Treasury Management Profile 2016 Armenia

Transcription

1 France Treasury Management Profile 2016

2 Contents Introduction...3 Legal and Regulatory...5 Taxation...7 Banking Payment Instruments Payment Systems Cash Management Electronic Banking Trade Finance Useful Contacts This is one of a series of Guides specifically designed for treasury managers offering a detailed picture of the banking and cash management arrangements for an extensive range of locations. Please note that the information contained in this document is of a general nature only and is subject to change whether for economic, political, social or other reasons. It is not intended to be comprehensive and does not constitute financial, legal, tax or other professional advice on which you should rely. Accordingly you should not act upon the information contained in this document without obtaining your own independent professional advice. The materials contained in this document were assembled in January 2016 (unless otherwise dated) and were based on the law enforceable and information available at that time. We make no representations, warranties or guarantees (express or implied) that the information in this document is complete, accurate or up to date. We will not be liable for any liabilities arising under or in connection with the use of, or any reliance on, this document or the information contained within it. 2

3 Introduction Capital/Other major cities: Yerevan/Gyumri, Vanadzor Area: 29,743km 2 Population: 2.98m Language: Currency: n n dram (AMD) Country telephone code: 374 Weekend: National holidays: Source: Business hours: Banking hours: Stock exchange: Sectoral distribution of GDP (% of GDP): Saturday and Sunday , 28 Jan, 8 Mar, 24 Apr, 1, 9, 28 May, 5 Jul, 21 Sep, 31 Dec , 28 Jan, 8 Mar, 24 Apr, 1, 9, 28 May, 5 Jul, 21 Sep, 25 Dec 09:00 18:00 (Mon Fri) 10:00 17:00 (Mon Fri) NASDAQ OMX Agriculture 23.3%, Industry 30.1%, Services 46.7% (2015 estimate) Government Legislature Semi-presidential republic with a unicameral parliament, the National Assembly (Azgayin Zhoghov). National Assembly: 131 members are elected to serve five-year terms. Head of state Serzh Sargsyan, president since 9 April The president is directly elected every five years. Political leader Hovik Abrahamyan, prime minister since 13 April The prime minister is appointed by the president. 3

4 Economy Q3 Q4 Year Q1 Q2 Exchange rate* (AMD/USD) Interest rate* (MMR) (%) NA Unemployment (%) NA 18.0 NA Consumer inflation** (%) GDP volume growth** (%) NA NA NA NA NA NA NA NA NA NA GDP (AMD bn) 3,460 3,778 4,001 4,556 4,829 5,032 GDP (USD m) 9,260 10,142 9,958 11,121 11,610 10,529 GDP per capita (USD) 3,128 3,426 3,342 3,720 3,857 3,486 BoP (goods/services/income) as % GDP * Period average. ** Year on year. Sources: IMF, International Financial Statistics, September 2016 and 2015 Yearbook. Country credit rating Fitch Ratings rates for issuer default as: Term Issuer Default Rating Short B Long B + Long-term rating outlook Stable Source: January In 2015, a fiscal stimulus package implemented to boost growth, pushed the public deficit to nearly 50% of GDP. In Q1 2016, the budget deficit rose 116% year on year to AMD billion. 4

