Energy is one of Armenia’s most fully operational and cost-effective sectors. The country is energy self-sufficient. Lacking industrial fuel resources, Armenia places high emphasis on development of its own renewable energy sources, such as hydro, wind and solar energy.
If your company operates in energy sector or if you are thinking about investing in renewable energy, it is important to work with advisers who have expertise in the industry and an understanding of the financial and taxation issues. Particularly, we have an extensive expertise of tax, accounting, audit, advisory in the following activities in energy sector:
- Electric energy supply
- Electric energy production
- Gas supply
- Nuclear power station operation
- Hydro-power station operation
- Thermal power plant operation
- Scientific and research works in energy sector
- Gas supply system maintenance services
- Repair of energy equipment
Mining is the most important industry sectors of Armenia and place a vital role both in the industry and economy levels, comprising 2.5% of GDP in the first semester of 2014.
The subsurface of Armenia is rich in certain mineral resources. More than 480 deposits of a range of mineral resources have been discovered here.
The Ministry of Economy estimates reserves of a few hundred million tons of iron ore deposits, a few million tons of copper, lead, and zinc reserves, a few hundred thousand tons of molybdenum, and a few thousand tons of gold and silver deposits.
Three different license types are issued by the Ministry of Energy and Natural Resources’ Mining Agency: license for geological explorations, license for geological explorations for further exploitation, permit for exploitation of mines.
Tax and accounting peculiarities
IFRS 6 “Exploration for and evaluation of mineral resources” addresses the financial reporting for the exploration for and evaluation of mineral resources. It does not address other aspects of accounting by entities engaged in the exploration for and evaluation of mineral reserves (such as activities before an entity has acquired the legal right to explore). Exploration and evaluation assets are initially measured at cost. After recognition, management applies either the cost model or the revaluation model to the exploration and evaluation assets, based on IAS 16 “Property, plant and equipment” or IAS 38 “Intangible assets” according to nature of the assets.
IFRIC 20 “Stripping costs in the production phase of a surface mine” applies to waste removal costs incurred in surface mining activity during the production phase.
Mining companies pay corporate taxes and royalties. The Law on Nature protection and Nature Utilization Payments stipulates that mining companies should pay royalty at the rate of 0.1% only in the case that their profitability ratio exceeds 25%. In this case business representatives complain that the tax burden extends not proportionate to profit increase.
How AN Audit can help you
We are proud to have client portfolio of almost 20 energy and mining sector companies which comprise the top giants of energy sector.
We can help you with the following services:
- Internal and external audit
- Accounting outsourcing
- Research and development tax relief and tax rationalization
- HR solution and due diligence
- Advise on application of IFRS 6
- Internal control systems development
- Due diligence