax authorities.

The most common issues in this area include the application of withholding tax to dividends, interest and royalties, the eligibility for reduced treaty rates or exemptions, the assessment of beneficial ownership, the existence of permanent establishment risks and transfer pricing adjustments. These disputes are often legally and technically complex, as they require interpretation of double tax treaties, OECD guidelines and, in some cases, foreign legal concepts.

In Armenia, the risk of tax controversy can be mitigated through a number of statutory mechanisms designed to promote transparency, encourage voluntary compliance and provide legal certainty. Under the Armenian Tax Code, the principal mitigation tools available to taxpayers are the following.

Clarifications and Guidance

Taxpayers have a statutory right to apply to the tax authority for clarifications on the application of tax legislation and the tax authority is in turn obliged to undertake awareness-raising and explanatory activities regarding legal acts and any subsequent amendments.

“Law-Abiding Taxpayer” Certification

Taxpayers may apply for "law-abiding taxpayer" status, which is granted on the basis of criteria established by the Government. The certificate confers a number of preferential administrative conditions. A shortened procedural timeline – a 15-day period (instead of the standard 30 days) for the examination of administrative appeals – is one such example of preferential conditions. As of 2025, there are 56 taxpayers holding “law-abiding taxpayer” status.

Voluntary Self-Correction and Adjustments

The Tax Code actively encourages taxpayers to identify and rectify errors on their own initiative:

• Amended returns – taxpayers may file amended tax calculations to correct self-identified errors. Where the amendment results in an increased tax liability, the taxpayer is generally exempted from under-reporting fines, although late-payment interest may continue to accrue.
• Transfer pricing self-adjustment – taxpayers may independently recalculate their tax base where they determine that controlled transactions do not satisfy the arm’s length principle. Provided that the adjustment is made voluntarily before the commencement of an audit, no penalties are imposed on the additional tax amount.

Advance Pricing Arrangements (APAs)

For complex international transactions, taxpayers may seek to mitigate controversy by applying for an Advance Pricing Arrangement. An APA enables the taxpayer and the tax authority to agree in advance on the pricing methodology applicable to transactions with non-resident related parties, thereby providing a significant degree of legal certainty.

Mutual Agreement Procedures (MAP)

In the field of international taxation, the Tax Code provides for a Mutual Agreement Procedure to resolve disputes arising from the application of double tax treaties. The MAP allows the Armenian tax authority to engage directly with its foreign counterparts in order to prevent double taxation and to address inconsistent treaty interpretations.

Interpretation in Favour of the Taxpayer

To limit the scope for arbitrary assessments, the Tax Code enshrines a fundamental interpretive principle: where contradictions, ambiguities, or differing readings exist between legal acts of equal force, those provisions must be construed and applied in favour of the taxpayer.

In practice, private tax advisory and due diligence processes also play an important role, enabling the early identification of potential tax risks, assessment of transaction structures, and ensuring compliance with applicable legislation, thereby reducing the likelihood of future disputes.

As a member of the OECD/G20 Inclusive Framework on BEPS, Armenia has incorporated key recommendations into its domestic tax legislation, significantly reshaping the tax environment. This has had a dual impact on tax controversies: increasing their complexity, while also introducing mechanisms for dispute prevention and resolution.

Integration of BEPS Measures

With the entry into force of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) on 1 January 2024, the regulatory framework for cross-border transactions has been significantly reshaped. Through the MLI, Armenia has modified 34 of its 51 Double Taxation Treaties (DTTs) and has implemented core BEPS standards through its Tax Code, including:

• transfer pricing rules – requiring compliance with the arm’s length principle and introducing three-tiered documentation (Local File, Master File and Country-by-Country Reporting); and
• transparency and AEOI – enabling the automatic exchange of financial account information.

Impact on Tax Controversies

To our knowledge, there are currently no international tax disputes in practice, including disputes related to transfer pricing. 

The obligation to pay an additionally assessed tax and the right to challenge it are procedurally separate. Taxpayers are not required to pay the disputed amount or provide security in order to file an administrative or judicial appeal. In principle, challenging an assessment in court generally suspends its enforcement. Under the Tax Code, an appeal suspends the accrual of default interest or penalties.

Where unpaid tax liabilities arise in the taxpayer’s personal account records maintained by the tax authority – except in cases where such liabilities have been assessed through an audit or other administrative acts – the tax authority, on its own initiative, initiates administrative proceedings for the recovery of the unpaid tax liabilities in accordance with the Law of the Republic of Armenia (“On the Fundamentals of Administration and Administrative Proceedings”) if the amount of the unpaid tax liability exceeds AMD200,000, or more than two months have passed since the date the liability arose.