5 Legal and Regulatory Central bank Established in 1993, the Central Bank of (CBA) is an independent institution operating in accordance with the n Law on the Central Bank of. Bank supervision The CBA s Financial Supervision Department supervises the financial sector in. Resident/non-resident status A company is considered resident in if it is incorporated in. Bank accounts Foreign exchange accounts and domestic currency (AMD) accounts can be held by residents both domestically and abroad. Resident domestic currency accounts are convertible into foreign currency. Non-resident bank accounts are permitted in both foreign and domestic currency. Non-resident domestic currency accounts are convertible into foreign currency. Interest can be offered on current accounts and savings accounts. Overdraft facilities are available to residents and non residents. Reporting All transactions between residents and non-residents must be reported to the CBA on a quarterly basis. Data is compiled by the Statistics Service of. Exchange controls The n dram (AMD) is s official currency. Foreign exchange controls are administered by the CBA. Foreign exchange transactions are effected by licensed foreign exchange entities, including banks, and other businesses that set their own buying and selling rates (and, consequently, their own exchange rates). No controls are applied to capital transactions, apart from real estate transactions. Non-residents are not permitted to purchase land in. Financial institutions may only grant consumer loans in domestic currency. Domestic and foreign currency deposits are subject to reserve requirements of 2% and 20% respectively. Anti-money laundering/counter-terrorist financing 1 has implemented anti-money laundering and counter-terrorist financing legislation: The Law on Combating Money Laundering and Terrorist Financing 2008, as amended; and Articles 190 and of the Criminal Code, as amended. The CBA has also issued a series of guidelines, most recently Rules for Registration of Reporting Entities under the Law on Combating Money Laundering and Terrorist Financing 2014 and Regulation on the Minimum Requirements to Reporting Entities in the Field of Combating Money Laundering and Terrorist Financing Further legislation has been drafted. is a member of the Council of Europe MONEYVAL Select Committee, which is a member of the Financial Action Task Force (FATF) and the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG) with observer-jurisdiction status. has an established a financial intelligence unit, the Financial Monitoring Centre (FMC). The FMC is a member of the Egmont Group. Account opening procedures require formal identification of the customer and beneficial owners and ongoing due diligence must be conducted throughout the whole course of the business relationship. Financial institutions must identify customers carrying out occasional transactions, or a series of linked transactions within 24 hours if the transaction exceeds 400 times the minimal salary in AMD or is carried out in foreign currency. All individuals making a wire transfer must be identified. The sources of income and main interests of foreign nationals, as well as legal entities registered in and/or operating in foreign territories, are to be identified. 1 Data as at January

6 The sources of income and main interests of foreign nationals, as well as legal entities registered in and/or operating in foreign territories, are to be identified. Financial institutions must report non-cash transactions exceeding AMD 20 million and cash-related transactions exceeding AMD 5 million to the FMC. Financial institutions in the broadest sense are required to record and report suspicious transactions to the FMC. Records must be kept for at least five years after completion of the last transaction or the end of the business relationship. Individuals entering the country with currency exceeding EUR 15,000 must declare this to the customs authorities; currency exports exceeding AMD 5 million (approximately EUR 16,000) must be conducted as a non-cash transfer. 6

7 1 Taxation Resident/non-resident A company is resident in if it is established in (i.e. entered into the n company register and registered with the tax authorities). Foreign companies, international organisations, and entities and organisations without a legal personality established outside the Republic of are considered non-residents of. Tax authority Tax and customs authorities within the Ministry of Finance. Tax year/filing The tax year is always the calendar year. Tax returns have to be filed by 15 April after the year-end along with annual accounting reports. Profit tax is payable in advance in four quarterly instalments by the 15th day of the third month of each quarter, each representing 18.75% of the previous year s tax liability. The amount is based on the tax liability of the previous year if in that year the company s profit tax exceeded AMD 500,000. The company may request to reduce its instalments if it expects a lower tax liability in the current year. However, underpayments attract interest. The balance of tax due should be paid by 25 April of the year following the reporting year. Group consolidated tax returns are not allowed. Each company in a group must make its own return. Corporate taxation n companies are taxed on their worldwide income. Foreign companies conducting business in through a permanent establishment (PE) are taxed on the PE s gross income from n sources reduced by expenses allowable for tax purposes. Profits are taxed at a rate of 20%. There is no surtax or alternative minimum tax. A turnover tax is payable by small and medium-sized enterprises (turnover under AMD million) and replaces VAT and profit taxes. Rates vary between 1% and 20%, depending on the nature of the business. Losses can be carried forward for up to five years, but not carried back. A credit is granted for foreign tax paid by companies on income from sources abroad up to the amount of n tax payable on the foreign income. Although the credit cannot exceed the amount of tax assessable in in respect of the foreignsourced income, any excess may be carried forward and set off against the company s future corporate income tax liability. Certain information technology companies are exempt from corporate tax on IT income. Resident companies engaged exclusively in exports are taxed at a rate of 5% if the total amount of goods exported exceeds AMD 40 billion in the reporting period, or at a rate of 2% if the total amount of goods exported exceeds AMD 50 billion in the reporting period. Advance tax ruling availability Advance tax rulings are not available in. Capital gains tax Capital gains are included in ordinary income and are subject to corporate income tax. Capital gains are generally defined as the difference between disposal proceeds and costs. In broad terms, the cost base includes acquisition, production, construction, assembly and installation costs, together with any other costs incurred with a view to enhance the value of an asset. Capital losses on business assets are deductible from ordinary business income. Resident companies are exempt from tax on domestic dividends received from after-tax profits. Taxpayers engaged in agricultural production are exempt from income tax. 1 All tax information supplied by Deloitte Touche Tohmatsu ( and Republic of Tax Service,

