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LAW OF THE REPUBLIC OF ARMENIA

of November 12, 2016 No. ZR-202

About financial equalization

(as amended on 12-12-2019)

Accepted by National Assembly of the Republic of Armenia on October 20, 2016

Article 1. Subject of regulation of the Law

1. This Law establishes concept, the principles of financial equalization, procedure of payments and distributions of the grants (further - grants) to local authority budgets provided by the principle of financial equalization.

Article 2. The basic concepts used in the Law

1. In this Law the following basic concepts are used:

1) financial equalization - reducing difference between financial opportunities of municipalities for contribution to harmonious development of municipalities, and also creations of opportunity to make expenses in the minimum quantity in all municipalities for accomplishment by local government bodies of the obligations assigned to them by the law;

2) coefficient of the budget providing municipality - ratio of the regulating yield ratios and account requirements of municipality;

3) yield ratio of municipality - profitability ratio per capita municipality so to similar indicator of the Republic of Armenia;

4) profitability of municipality - the total amount of the land tax, property tax, the deductible taxes, state fees and grants provided by part "an" of the Law, enshrined in the local authority budget and provided by this Law;

5) the regulating coefficient of account requirements - the amount of the account factors established by this Law which influences expenses of municipality on implementation of the powers by it;

6) factors of expenses - the factor which is characterizing features of municipality and having influence on implementation of the powers assigned to municipalities by the law. This Law includes the following factors of expenses:

1) large-scale coefficient;

2) coefficient of availability of transport;

3) coefficient of degree of vysokogornost of municipality;

4) the number of the settlements included in municipality;

5) factor of age structure of the population;

7) the boundary level of equalization - value of this indicator is caused the size of grants by part "b", the stipulated in Article 5 these Laws selected on municipalities and also possibility of obtaining or not receipt of municipal grants;

8) in sense of this Law - the estimated year is year on which the grant is calculated.

In sense of this Law the state authorized body (further - the state authorized body) for calculation of the amounts of grants is the state body authorized by the Government of the Republic of Armenia in the field of territorial administration and development.

Article 3. Principles of financial equalization:

1. The principles of financial equalization are:

1) mitigation of inequality between financial opportunities of municipalities;

2) the gratuitousness and inappropriate grants provided from the government budget to municipalities;

3) preserving freedom and autonomy of municipalities in implementation of the powers and uses of financial resources;

4) determination of the minimum total amount of the grants provided from the government budget;

5) approval on separate municipalities of the size of the grants selected to municipalities from the government budget according to the Law of the Republic of Armenia "About the government budget of the Republic of Armenia" in the procedure established by this Law.

Article 4. The source of forming of grants and municipalities receiving grants

1. Financial resources of grants are created of means of the government budget and represent inappropriate current state transfers in local authority budgets.

2. The municipalities receiving grants keep the right to action under own responsibility and freedom of use of these financial resources.

3. Based on procedure for distribution of the financial resources established by this Law, grants cannot receive those municipalities which do not conform to the requirements provided by articles 6 and (or) 7 of this Law.

Article 5. Structure of grants

1. Grants consist of two parts - "an" and. Each of these parts is calculated for separate municipalities.

Grants by part "an" are calculated by quantity of the population in municipalities - Yes,

Grants by part "b" are calculated on coefficient of the budget providing - DB

Article 6. Procedure for calculation of grants of part "a"

1. Grants by part "an" are provided to those municipalities which population does not exceed 3500 people.

2. Grants by part "an" are provided to each municipality in equal quantities which extent is established by the Law of the Republic of Armenia "About the government budget of the Republic of Armenia".

3. The population of municipality is quantity of the population registered in the territory of this municipality on condition of the beginning of the year year (on January 1) preceding the estimated year.

4. Total amount of the grants provided by part "an" is calculated by the following formula:

YES = KMA x HELL, where:

YES - the total amount of the grants provided according to part "a";

KMA - total quantity of the municipalities receiving grants according to part "a";

HELL - the amount of the grant selected to one municipality according to part "a".

5. Receipt of grants by municipality according to part "a" does not exclude receipt of grants of the same municipality according to part "b". Means from the grants received according to part "a" join in calculation of profitability of the municipalities which received means, as additional income.

Article 7. Procedure for calculation of grants of part "b"

See Article 7. Procedure for calculation of grants of part "b" (10Kb In original language)

Article 8. Procedure for calculation of the budget providing municipality

1. The coefficient of the budget providing municipality is ratio of profitability and the regulating coefficient of account requirements of municipality.

2. The coefficient of the budget providing municipality is estimated on the following formula:

KBOI = KDMI/RKRPI, where:

KBOI - coefficient of fiscal capacity of municipality i;

KDMI - yield ratio of municipality i;

RKRPI - the regulating coefficient of account requirements of municipality i.

Article 9. Procedure for calculation of profitability of municipality

1. The yield ratio of municipality is total amount of tax revenues, the state fees fixed by the law to local authority budgets and the grants provided by this Law according to part "a" by calculation per capita in this municipality concerning average value on the republic.

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