To secure recovery, the tax authority may impose an attachment on assets, including bank accounts, where the outstanding debt exceeds AMD1.5 million and there is a risk of asset dissipation. Importantly, such measures are not suspended by the filing of an appeal. However, an attachment may be replaced with alternative security, such as a pledge, bank guarantee, or insurance guarantee, provided that at least 20% of the liability is paid upfront. In practice, pledge arrangements typically allow repayment of the remaining amount over a period of up to nine months and are the primary mechanism used to avoid or lift enforcement while the assessment is being disputed. 

Tax audits are conducted on a risk-based approach administered by the SRC. Taxpayers are classified as high, medium, or low-risk based on non-public criteria.

Frequency of complex tax audits:

• for high-risk taxpayers – no more frequently than once within a tax year;
• for medium-risk taxpayers – no more frequently than once within three consecutive tax years; and
• for low-risk taxpayers – no more frequently than once within five consecutive tax years.

Taking into account the risk level of taxpayers, an annual plan of complex tax audits is prepared in compliance with the following mandatory requirements.

• taxpayers classified as high-risk must constitute at least 70% of the taxpayers included in the audit plan; and 
• taxpayers classified as low-risk must constitute no more than 5% of the taxpayers included in the audit plan.

Frequency of transfer pricing audits:

• for high-risk taxpayers – no more frequently than once within three consecutive tax years;
• for medium-risk taxpayers – no more frequently than once within four consecutive tax years; and
• for low-risk taxpayers – no more frequently than once within five consecutive tax years.

Exceptions to frequency limits apply in cases such as non-filing of tax returns, liquidation or deregistration, criminal investigations, audits initiated upon a written instruction from the Prime Minister (which is hardly ever applied), taxpayer-initiated audits, intelligence findings, or discrepancies identified through cross-check procedures.

In addition, thematic audits may be conducted on a risk basis, focusing on specific areas, such as:

• correct application of cash register machines (CRMs);
• correct calculation and collection of state duty;
• correct application of excise stamps, duty stickers or identification marks;
• proper registration of employees and/or timely submission of employee registration applications;
• compliance with Articles 6 and 7 of the Law "On Currency Regulation and Currency Control";
• compliance with the Law "On Non-Cash Transactions" regarding acceptance of card payments, availability of non-cash payment facilities and cash acceptance restrictions;
• compliance with rules governing the issuance of settlement documents (excluding CRM receipts);
• accuracy of prices of goods, services and works used as the basis for tax calculation; and
• posting of prescribed information at the taxpayer’s place of business.

Thematic audits can be used to assess additional tax liabilities by type of tax.

Individuals are not subject to such audits, but are covered by risk monitoring and desk reviews. Starting from the 2025 reporting year, a universal income declaration system applies to all Armenian citizens who are tax residents, with enhanced scrutiny for higher-risk taxpayers.

A complex tax audit is initiated by a written order of the tax authority, with at least three working days’ prior notice to the taxpayer.

The standard duration is 15 working days, extendable by ten days. For taxpayers with revenue over AMD3 billion, it may extend up to 75 working days. Audits may also be suspended (generally up to 90 working days), which can significantly prolong the process. 

Statute of Limitations

The general limitation period is three years, starting from the year following the filing of the relevant tax return. After expiry, no additional tax may be assessed. The period is suspended in certain cases, such as during criminal proceedings, or if there is obstruction of an audit.

Effect of an Audit on the Limitation Period

Additional tax assessments may only be made for periods where the limitation period has not expired as of the date the audit assignment is issued.

Complex tax audits are generally conducted at the taxpayer’s premises, where inspectors review accounting records, source documents, IT systems, and inventories. The taxpayer must provide workspace and full access to documentation. Inspectors are also entitled to seize or copy relevant documents and electronic data (including software and files) at the time the audit assignment is presented, subject to subsequent judicial challenge.

Thematic audits, desk reviews, and cross-checks are increasingly carried out remotely via the e-cabinet system. Since 2025, taxpayers are routinely required to upload contracts electronically, enabling fully remote review and reducing paper-based interaction, though limiting real-time explanations.

Transfer pricing audits are predominantly desk-based, relying on Local File, Master File, and Country-by-Country Reporting, supplemented by written information requests, to which the taxpayer must respond within 30 working days.

Tax auditors focus on both substantive tax risks and formal compliance requirements across all tax types.

Substantive issues include:

• economic substance and reality of transactions, particularly with high-risk or “unscrupulous” counterparties;
• deductibility of expenses, including proper documentation, business purpose and statutory limitations;
• application of VAT zero-rating and exemptions, especially for cross-border services;
• correct withholding tax on payments to non-residents and availability of treaty relief;
• recharacterisation of transactions under the substance-over-form principle; and
• compliance with transfer pricing rules for controlled transactions.