8 Withholding tax (subject to tax treaties) Payments made to n resident entities are not subject to withholding taxes. There is a 10% withholding tax on the n sourced income of foreign companies that do not have a PE in (subject to tax treaties). Insurance, reinsurance and freight are subject to a 5% withholding tax. Income from the lease of property is subject to a 10% withholding tax. Payments made to a non-resident for services are subject to a 20% withholding tax. Tax treaties/tax information exchange agreements (TIEAs) has exchange of information relationships with 37 jurisdictions through 36 double tax treaties and one TIEA. Thin capitalisation There are no specific thin capitalisation rules, but limits on the deduction of interest expense exist. Interest expense on loans from entities other than banks and credit organisations may be deducted in an amount not exceeding nine times the value of tax net assets of a taxpayer in the financial sector and twice the net assets for other taxpayers. Transfer pricing The n tax authorities can reallocate transaction income and expenses between related parties as if the transactions were between independent companies. Related parties are widely defined, but in general this term refers either to companies with a shareholding of 20% or more in each other, or companies that are under common control. is currently adopting transfer pricing rules following OECD rules. Stamp duty Stamp duty is levied on the grant of a licence and for carrying out certain types of activities. Cash pooling has no specific tax rules for cash pooling arrangements. Sales taxes/vat Goods, works, services and imports are subject to VAT at a rate of 20%. Exempt supplies include financial services, secondary education, insurance and newspapers. Exports of goods and international transportation services are zero rated. An entity generally must register for VAT purposes if its annual taxable turnover exceeds AMD 115 million. VAT for small and medium-sized enterprises has been replaced by the turnover tax. Financial transactions/banking services tax There are no specific banking services taxes in. Property taxes There are no taxes on the transfer of property. Land tax is levied by municipal authorities at 0.5% to 1% of the value of the land. Agricultural land tax is 15% of the net income based on the cadastral evaluation. Property tax is levied at 0.3% of the value of buildings. Payroll and social security taxes No payroll tax is levied on employers in. In broad terms, employers contribute 7 15% of employees base salaries as social security contributions. Individuals are liable to social tax. The rate is 3 8% of received salary/compensation, but may not exceed AMD 25,000. Withholding tax (subject to tax treaties) Payments to: Interest Dividends Royalties Other income Branch remittances Resident companies None None None None NA Non-resident companies 10% 10% 10% 5%/20% None 8

9 Turnover tax also levies a turnover tax on individual entrepreneurs and commercial entities with previous year revenue from the sale of goods and the provision of services not exceeding AMD 115 million (subject to certain exceptions). The turnover tax rates are as follows: 3.5% for income from manufacturing; 5% for income from a trade; and 10% for income from the sale of property and passive income. Other taxes For certain businesses, there is a presumptive tax system in place of profits tax and VAT. For certain businesses, there is a licence system in place profits tax and VAT. Individuals are liable to social tax. The rate is 3 8% of received salary/ compensation, but may not exceed AMD 25,000. 9

