Armenia`s authorities restricting citizens` right to legal aid -  lawyers 

ArmInfo. The initiative of the Armenian authorities to review the turnover tax system and increase the tax burden of lawyers primarily affects ordinary citizens. This was stated on May 21 at a press conference by the Chairman of the Chamber of Lawyers of Armenia Simon Babayan, regarding the amendments proposed by the Ministry of Finance to the Tax Code of the Republic of Armenia.

According to Simon Babayan, the legal community was not informed in 

advance about the planned changes and got acquainted with the draft 

proposed changes after it was posted on a single portal of legal 

acts. After studying the initiative, the first thing that caught my 

eye was that the document was presented without a single 

justification and statistics confirming the need to make these 

changes. The Ministry of Justice also gave a negative response, since 

the project affected the interests of notaries, as well, the head of 

the Chamber noted.

As a result, a discussion on the issue was initiated in the relevant 

commission, where it was recorded that the project was controversial. 

We agreed to hold additional discussions. <But, to our surprise, the 

project was included in the government agenda and after its approval 

(May 2 - ed.) today it is being discussed by parliament. This is 

unacceptable for us," Babayan noted.

Meanwhile, the lawyer notes, the Republic of Armenia and the state 

have an obligation to the citizen to provide him with the opportunity 

to use legal assistance. However, as a result of the application of 

this project, the cost of legal services and, in particular, 

lawyering, will sharply increase by at least 30%. The average citizen 

will have to pay for this. At the same time, about 250 thousand cases 

are currently being considered by the courts alone, which means that 

this innovation will affect at least 250 thousand people, Babayan 

explained.

In addition, after the introduction of new tax rules, lawyers will 

have to keep very complex tax records in order to determine the 

amount of taxes to be paid - correctly calculate income, deduct 

expenses, take all this into account in reducing the tax base (if 

such is possible in the practice of law) for tax, etc. And for this 

you will need to resort to the help of a qualified accountant, which 

involves new expenses. Under these conditions, it becomes almost 

impossible to provide free legal assistance, the head of the Chamber 

noted.

"The new tax burden will fall on the shoulders of an ordinary 

citizen, since if he is not a VAT payer, then he will have to pay an 

additional 20% VAT, and if the consumer of legal services is a legal 

entity, then the services will become more accessible for him, since 

being a VAT payer for the latter there will be an opportunity to take 

advantage of the tax deduction," Simon Babayan indicated.

In this regard, lawyers today announced their refusal to participate 

in any trials, as well as in any proceedings with government 

agencies.

The government of Armenia plans to review the turnover tax system 

from October 2024, and from 2025 to narrow the scope of beneficiaries 

of the micro-enterprise system. Currently, turnover tax (replaces VAT 

and income tax) is paid by business entities whose annual turnover 

does not exceed 115 million drams (from January 1, 2020, Armenia 

returned to non-taxable annual turnover up to 115 million drams). 

This group includes SMEs, individual entrepreneurs and notaries. We 

are talking, in particular, about payments of 5% from the turnover of 

commercial activities and 3.5% from industrial activities.

Now the Ministry of Finance proposes to double the turnover tax rates 

established for main types of activities, providing the opportunity 

to reduce the tax payable through documented expenses. According to 

the Ministry of Finance, this will stimulate the transition to a 

common taxation system.

The legislative initiative, among other things, provides for a 

significant increase in the tax burden on legal activities, proposing 

to establish a turnover tax in the amount of 10% of profits from 

October 2024, and introduce a general taxation system, including VAT 

in the amount of 20% and income tax in 18% starting January 2025. "It 

is obvious that if the project is adopted, the tax burden of lawyers 

will increase sharply, which will lead to a significant increase in 

the cost of legal services. After all, for this group of citizens, 

expenses are an investment in knowledge and acquired experience. Then 

what kind of deduction can we talk about? On the contrary, an 

increase in rates will inevitably lead to an increase in the price of 

legal services by at least 30-40%. As a result, access to legal 

assistance will be reduced, especially for people of average income 

and below, who will try not to seek legal assistance unless 

absolutely necessary, as is done today in the case of medical 

services," tax expert Tigran Keyan said earlier in an interview with 

an ArmInfo.