Formal and documentation issues include:

• timely and complete tax filings;
• proper use of cash registers and documentation of retail sales;
• employment registration and correct withholding/remittance of income tax and social contributions;
• use of excise stamps where applicable; and
• maintenance of accounting records in accordance with regulatory requirements.

Failure to maintain or produce required documentation is itself a violation and may result in penalties, often shifting the evidentiary burden to the taxpayer.

The expansion of cross-border information exchange has had a clear impact on tax audit practice in Armenia.

Armenia is a member of the OECD/G20 Inclusive Framework on BEPS and a party to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. It joined the CRS Multilateral Competent Authority Agreement on 12 January 2024 and carried out its first automatic exchange of financial account information in September 2025 with 47 jurisdictions.

Country-by-Country Reporting obligations also apply to multinational groups with consolidated revenue exceeding EUR750 million.

These mechanisms have significantly increased audit intelligence available to the SRC, particularly in relation to undeclared foreign income, beneficial ownership structures and consistency of transfer pricing positions.

In practice, they have not yet resulted in a material number of audits with foreign tax authorities, nor in secondment of foreign officials, although the legal framework for such cooperation exists and may develop further.

Early Representation and Digital Readiness

Engagement of legal counsel from receipt of the audit order is essential. The SRC increasingly relies on electronic data analytics to detect discrepancies in real time, making early control of information flow and audit scope critical.

Scope Control and Information Management

All responses should be provided in writing and strictly within the audit scope, with reference to source documents. Under the Tax Code, the tax authority cannot rely on information for assessment before the taxpayer has had the opportunity to review and explain it. Failure to disclose documents during audit may limit their use at appeal stage.

Voluntary Correction

Self-correction prior to audit commencement eliminates under-reporting penalties. 

Objections to Draft Audit Report

Taxpayers may submit written objections within ten working days of receiving the draft act. The tax authority must address these in the final decision, making this stage critical for narrowing or preserving issues for appeal.

Security Measures

Attachment risks may be mitigated through substitution with pledge, bank or insurance guarantees. If at least 20% of the liability is paid, enforcement may be replaced with alternative security and instalment arrangements (up to nine months).

International Dispute Resolution

For cross-border cases, the MAP provides an alternative dispute mechanism. The 2026 Armenia–Japan treaty introduces selective arbitration for unresolved MAP cases and the updated MAP framework allows faster relief (within 30 days in substantiated cases).

In Armenia, the administrative appeal stage following an additional tax assessment is optional. The taxpayer may either first challenge the assessment through the administrative procedure or directly initiate proceedings before the Administrative Court. In practice, the administrative route is frequently used as it is faster, less costly, and often results in partial or full correction of the assessment.

Administrative Appeal Body and Deadline

An appeal is filed with the Tax Appeals Commission of the SRC, an internal body chaired by the head of the tax authority and composed of senior officials. The appeal must be submitted within two months from the date the contested act takes effect. It should identify the disputed findings, legal and factual grounds, and supporting evidence.

Procedure

The Commission reviews the case based on written submissions and the audit file. The taxpayer may also participate in hearings. The Commission may fully or partially annul the assessment, uphold it, or remit the case for re-examination by tax inspectors. Its decision is reasoned and may be challenged before the Administrative Court.

The Tax Appeals Commission must decide an administrative claim within 30 days from filing (15 days for “law-abiding taxpayers”). This period may be extended once by up to 15 days with notification to the taxpayer.

There is no further hierarchical appeal within the tax authority. The taxpayer may initiate judicial proceedings before the Administrative Court either after the Commission’s decision or at any time during the administrative process.

Judicial tax litigation is initiated by filing a claim with the Administrative Court, a specialised first-instance court with exclusive jurisdiction over disputes involving public authorities, including the SRC.

Deadlines and Procedural Rights 

The claim must be filed within two months from the date on which the contested administrative act took effect or from the date of the Tax Appeals Commission’s decision. Importantly, a taxpayer is not required to exhaust administrative remedies and may initiate a judicial claim at any stage of a pending administrative appeal.

Correction on Authority Inaction 

See 3.2. Deadline for Administrative Claims for relevant information.

Form and Submission 

The claim must set out the contested act, legal and factual grounds and include supporting evidence and proof of state duty payment. Filing is conducted electronically through the mandatory e-court system.

Proceedings before the Administrative Court follow the Administrative Procedure Code and proceed in four main stages:

• Acceptance phase – the court accepts the claim, formally notifies the SRC and opens the case. At this stage, enforcement of the challenged tax obligation is suspended until a final administrative or judicial act enters into force.
• Preparatory stage – the court clarifies the facts, addresses procedural issues and considers interim relief requests. Suspension of enforcement is not automatic and requires a separate court order.
• Merits hearing – the case is mostly examined in written form.
• Judgment – after closing submissions, the court issues a reasoned written judgment.