10 Banking Overview There are 21 commercial banks, one development bank (Panarmenian Bank) and two representative offices of foreign banks operating in. s five largest banks accounted for 51.2% of the banking sector s total assets in There are no restrictions on foreign ownership of financial institutions in and foreign banks play an active role in the country s financial sector. Notable foreign banks active in include France s Crédit Agricole, the UK s HSBC, Russia s VTB Bank and Gazprombank. Of the 21 commercial banks, 14 have over 50% foreign capital (12 of the 14 have over 95% foreign ownership). In addition, of the 32 credit organisations operating in, eight have over 50% foreign ownership and five are over 95% foreign owned. Foreign-owned banks account for approximately 70% of the banking sector s total assets. In January 2015, the CBA announced it was raising the minimum capital requirement for commercial banks to AMD 30 billion from AMD 5 billion effective from 1 January It is hoped the measure will encourage consolidation within the banking sector. In May 2016, the CBA approved the merger of Armeconombank and Kazakh BTA Bank. In December 2015, Inecobank acquired 100% of ProCredit Bank in a deal back by the EBRD. Approximately 80% of ns are unbanked. Major banks Bank Total assets (USD millions) 30 September 2016 Ameriabank 1,100 Ardshinbank 929 Armbusinessbank 696 VTB Bank () 641* HSBC Bank 569* * Data as at 31 December Source: January

11 Payment Instruments Payment statistics Thousands of transactions % change Traffic (AMD billions) / % change 2014/2013 Cheques Electronic funds transfers 9, , , , Paper-based funds transfers 4, , , , Debit transfers 3, , Card payments 20, , , , Total 37, , , , Source: Central Bank of, 2014 Statistical Bulletin. Cash Cash is an important payment medium in, particularly for low-value retail transactions. Credit transfers Credit transfers in can be paper based or automated. Electronic credit transfers accounted for 66% of the volume of all credit transfers in Electronic credit transfers are settled in real time via the national Electronic Payment System. (Electronic credit transfers are increasingly used by companies for payroll, supplier and third-party payments.) Paper based credit transfers are processed via the Paper based Gross Settlement System on a same-day basis. Credit transfers accounted for 33% of the volume of all cashless payments in 2014, but 97% of the value. Debit transfers Direct debits are available in, but not widely used. They are cleared and settled in real time via the Electronic Payment System. Cheques Cheque usage is in terminal decline due to an increasing preference for electronic payments for both high-value and low-value transactions. Cheques are principally used for high-value commercial payments. Cheques are processed via the Paper based Gross Settlement System on a same day basis. Card payments The use of payment cards in has increased rapidly in recent years. Payment cards accounted for 56% of the volume of all cashless payments in 2014, but just 2.9% of the value. There were approximately 546,500 n cards (ArCa), 712,200 Visa cards, 320,700 MasterCard cards, and 44,700 other international cards (e.g. American Express and Diners Club credit cards and HSBC debit cards) in circulation at the end of Chip cards and magnetic strip cards are issued. The ArCa Unified Payment System, which has 18 participant commercial banks, processes ArCa card payments, as well as Visa and MasterCard card payments. American Express and Diners Club payment transactions are processed via their respective international card schemes. There were 1387 ATM terminals and 6954 POS terminals in at the end of ATMs can be used to pay for utility bills and to charge mobile phone cards, as well as for cash withdrawals. ArCa operates the national ATM network. Payments are processed either via the ArCa Unified Payment System or via the respective card issuers. A number of single-purpose pre-paid mobile phone cards are issued in. 11

12 Other payments Postal instruments Postal money transfers are a more popular method of payment in the remoter areas of. However, no official figures regarding their usage are currently available. The ArCa Unified Payment System, which has 18 participant banks, processes ArCa card payments, as well as Visa and MasterCard card payments. 12

