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5.5. Source Rules with Respect to Income Derived by Non-Residents

Income earned by non-residents from sources in Armenia is subject to tax in the country. Taxes are collected through withholding tax which is deemed to be the final tax on such income. Income subject to withholding tax includes capital gains, dividends, interests, royalties, rent, service fees, etc.

With respect to the sale of goods to Armenia, the source test is whether the income is attached to offshore or to domestic activities. Where title of ownership passes on crossing the border, the income derived from the sale is deemed to be related to external activities and is not taxable in Armenia. Services related to real estate situated in Armenia are deemed to produce Armenian-source income regardless of the where the activities are actually carried on. Royalties are generally deemed to be from Armenian sources if the payer is a resident entity or the Armenian PE of a non-resident. Interest is deemed to be from Armenian sources if paid on account of a loan granted to a resident or the Armenian PE of a non-resident, on a deposit with an Armenian bank or on securities issued by a resident. Income from the leasing of property is deemed to be from Armenian sources if the leased asset is either subject to registration in Armenia (does not apply to aircraft) or is actually located in Armenia during the lease period. Income from various types of services, including management, legal, accounting, marketing, consultancy, or engineering services, is deemed to be from Armenian sources if provided to residents or to the Armenian PE of a non-resident, regardless of the actual location where the services are rendered.

Generally, where it is not possible to precisely attribute an item, income to local or foreign sources, the entire income should be attributed to a local source.