Court’s role

The court may actively request and obtain evidence ex officio and is not strictly bound by party submissions, ensuring verification of the factual basis of tax assessments. This ensures a comprehensive examination and verification of the factual basis for determining tax liabilities, based on the materials of the administrative proceedings.

Procedure and timing

Proceedings are fully digital via the e-court system, with filings and decisions delivered electronically. Hearings are conducted in Armenian with interpretation available. First-instance proceedings typically last around 15 months, expedited four-month tracks apply only in limited urgent cases. Appeals may be brought before the Administrative Court of Appeal and ultimately the Court of Cassation on points of law.

Documentary evidence is the primary evidentiary basis in tax disputes. It must generally be submitted at the preparatory stage. Courts primarily rely on evidence already produced during administrative proceedings. New evidence is admitted only if the party proves it could not have been submitted earlier.

Importantly, documents requested by the SRC but not provided during audit may not later be relied upon in court, unless justified by objective impossibility. Proper management of the audit file is therefore critical.

Witness evidence is admissible and examined orally at the merits stage. However, in practice it is used very rarely in tax litigation. 

Cross-examination is permitted, especially where testimony is contradictory. 

Expert evidence is frequently used in technical disputes. Experts provide written reports and may be summoned for oral clarification and cross-examination of methodology.

As a general rule, in tax disputes, the administrative authority bears the primary burden of proving the factual basis of an assessment, while the taxpayer must substantiate any facts it invokes in its favour. The court may also actively collect evidence ex officio under its powers.

A key exception applies where the taxpayer failed to submit requested documents during the audit. In such cases, the burden shifts to the taxpayer in court to prove favourable circumstances, and the SRC is not required to further substantiate those points.

Strategy in tax litigation is driven by the early management of evidence, financial exposure and procedural positioning. Evidence should be submitted as early as possible – ideally with the claim – as documents not produced during the audit are generally inadmissible unless objective impossibility is demonstrated, making audit-phase preparation decisive.

Interim measures apply by operation of law from the outset, while the court may additionally suspend enforcement where execution risks irreparable harm or affects the subject matter of the dispute. 

In technical disputes, expert evidence is critical and should be prepared early or requested at the preparatory stage, with court-appointed experts frequently used to test SRC findings. Although no formal settlement mechanism exists, partial resolution may occur through self-correction. The process is fully digital, requiring continuous monitoring due to electronic service and strict procedural deadlines.

Domestic jurisprudence is the primary source of legal certainty in tax matters. Decisions of the Court of Cassation are binding on lower courts, while Constitutional Court rulings are also binding and may suspend proceedings where constitutionality is challenged. Court of Appeal decisions are not binding but are regularly cited as persuasive authority.

A key statutory interpretive rule under the Tax Code requires that ambiguities in tax legislation be interpreted in favour of the taxpayer.

OECD instruments are not formally binding, but are widely used as authoritative interpretive sources, especially in transfer pricing and treaty disputes, given Armenia’s alignment of its treaty network and SRC practice with OECD standards.

Following implementation of the MLI, synthesised treaty texts are used as interpretative aids.

Academic doctrine is of persuasive value only. However, written administrative interpretations issued by the tax authority are highly significant and taxpayers acting in accordance with them are protected from liability.

Tax disputes follow a three-tier judicial system: the Administrative Court (first instance, exclusive jurisdiction over tax disputes), the Administrative Court of Appeal (second instance) and the Court of Cassation (highest court, reviewing points of law only). A separate constitutional review may be initiated before the Constitutional Court where constitutionality of a legal norm is challenged, but it does not operate as a further appellate instance.

An appeal as of right lies with the Court of Appeal and may be based on misapplication of law, procedural violations, or incorrect factual findings.

A cassation appeal is discretionary and is admitted only where the case is significant for uniform application or development of law, contradicts existing Court of Cassation case law, or involves fundamental rights violations or serious judicial error. The Court of Cassation primarily performs a legal review and its decisions are binding on lower courts.

Appeal availability does not depend on the type of tax dispute or its value beyond the statutory threshold for appellate review, but cassation admission is strictly limited by legal criteria rather than case value.

All proceedings are fully digital under the e-court system, with electronic filing and service. Filing an appeal does not automatically suspend enforcement; interim measures must be granted separately.

Tax appeals follow a three-tier judicial structure under the e-court system, with all filings and communications conducted digitally.

