Georgia Pocket Tax Book 11

8/3/2019 Georgia Pocket Tax Book 11

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Pocket

Tax Book

GEORGIA


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This publication has been prepared and/or edited by Ernst & Young practice in Georgia and the Ministry ofFinance of Georgia. The book is intended to be a general guidance on taxation. It is thus not expected to be asubstitute for a detailed research or exercise of professional judgment on taxation matters in Georgia. Com-panies and individuals, operating in Georgia or planning to operate, are strongly advised to obtain current and

detailed information from experienced professionals.

None of the organizations mentioned above, nor their members, employees or agents accept liability for theconsequences of you and anyone else acting or refraining to act on the information contained in this publica-tion or for any decision based on it.


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Dear Readers,

We are pleased to ntroduce our updated publcaton o Pocket Tax Book. The nor-

maton t contans s based on taxaton law and practce n orce startng as o Janu-

ary 2011 and covers all the man aspects o the tax system n Georga.

We are dedcated to develop the tax envronment that acltates the now o oregn

nvestments nto Georga. Havng ths n mnd, we have recently undertaken radcal

changes to the tax and customs legslaton o Georga, and ntroduced a new Tax

Code that s to be n orce startng 1 January 2011.

Accordng to the World Bank, Georga remans one o the most actve reormers n

the world and t has the lowest total tax burden n Central and Eastern Europe, and

the 7th lowest n the world. Accordng to the Forbes Tax Msery and Reorm Index o

2010, Georga ranks 4th best n the world n terms o tax burden.

Please send any eedback on ths document to emal: [email protected]

Ths document can be ound on the ofcal webste o the Mnstry o Fnance

o Georga at http://www.mo.ge.

The Mnstry o Fnance o Georga


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GEORGIA

Investment Incentives

The Government o Georga has been reormng snce 2004 to oer an nvestment

rendly envronment to nvestors. By undertakng numerous economc reorms the

country has postoned tsel as an attractve destnaton or oregn nvestments.

Georga oers the nvestors:

Attractive Destination or Foreign Business. By contnuous mprovement o the bus-ness clmate Georga has ranked 11th out o 183 economes n terms o ease o dong

busness n World Bank & IFCs Dong Busness Report. In addton, Dong Busness

2011 ranked Georga as the worlds top reormer country durng the last fve years.

Georga has been assgned Standard & Poors ratng B +, ranked 26th among the

most ree economes accordng to the Economc Freedom Index o Hertage Founda-

ton, and 37th accordng to the World Economc Forum.

Stable Macroeconomic Environment. Georga has successully overcome the global

fnancal crses and s returnng back to a stable growth condton ater a perod o

reduced GDP.

Strategic Geographic Location. Georga s pleased to emerge and serve as a physcal

and poltcal brdge connectng European and Western markets to the vast Caspan/

Central Asan potental, through an ongong mplementaton o several major energy

and transport projects. Four exstng sea ports, upgraded ralway nrastructure, three

nternatonal arports and a hghway o nternatonal standards passng rom the east-

ern border o Georga to the Black Sea, are creatng the astest transt opportunty or

goods rom Central Asa to Europe, and vce versa.

Low Taxes. Only sx taxes are let n Georga, at low rates. Tax ree regmes may also

be establshed here. Low tax rates together wth the tax exemptons make Georga

Ofcial name: GeorgaLocal name: SakartveloLocation & Size: Georga s stuated

at the crossroads o Europe and AsaAbout the sze o Swtzerland t occupes 69,700 sq. km betweenthe Black and Caspan Seas. It borders Turkey, Russa, Armena, and AzerbaianGovernment: Presdental Parlamentary DemocracyLanguage: Georgan, whch s over 2,000 years old and has ts own alphabetPopulation: 4.4 mllonCapital: Tbls, 1.2 mllon


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one o the most attractve tax jursdctons n the world. Currently Georga has estab-

lshed double tax treates wth a number o countes, and s plannng to extend ths lst

annually.

Benefcial Tax Regimes. Georgan tax legslaton consders these benefts to be

unque opportuntes, and extends optons to manuacturers to nvest under the ol-

lowng Tax Free Regmes:

Free Industrial Zones

The Law o Georga on Free Industral Zones and the Tax Code o Georga gve manu-

acturers a unque opportunty to process, produce and export goods wth a mnmum

tax burden. Wth Georgan Free Trade Agreements, one can export goods ree o

trade barrers to global markets consstng o over 300 mllon consumers. Thousands

o goods can be exported rom Georga to the European Unon (the EU) market, ree

o trade barrers under the GSP+ arrangements.

Free Warehouse Company

Georgas goal to provde the shortest and astest transt route between Europe and

Central Asa, s also ensured by relevant legslaton. The Free Warehouse Company,

rom a taxaton perspectve, s desgned as an ntegral logstcal unt or nternatonal

transt companes. The benefts nclude:

Exempton rom corporate ncome tax appled to ncome receved rom re-exportng

goods rom ree warehouses va the Free Warehouse Company;

Exempton rom VAT on the supply o goods by a Free Warehouse Company to a

VAT payer n a ree warehouse.

The Free Warehouse Company categorzaton can be eectvely used by nternatonal

cargo companes, large regonal network dstrbutors, and any stakeholder desrng to

transport goods rom Central Asa to global economc markets, or vce versa, n the

astest and least costly way.

