The Constitutional Court recently made a decision on the unconstitutionality of a number of provisions set forth by the Government Decree No 1373-Ն of October 5, 2017 based on the application of the Human Rights Defender.
The Defender’s Office has thoroughly analyzed that the RA Tax Code, defining the regulations for determining and paying income tax, does not explicitly provide some terms used herein. As a result, these terms are defined by a legal act of lower legal force, a government decree. Meanwhile, the law does not foresee the disclosure of terms used herein, by the Government's Decree, causing contradictions with the principle of legal certainty. At the same time, it turned out that this causes a problem concerning the guarantees for exercising the entrepreneurial ownership rights that are enshrined in the Constitution.
Taking into consideration the issue raised by the application the Constitutional Court found (DCC-1436) that as a result of contested regulations unlawful interference occurs in the right to property. It was also mentioned that the tax content and the amount of tax liability should be defined by the law, and in each particular case the tax liability is considered to be in compliance with the law, if it is enshrined by the law not purely in formal way but the elements of its content find their full reflection in the law.
The Constitutional Court also recorded that the taxable income for income taxpayers is the positive difference of gross income and deductions. Meanwhile, if the entrepreneurial costs, losses and deductions are deducted from the gross income, and income and costs are taken into account when determining the taxable income, then the "elements not considered as income" and "elements not considered as costs" are not accounted and not reflected in the calculations of income tax presented to tax office.
At the same time, the 1 May, 2019 was set as a deadline for the loss of force of the provisions deemed to be contrary to the Constitution, which gives the National Assembly an opportunity to comply the legal regulations of the Tax Code of the Republic of Armenia to the requirement of this decision and avoid such serious consequences for the state or the public that would damage legal security, which should be established at that time by repealing the mentioned normative legal act.