Appeal to the Administrative Court of Appeal

An appeal must be filed within one month of publication of the first-instance judgment. It must specify grounds such as incorrect application of law, procedural violations, or incorrect fact-finding, and is served on the opposing party. The court generally conducts a written review based on the case file and does not re-hear witnesses, relying instead on first-instance records. Oral hearings may be held where necessary. The court may uphold, amend, annul, or remit the case. Proceedings typically take around 13 months to first hearing.

Appeal to the Court of Cassation

A cassation appeal must be filed within one month of the appellate judgment. It is a discretionary review limited to points of law. The Court decides admissibility within one month and accepts cases only where they are relevant for uniform application of law, contradict existing Cassation case law, or involve fundamental rights violations. If admitted, the case is decided in writing; judgments are final and binding.

Suspension of Enforcement

Filing an appeal does not suspend enforcement. Interim measures must be separately requested and granted, based on a demonstrated legal claim and risk of irreparable harm, and are essential to prevent collection actions during litigation.

Tax cases are heard within a three-tier judicial system with different panel structures depending on the instance and type of act.

At first instance (Administrative Court), cases are decided by a single judge acting as the court.

At second instance (Administrative Court of Appeal), composition depends on the subject of appeal: merits decisions are reviewed by a panel of three judges, while interim decisions are reviewed by a single judge.

At third instance (Court of Cassation), cases are heard collegially by a panel of at least five judges, including the chamber chairperson. Decisions are adopted by majority vote.

Judges are appointed by the President of the Republic upon nomination by the Supreme Judicial Council under a merit-based selection system. Case allocation is carried out automatically through an electronic system designed to ensure random distribution, workload balance, and avoidance of conflicts of interest.

If a judge is replaced during proceedings, the case must generally be reheard from the beginning in accordance with the principle of unchanged judicial composition.

Tax disputes, being matters of public law involving the assertion of state revenue claims, are not, as a general rule, arbitrable and there is no mediation procedure dedicated to tax disputes. In the field of international taxation, the most integrated ADR mechanism is the MAP, which is used to resolve disputes where taxation is not in accordance with DTTs.

See 6.1. Mechanisms for Tax-Related ADR in This Jurisdiction.

See 6.1. Mechanisms for Tax-Related ADR in This Jurisdiction.

Armenia provides tax certainty through official clarifications and Advance Pricing Arrangements.

The Ministry of Finance issues general official clarifications on tax law interpretation. Taxpayers may request case-specific guidance from the SRC.

Taxpayers acting in accordance with official clarifications cannot be held liable, even if such clarifications are later amended or withdrawn. This effectively operates as a statutory safe harbour against retrospective reassessment.

Taxpayers may conclude APAs with the SRC to determine transfer pricing methodology and arm’s length ranges for controlled cross-border transactions. APAs are binding for three years, extendable by up to two additional years and function as an advance dispute-prevention mechanism.

See 6.1. Mechanisms for Tax-Related ADR in This Jurisdiction.

There is no ADR mechanism specifically for transfer pricing.

An additional tax assessment in Armenia is not automatically accompanied by administrative or criminal liability. The Tax Code clearly separates the principal tax liability, default interest and penalties/fines which arise only under specific statutory conditions.

Tax liability is triggered by any established underpayment, regardless of fault and is subject to collection together with default interest. Default interest accrues automatically at 0.075% per day for late payment, up to a maximum of 730 days.

Administrative fines arise only where the taxpayer’s conduct meets the legal definition of a tax infringement, typically in cases of under-reporting identified during audit. The standard fine is 50% of the underpaid tax, increasing to 100% in case of repeated violation within one year. However, if the taxpayer corrects the position before initiation of a tax audit (self-correction), the under-reporting fine does not apply.

In practice, the key distinction is that tax liability and interest are automatic consequences of any adjustment, while penalties are conditional and may be avoided through timely voluntary correction.

Application of GAAR and SAAR

Armenian domestic law does not contain a codified GAAR and SAAR rules.

Criminal Tax Offenses and Initiation

Criminal liability is independent of administrative tax liability and is governed by the Criminal Code. Criminal tax offences require intent (willful evasion) and a specific threshold of damage. Negligence or inadvertent errors do not constitute criminal offences.

A crime is considered to have occurred if the unpaid tax exceeds AMD10 million ("large scale") or AMD20 million ("particularly large scale"). 

Civil tax assessments, administrative penalty proceedings and criminal tax proceedings are formally independent under Armenian law. Tax liability under Article 399 of the Tax Code does not preclude parallel criminal proceedings, meaning a taxpayer may simultaneously challenge the assessment before administrative courts while defending criminal charges.

