Armenian firms seek end to US treaty void
The Armenian National Committee of America has welcomed the signing of the US-Armenia Trade and Investment Framework Agreement (TIFA) but has said that a renegotiated double tax agreement is a priority in order to fully realize the two nations’ bilateral trade and investment potential, reports Tax News.
The TIFA was signed on May 7 and was immediately welcomed by the House Foreign Affairs Committee Chairman Ed Royce (R – California) and Congressional Armenian Caucus Co-Chair Frank Pallone (D – New Jersey). Pallone said “the Trade and Investment Framework Agreement signed between the Republic of Armenia and the United States represents our shared commitment to mutual prosperity. With this agreement, I am certain that the United States and Armenia will continue to focus on our shared trade and investment interests. Armenia has always been a proud ally of the United States and I am pleased that we have made progress that will support workers in both of our nations.”
The ANCA welcomed the move and called for further expansion of US-Armenia economic relations through the negotiation of a bilateral treaty ending double taxation on businesses and investments. In a fact sheet shared with Congressional leaders, the ANCA outlined the benefits of a US-Armenia tax treaty, as well as the costs of the status quo, of having “an outdated an obsolete Soviet-era agreement.”
The fact sheet pointed out that a US-Armenia double tax treaty would establish a clear legal framework for investors and individuals that have business activities in both jurisdictions, preventing double taxation and facilitating the expansion of economic relations. It said the lack of a working US-Armenia double tax treaty hinders the growth of US-Armenia economic relations, creating legal uncertainty that deters investment and diverts investment flows.
The outdated forty-year-old 1973 US-USSR tax treaty is recognized by the US but not Armenia. The fact sheet says, even by 1970s standards, the Soviet tax treaty was a limited agreement between two hostile superpowers. “Its current legal status remains unclear and its terms are inadequate to the needs of present-day US-Armenia relations. While investors have found ways to adjust to its inadequacies, the existing system of foreign tax credits and deductions is not consistent with any accepted tax or accounting system,” the ANCA said.
It added that “negotiating a double tax treaty between the US and Armenia should be relatively straight-forward. It would be, in great measure, an ‘off the shelf’ treaty, not requiring a great deal of time or effort to research, tailor, negotiate, or implement. A US-Armenia double tax treaty would likely largely follow the US Model Income Tax Convention of 2006, updated by more recent features of US tax treaty policy such as provisions for mandatory arbitration.”