13 Payment Systems Type The CBA owns and operates the folllowing two systems in : The Electronic Payment System: an automated gross settlement system; and The Paper-based Gross Settlement System. The CBA is aiming to implement an automated clearing house to replace the paper-based system. Participants The Electronic Payment System has approximately 23 participant banks, in addition to the Treasury, the ArCa processing centre, Moscow Interstate Bank and the CBA. The Paper-based Gross Settlement System has approximately 23 participant banks, in addition to the Treasury, the CBA, the ArCa processing centre and six other domestic organisations with accounts held at the CBA. Transaction types processed The Electronic Payment System processes electronic credit and debit transfers. There is no minimum value threshold. Final settlement takes place across participant banks correspondent accounts at the CBA with immediate finality. Paper-based Gross Settlement System All transactions are transmitted in paper format to the CBA, where they are entered one by one into the CBA accounting programme for debit and credit calculation and subsequent same-day settlement via accounts held at the CBA by each of the participants. 09:30 16:00: the Paper-based Gross Settlement System accepts transactions. Currency centre holidays , 28 Jan, 8 Mar, 24 Apr, 1, 9, 28 May, 5 Jul, 21 Sep, 31 Dec , 28 Jan, 8 Mar, 24 Apr, 1, 9, 28 May, 5 Jul, 21 Sep, 31 Dec Source: The Paper-based Gross Settlement System processes paper-based credit transfers and cheques. Operating hours The Electronic Payment System operates from 09:00 to 18:00 local time. The Paper-based Gross Settlement System operates from 09:30 to 17:00 local time. Clearing cycle details Electronic Payment System All transactions are executed in real time using the automated interbank network established by the CBA (CBA network) on a first-in, first-out basis. 09:00 16:30: the Electronic Payment System accepts transactions. 16:30 17:00: all previously received instructions that have not been processed are entered into the system and then all remaining operations are settled and participants notified. 13

14 Cash Management There is no information available on notional pooling or cash concentration in. Collections Automated collection methods are increasingly being used by medium-sized and large companies in, although paper-based credit transfers remain popular. Cross-border Cross-border payments are routed via SWIFT and settled through accounts held with correspondent banks abroad. Short-term investments Interest can be earned on current accounts and savings accounts. Demand and time deposits can be held in AMD or major foreign currencies. Time deposits typically have maturities of up to one year. Custody and securities settlement 1 Depository Central Depository of (CDA). The CDA open joint stock company is one of the oldest securities market institutions in. The CDA provides securities account opening and maintenance services to corporate and individual customers. It also clears and settles all equity and corporate debt securities transactions concluded on the organised exchange market or over the counter. Since the exchange trading in securities is currently done with pre deposition of both securities and cash on a same-day settlement basis (T+0), the CDA makes sure that the securities to be traded are available on the accounts and are prevented from any other use prior to the trading session (blockage of securities). Settlement cycle T+0. Certificates of deposit are offered by commercial banks. Commercial paper is available. Issuance is low. Treasury bills are issued by the government at weekly auctions, or via the secondary market, with maturities of up to one year. Repurchase agreements are available. Maturities do not usually exceed one month. 1 Data as at February

15 Electronic Banking Electronic banking is available in and offered by both domestic and international banks. There is no bank independent electronic banking standard; each bank offers its own proprietary system for corporate banking purposes. Electronic banking services include balance and transaction reporting and payment initiation. Internet banking is offered by all but three commercial banks in, but has not been widely adopted. had an internet penetration rate of 70% at the end of November Mobile banking is offered by the country s leading banks, but has not been widely adopted. had a mobile penetration rate of 116% at the end of 2014; mobile broadband penetration exceeded 30%. had a mobile penetration rate of 116% at the end of 2014; mobile broadband penetration exceeded 30%. 15