At the same time, the two tracks are substantively linked through the concept of “damage” in criminal tax offences. Under Article 290 of the Criminal Code, tax evasion is defined by reference to unpaid tax․ Although criminal courts are not formally bound by administrative findings, the annulment of a tax assessment often removes the basis for criminal liability.

In practice, criminal reports are typically not submitted to prosecution authorities until the Tax Appeals Commission has reviewed the audit findings. While there is no automatic legal suspension of criminal proceedings pending tax litigation, courts in both tracks often coordinate: administrative courts may suspend proceedings where criminal findings are relevant, and criminal courts may defer determination of “damage” until the tax dispute is resolved.

Finally, under the Criminal Code, criminal liability is excluded if the taxpayer fully pays the assessed tax, interest and penalties before the conclusion of criminal proceedings, making restitution the primary mechanism for avoiding criminal exposure.

Administrative infringement proceedings in Armenia are typically initiated through the same audit act that determines the additional tax liability. Under the Tax Code, any identified infringement must be recorded in the audit report, which simultaneously establishes the tax adjustment and the administrative fine. The taxpayer may challenge both elements through a single appeal before the Tax Appeals Commission or the Administrative Court.

See 7.2. Relationship Between Administrative and Criminal Processes for criminal proceedings.

Evidence management is critical: documents not provided during audit are generally inadmissible in later proceedings unless objective impossibility is shown.

The administrative penalty process and criminal tax proceedings are separate procedural tracks governed by different codes and heard by different courts, although both increasingly operate through the electronic e-cabinet system.

Administrative Process

The process begins with a tax control procedure and concludes with an audit act that determines both the additional tax assessment and administrative fines. The taxpayer may optionally appeal to the Tax Appeals Commission of the SRC.

Subsequent judicial review lies with the Administrative Court, followed by appeal to the Administrative Court of Appeal and the Court of Cassation.

Criminal Process

Criminal proceedings are initiated where audit findings indicate potential tax crime. The case is referred to investigative authorities, followed by investigation, indictment by the prosecutor and trial before the Criminal Chamber of the Court of First Instance of General Jurisdiction. Appeals lie with the Criminal Court of Appeal and the Court of Cassation.

Jurisdictional Distinction

The Administrative Court determines the legality and amount of the tax assessment, while criminal courts assess criminal liability. Although separate, the administrative findings on tax liability are typically decisive for establishing the “damage” element in criminal proceedings.

The upfront payment of an additional tax assessment following the finalisation of an audit does not, of itself, operate to reduce the administrative fines already imposed by way of the audit act. Armenian law does, however, provide a number of proactive and reactive mechanisms by which a taxpayer may materially reduce or eliminate its exposure to financial and to criminal sanction. 

Administrative Safe Harbours

• Voluntary self-correction.
• Transfer pricing self-adjustment.

Restitution and Criminal Liability

• Mandatory exemption.
• Mitigation.

Favourable Interpretation

Tax ambiguities are interpreted in favour of the taxpayer, especially in penalty cases.

Upfront payment of an additional tax assessment does not, in itself, reduce administrative fines imposed by the audit act. However, Armenian law provides several mechanisms that may reduce or eliminate exposure to penalties and, in some cases, criminal liability.

See 7.5. Possibility of Fine Reductions.

A first-instance judgment in criminal tax cases may be challenged through a two-tier appeal system, both stages subject to a one-month filing deadline and processed via the mandatory electronic justice system. Following this, there are two further possible appeal routes:

• Appeal (second instance) – the judgment may be appealed within one month to the Criminal Court of Appeal, sitting in a three-judge panel. Grounds include incorrect findings of fact, misapplication of criminal law or treaties, serious procedural violations, or disproportionate sentencing.
• Cassation (third instance) – the appellate decision may be challenged within one month before the Criminal Chamber of the Court of Cassation. This is a discretionary review: the case is admitted only if it raises issues of uniform application of law, conflicting jurisprudence, fundamental human rights violations, or serious judicial error. Cassation judgments are final and binding on all lower courts.

After exhaustion of domestic remedies, an application may be lodged with the European Court of Human Rights. A finding of violation may constitute grounds for reopening the case under the “new circumstances” procedure.

Armenian domestic law does not contain a codified general anti-avoidance rule. However, anti-avoidance effects are achieved through substance-over-form principles under transfer pricing rules.

In practice, challenges under these rules – including transfer pricing adjustments and recharacterisation of transactions – generally give rise to administrative tax consequences such as additional assessments, default interest and administrative fines. They are treated primarily as tax compliance matters, as they typically lack the intentional element required for criminal liability.

Criminal proceedings are initiated only in cases involving clear indicia of fraud or deliberate tax evasion. Liability under the Criminal Code requires intentional concealment or distortion of tax-relevant information together with the statutory damage threshold, while provisions addressing fictitious invoicing and VAT fraud schemes – including “mailbox” companies – target the use of such arrangements in tax evasion structures.

