Main trading countries (2000)

2. Taxation               [top]

The tax field is regulated according to the NKR “Law on Taxes” and other laws about taxes.

Taxes in NKR:

2.1. Profit tax
Profit tax is the positive difference between the gross income of a taxpayer and reductions fixed by law.

A 10% tax rate is used for taxable income.

In the field of profit tax, there are certain privileges for investors, particularly:

If in the authorizing capital of a resident enterprise (with the exception of banks) the minimal level of factual investments reaches AMD25 million then the income tax decreases according to the following schedule

There is no profit tax for taxpayers’ dividends.

2.2.Income tax
Income tax is the positive difference between the gross income of resident and non-resident natural persons and reductions fixed by law. In Nagorno Karabakh a standard 5% rate is used for taxable income.

2.3. Excise tax
Excise tax is taken from the sales profits of appropriate taxable products.

There are different excise tax rates for different products:
Beer - 20%
Wine and wine stuff - 50%
Alcohol and alcoholic drinks – 125%
Cigars, cigarettes – 100%
Jewelry – 15%

Excise tax rates are lower for goods made of local primary products:
Wine and wine stuff – 20%
Vodka (including mulberry vodka) – 30%

Exported goods are not subject to excise taxation.

2.4.Value Added Tax (VAT)
The rated object of VAT is the gross value of goods and services.
VAT equals 20% from the rated turn over of goods and services.

The following categories are not subject to VAT:
· Processing and sale of agricultural products;
· Humanitarian aid
· Exported products and services

2.5. Property tax
Property tax is a tax imposed on taxpayer’s property. The property tax rate constitutes an average of 0.6% of the taxable base.

2.6. Land tax
Landowners and entities who temporarily use state owned land pay Land tax.
Land tax on agricultural lands constitutes 6% of the net profit as fixed by the cadastral calculation.
Land tax on non-agricultural lands constitutes 1.0% of the land’s cadastral valuation.

2.7 Payments for social insurance.
Payments for social insurance are mandatory. Employers allocate for social insurance 15% of the sum directed to wages. In 2002-2003 the rate will be 13%, whereas after 2003 – 10%. Employees pay 3% of their salary for social insurance.

3. Import - Export                [top]

Nagorno Karabakh Republic is in a common customs zone with the Republic of Armenia. Imports to NKR are regulated according to customs legislation of the Republic of Armenia.

3.1 Customs duties
10% rate is fixed for most imported products (food, raw material, and fuel).

The following categories are free from customs duty:
· Imported capital assets fixed in the authorized funds of enterprises with joint and foreign investments
· Imported goods that belong to foreign firms and are designated for local processing and further export
· Exported products and services

3.2.Value Added Tax (VAT)
Importers pay VAT irrespective of the type of product.

However, certain categories of imports are not subject to VAT:
· Goods with a customs duty rate of 0%,
· Goods that are free of excise taxation,
· Humanitarian aid



4. Foreign Investments               [top]

In the NKR, the “Law on Foreign Investments” regulates legal, economic and organizational matters concerning foreign investments.

Foreign investments are encouraged by favorable terms in the NKR legislation regulating foreign investments. Should there be changes in the legislation, foreign investors can use the existing regulations for a 10 year period since the start date of their investment activities. Foreign investors are free to move out their property or profit at any time.

Foreign investors can establish branches, subsidiary offices, representations belonging to foreign natural persons, acquire and own industrial enterprises and their shares, establish new enterprises, acquire shares, bonds as well as use land and natural resources. Shares can be exchanged for foreign currencies.

In the sphere of privatization the policy of privatization investments is carried out. In order to attract investors it is planned to privatize enterprises for free.

Limitations on Foreign Investments

Foreign ownership of the NKR land is not allowed due to national security reasons.
Enterprises with foreign capital can be involved in special activities only with standing procedure upon getting license.
Only resident companies can carry out banking, financial or insurance activities.

5. General Information on Firms               [top]

· Full value company
Full value companies are companies whose members are engaged in business activities according to the company’s association status, on behalf of the company, and hold responsibilities with their property for the company's obligations. A person can be a shareholder in only one full value company. A full value company is ruled by the consent of all members.

· Trust company
A trust company is a company whose members hold responsibilities for the company’s obligations either with their property or shares, and do not participate in the business activities of the company. A person can be a member of only one trust company. Only full members govern a trust company.

· Limited liability company
A limited liability company is a company founded by one or more persons whose authorized capital is divided into shares according to the company’s charter. Members of a limited liability company are not personally responsible before its obligations, and only share possible losses related to the company’s activities with their pro rata shares. The authorized capital of a limited liability company is formed from the value of its participants. The governing body of this type of enterprise is a meeting of its shareholders.

· Company with added responsibility
A company with added responsibility is a company whose authorized capital is divided into a definite number of shares. Such companies are founded either by one or several persons. Its members hold subsidiary responsibilities for the company’s obligation with their properties pro rata. In case of bankruptcy of one member his/her responsibilities are divided among the other members in proportion with their shares.

· Joint stock company
A joint stock company is a company whose authorized capital is divided into a definite number of shares. Only joint stock companies have the right to issue shares. Shareholders of a joint stock company do not hold responsibilities for the company’s obligations and with their shares pro rata share possible losses related to the company’s activities. One person can found a joint stock company. A joint stock company can consist of one person if he/she acquires all the stocks of the company. In this case the owner cannot own shares in other businesses.

· Open joint stock company
In an open joint stock company its members can easily, without the consent of other shareholders sell their own shares. Open joint stock companies can organize open sales of their shares.

· Closed joint stock company
A closed joint stock company is a company where the shares are allocated among its founders or other previously decided persons. Closed joint stock companies can neither organize open sales of their shares nor give opportunities for unlimited number of persons to acquire the shares. The central governing body of the company is the meeting of its stockholders.

· Co-operatives
A co-operative is a company founded by private citizens or legal persons who allocate their own property for the needs of the co-operative. The governing body of a cooperative is the assembly of its members.

State registration
A legal person is subject to state registration. A legal person is recognized as such upon appropriate state registration.