16 Trade Finance Trading partners Import Russia 24.9%, China 9.5%, Germany 6.4%, Turkey 5.3%, Iran 4.7%, Ukraine 4.6%, Italy 4.1%. Export Russia 20.3%, China 11.3%, Germany 10.4%, Canada 6.1%, USA 5.8%, Bulgaria 5.6%, Iran 5.6%, Georgia 5.5%, Iraq 5.3%, Netherlands 4.9%, Belgium 4.1%. Source: The World Factbook Washington, DC: Central Intelligence Agency, 2013 ( Imports Documents In order to import goods into, a customs declaration, commercial invoice, bill of lading, packing list and, in certain cases, certificate of origin are required. Licences Licences are required from the Ministry of Agriculture and the Ministry of Health for importing pesticides and pharmaceuticals respectively. Special authorisation is required from the government for importing military equipment, armaments, ammunition and explosives. A licence is required from the Ministry of Finance for importing diamonds and fireworks. Taxes/tariffs and other fees is a member of the European Economic Union (EEU). The EEU, which comprises, Belarus, Kazakhstan, Kyrgyzstan and Russia, came into force on 1 January Customs border controls between EEU member states have been lifted. is also a member of the Commonwealth of Independent States (CIS). Imports from fellow CIS member states are exempt from customs duties. (alongside Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Ukraine and Uzbekistan) is a signatory of the CIS Free Trade Zone Agreement (CISFTA). The CISFTA has been ratified in all signatory countries, with the exception of Tajikistan. A customs duty of 10% is applied to certain new materials and manufactured products. The majority of imports are zero rated. Prohibited imports A negative list (of products that may not be imported) is in operation. It is prohibited to import certain commodities into, in order to protect the safety and health of fauna and flora, and for reasons of national security. Exports Documents In order to export goods from, a customs declaration, commercial invoice, bill of lading and packing list are required. Licences Licences are required for exporting wild animals, plants, medicines and diamonds. Special authorisation is required from the government to export military technology, nuclear technology and waste, and related products. Exports of metals and foreign-produced items have minimum value thresholds. Taxes/tariffs and other fees No taxes are charged on exports from. Prohibited exports A negative list (of products that may not be exported) is in operation. Exporting certain works of art and antiques is prohibited. Financing imports and exports Imports There are no financing requirements for imports. Exports There are no financing requirements for exports. 16

17 Useful Contacts Central Bank of Leading banks: Ameriabank Ardshin Bank Armbusinessbank HSBC Bank VTB Bank () Union of Banks of n Banks Portal Financial System Mediator Ministry of Finance Ministry of Economy Chamber of Commerce and Industry of the Republic of n Development Agency Government Department of State Property Management NASDAQ OMX n Card (ArCa) HSBC contact details HSBC Commercial Banking HSBC Global Banking and Markets This document is produced by HSBC Bank plc and members of the HSBC Group, together with their third-party contributor. It is not intended as an offer or solicitation for business to anyone in any jurisdiction. The information contained in this document is of a general nature only. It is not meant to be comprehensive and does not constitute financial, legal, tax or other professional advice. You should not act upon the information contained in this document without obtaining your own independent professional advice. The views and opinions expressed by the third-party contributor are their own and not necessarily those of HSBC. The information contained in this document has not been independently verified by HSBC. This document contains information relating to third parties. The information does not constitute any form of endorsement by these third parties of the products and/or services provided by HSBC or any form of cooperation between HSBC and the respective third parties. Under no circumstances will HSBC or the third-party contributor be liable for (i) the accuracy or sufficiency of this document or of any information, statement, assumption or projection contained in this document or any other written or oral information provided in connection with the same, or (ii) any loss or damage (whether direct, indirect, consequential or other) arising out of reliance upon this document or any opinion or statement made in this document. All efforts have been made to ensure that the information contained is current at the first date of publication. HSBC and the third-party contributor does not undertake, and is under no obligation, to provide any additional information, to update this document, to correct any inaccuracies or to remedy any errors or omissions. No part of this document may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of HSBC and the third-party contributor. Any products or services to be provided by HSBC in connection with the information contained in this document shall be subject to the terms of separate legally binding documentation. 17