Where a cross-border double taxation situation arises from an additional Armenian assessment, taxpayers typically pursue two parallel routes: domestic litigation before the Administrative Court and a Mutual Agreement Procedure under the relevant double taxation treaty, the domestic basis for which is set out in the Tax Code.

Under the MLI, Armenia has adopted the principal purposes test in accordance with the BEPS Action 6 minimum standard, but did not opt into Part VI of the MLI concerning mandatory binding arbitration. It has, however, begun to adopt arbitration on a selective bilateral basis. For example, the Japan-Armenia treaty introduced "final-offer" arbitration for unresolved MAP cases.

Following Government Decision 533-N of 2024, the SRC is required to seek an unilateral resolution of a substantiated MAP claim within 30 working days before engaging the foreign competent authority. The MAP may proceed in parallel with domestic litigation, provided that any agreement reached does not deviate from the final ruling of the court. As Armenia is not a member of the European Union, Directive (EU) 2017/1852 does not apply.

For GAAR or SAAR application see 7.8. Rules Challenging Transactions and Operations in This Jurisdiction.

In the international context, the position is governed principally by the MLI. Armenia has adopted the principal purposes test as its primary instrument for the prevention of treaty abuse: a treaty benefit may be denied where it is reasonable to conclude that the obtaining of that benefit was one of the principal purposes of the arrangement.

The interaction between the substance-over-form principle and the principal purposes test is expected to be a defining theme of cross-border tax practice in 2026, with litigation anticipated in particular in respect of beneficial ownership, holding structures and the entitlement to reduced withholding rates.

International transfer pricing adjustments affecting Armenian taxpayers have, to date, been challenged predominantly through domestic administrative and judicial channels, rather than through MAP or APAs mechanisms.

Advance Pricing Arrangements are established and operate as the principal preventive mechanism for the management of transfer pricing disputes in Armenia. The Tax Code provides for unilateral APAs, concluded with the SRC. To date, the number of concluded APAs in Armenia remains limited. The procedure follows a structured sequence. It begins with pre-filing consultations between the taxpayer and the SRC, in which the proposed scope and methodology are discussed. A formal application, comprising a transfer pricing analysis and supporting documentation, is then submitted electronically. The SRC’s specialised units examine the application and negotiate the methodology and the arm’s length range with the taxpayer. The agreement is reduced to writing and signed by the parties. 

An APA is binding upon both the state and the taxpayer for a period of up to three years and is capable of extension for a further period of up to two years.

There are no published official statistics on this matter. However, the most frequent areas are withholding tax on payments to non-residents and permanent establishment issues for non-resident service providers.

Armenia is not a member of the European Union, and as such, this topic is not applicable.

Armenia is not a member of the European Union, and as such, this topic is not applicable.

Armenia is not a member of the European Union, and as such, this topic is not applicable.

Armenia is not a member of the European Union, and as such, this topic is not applicable.

Armenia has not opted into Part VI of the MLI regarding mandatory binding arbitration. While excluded from the MLI, arbitration clauses exist on a bilateral basis in DTTs with such countries as the Netherlands, Germany and Japan.

As Armenia did not adopt the MLI arbitration provisions, it has no general policy under that instrument. Under its bilateral framework, specifically the Japan-Armenia DTT, unresolved issues arising from a MAP that result in taxation not in accordance with the treaty can be submitted to arbitration.

Armenia utilises Baseball Arbitration in its treaty with Japan to incentivise both tax authorities to submit reasonable, moderate offers, as the arbitrator must pick one offer in its entirety.

Armenia is not an EU member state. Therefore, the EU Directive does not apply.

The MLI remains a recent instrument and a reliable body of practice has yet to develop.

Armenia is expected, in due course, to align with Pillars One and Two of the OECD/G20 framework, in line with the maturation of its digital economy and of its broader international tax framework.

Since Armenia has chosen not to implement the MLI provisions related to arbitration in double taxation agreements, no such decisions are issued or made public.

At present, international tax disputes are typically resolved under domestic legal frameworks via litigation between taxpayers and the state.

Independent professionals are primarily hired by taxpayers at domestic level. They provide "reasoned technical opinions" during the preliminary stages of an audit to resolve disputes before they escalate to formal assessments or litigation.

Neither the initiation of a Mutual Agreement Procedure nor the lodging of an administrative appeal with the Tax Appeals Commission attract a state duty in Armenia. The taxpayer is, however, responsible for the costs of preparation and submission, including the professional fees of specialists, auditors and counsel engaged to provide technical justifications and reasoned opinions in support of the taxpayer’s position.

Judicial costs in Armenia consist of the state duty and other litigation-related expenses, including witness compensation, expert fees, and reasonable legal costs.

State duty is payable when filing a claim before the court of first instance and is also required for subsequent appeals, in accordance with the Law on State Duty. In principle, it must be paid in advance upon submission of the claim or appeal.

As a general rule, litigation costs are borne by the losing party. Where a claim is only partially satisfied, costs are allocated proportionally. State duty may be refunded in cases where proceedings are terminated or an administrative act is annulled.

At first instance (Administrative Court), for claims challenging administrative acts that establish or relate to a monetary obligation, the state duty is calculated based on the value of the disputed amount using a progressive scale, applied in multiples of the basic state duty (AMD1000), as follows:

• For claims up to AMD10,000 (inclusive), the duty equals four times the basic state duty. 
• For claims between AMD10,000 and AMD100,000, the duty is five times the basic state duty plus 1% of the amount exceeding AMD10,000. 
• For claims between AMD100,000 and AMD1,000,000, the duty is ten times the basic state duty plus 0.5% of the amount exceeding AMD100,000. 
• For claims between AMD1,000,000 and AMD5,000,000, the duty is 15 times the basic state duty plus 0.25% of the amount exceeding AMD1,000,000. 
• For claims between AMD5,000,000 and AMD10,000,000, the duty is 25 times the basic state duty plus 0.1% of the amount exceeding AMD5,000,000. 
• For claims between AMD10,000,000 and AMD50,000,000, the duty is 30 times the basic state duty plus 0.05% of the amount exceeding AMD10,000,000. 
• For claims between AMD50,000,000 and AMD100,000,000, the duty is 50 times the basic state duty plus 0.025% of the amount exceeding AMD50,000,000. 
• For claims exceeding AMD100,000,000, the duty is 70 times the basic state duty plus 0.01% of the amount exceeding AMD100,000,000, but in any case not exceeding 80 times the basic state duty. 

At the appeal stage (Administrative Court of Appeal), the state duty is equal to the amount payable at first instance for challenging the relevant administrative act, increased by an additional amount equal to ten times the basic state duty.

At the cassation stage (Court of Cassation), the state duty is equal to the amount payable at first instance for challenging the relevant administrative act, increased by an additional amount equal to 20 times the basic state duty.

Taxpayers are legally entitled to seek compensation for damages. They may claim indemnification for losses resulting from unlawful decisions, actions or omissions of the tax authorities and their officials. A court ruling declaring an initial tax assessment invalid provides sufficient legal grounds for pursuing such claims under the general provisions of civil and administrative law.

The MAP procedure is generally available free of charge.

The official website of the Supreme Judicial Council publishes statistics in Excel format by types of administrative cases. However, the respondent public authority and the detailed type of case are not distinguished (it publishes “challenges to acts of state bodies” without specifying the specific type of act), and the data are also presented by judges. No separate statistics are maintained specifically for tax authorities.

The Ministry of Justice of the Republic of Armenia is continuously introducing new e-justice tools, including a new reporting system. After its implementation, such information will become accessible.

For 2025, the total number of newly received cases challenging administrative acts amounted to 22,092; the number of cases carried over from the previous period was 10,510. During the reporting period, 16,394 cases were completed, of which 13,127 were fully upheld, 142 were partially upheld, and 3,123 were dismissed. Thus, the overwhelming majority of claims are upheld. A total of 4,351 cases were appealed.

In 2025, the Court of Cassation of the Republic of Armenia accepted 90 cases for proceedings.

Some statistical data can also be found on the official website of the State Revenue Committee, but systematic information is not available.

No separate statistics are available, as noted in 12.1 Pending Tax Court Cases. However, VAT and corporate income tax cases constitute the most common categories.

Overall statistics are provided in 12.1 Pending Tax Court Cases; no separate statistics relating to tax authorities are available. Based on our professional estimates, equal chances of success are possible.

Effective management of tax disputes in Armenia requires a proactive and evidence-based approach.

The State Revenue Committee increasingly relies on digital systems and automated risk analysis, making complete and timely electronic documentation essential. Early engagement of independent experts can help resolve issues before they develop into formal disputes.

Procedural safeguards are also important, including restrictions on the use of documents not disclosed during audits and strict appeal deadlines. In cross-border matters, substance requirements and the principal purpose test under the MLI are increasingly relevant.

From a risk perspective, full payment of assessed tax liabilities may, in certain cases, remove exposure to criminal liability. In addition, failure of the Tax Appeals Commission to decide within statutory deadlines may operate in favour of the taxpayer, and ambiguities in legislation are generally interpreted in the taxpayer’s favour.