International Financial Company

Georgan tax legslaton oers another unque opportunty to serve oshore compa-

nes n the most efcent and least costly way. Internatonal Fnancal Company, a f-nancal nsttuton establshed n accordance wth Georgan tax legslaton, carres out

most o ts servces wth partes outsde o Georga. Internatonal Fnancal Company

s not requred to obtan a lcense rom the Natonal Bank o Georga. The actvtes o

Internatonal Fnancal Companes are tax exempt. Corporate ncome tax exemptons

apply to:

Profts receved rom fnancal servces provded by an Internatonal Fnancal

Company;

Gans rom sale o securtes ssued by an Internatonal Fnancal Company; Dvdends pad by an Internatonal Fnancal Company.


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Busnesses nvolved n the ollowng actvtes can eectvely use the status and prv-

leges o an Internatonal Fnancal Company:

Wealth management;

Asset management;

Fnancal ntermedaton actvtes; Other smlar actvtes.

Preerential Trade Regimes. All the above mentoned benefts are leveraged wth

Georgas preerental trade regmes wth ts major tradng partner countres. Georga

benefts rom Most Favoured Naton Regme (MFNR) wth WTO members, and n ad-

dton rom GSP wth the USA, Canada, Swtzerland and Japan. Georga s benefcary

o a GSP+ tradng regme wth Turkey and the EU. Georga expects to enter nto the

Free Trade Agreement wth the EU n the near uture.

Liberal Labour Code. Georga s a member o the Internatonal Labour Organzatonand has one o the most lberal labour codes n the world. Ths guarantees complete

reedom o employers and employees to contract.

Simplifed Licensing Procedures. The number o lcences and permts requred n

Georga are at mnmum, and rules or obtanng them are smple.

Dynamic Banking Sector. In lght o the recent global fnancal crses t became obv-

ous that Georga has a strong and ast growng bankng sector. Many banks try to lst

ther shares on recognzed oregn stock exchanges, whch contrbutes even urther

to the sector development.Corruption-Free Environment. The corrupton level has sgnfcantly decreased n

Georga durng recent years; however, the Government o Georga contnues to mple-

ment ant-corrupton measures to reduce t even urther.

New Tax Code. A new Tax Code comes nto orce startng 1 January 2011. It s a un-

fed document o the old tax and customs codes, the latter wll be abolshed rom ths

pont orward. The new Tax Code ams to ncrease confdence towards the Georgan

tax system and enhance trust n the Georgan tax authortes, by mprovng commun-

caton between taxpayers and the tax authortes, by protectng the taxpayers rghts,by makng admnstraton more efcent, and by harmonzng the Georgan laws wth

the best nternatonal tax practces and EU drectves.

The new Tax Code oers low tax rates on exstng ew taxes, or total exempton.

Wthholdng taxes on nterest and dvdends wll be annulled by 2014. Indvduals wll

also beneft by 2014 rom the gradually reduced personal ncome tax rate decreasng

to 15%. Mcro and Small Busness status shall reduce overall admnstratve and tax

burden on ndvdual taxpayers.

The smplfed rules or obtanng a resdency status o Georga s an opportunty orhgh net worth ndvduals, as they can become Georgan resdents wthout actual

presence n Georga.


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Extended flng perods, automatc reunds, and smplfed taxaton on mports

comprse the constantly expandng lst o benefts oered to taxpayers. Income and

gan receved rom lsted securtes and Government bonds have been exempted

rom taxaton or both corporate and ndvdual taxpayers. Noteworthy, that Georga

already started convergence to European tax standards, n that t has recognzed the

techncal regulatons o the Organzaton or Economc Cooperaton and Development(OECD), and has ntroduced the generally accepted transer prcng rules wthn the

new Tax Code. Ths act wll consequently promote the development o the busness

envronment and cross-border tradng.

The tax admnstraton system has been smplfed and advanced, oerng a wde

range o E-servces to taxpayers. Communcaton between a taxpayer and the tax

authortes wll be mproved by the newly ntroduced Advance Tax Rulng, Prvate Tax

Agent, and Tax Deal mechansms.

The new uncton o a Tax Ombudsman secures the protecton o taxpayers rghtsand takes the responsblty to acltate a healthy tax envronment n Georga, n ths

respect.


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Table o Contents

Abbreviations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

1. Tax Rates at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

1.1. Standard Tax Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

1.2. Tax Rates or an International Financial Company . . . . . . . . . . . . . . . . 11

1.3. Tax Rates or a Free Warehouse Company . . . . . . . . . . . . . . . . . . . . . . 12

1.4. Tax Rates or a Free Industrial Zone Company . . . . . . . . . . . . . . . . . . . 12

2. Individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

2.1. Personal Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

2.1.1. General Prncples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

2.1.2. Hgh Net Worth Indvduals Becomng Resdents o Georga . 14

2.1.3. Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

2.1.4. Deductble Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152.1.5. Allowances and Thresholds. . . . . . . . . . . . . . . . . . . . . . . . . . . 15

2.1.6. Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

2.1.7. Exemptons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

2.1.8. Complance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

2.2. Property Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

2.2.1. Taxable Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

2.2.2. Tax Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

2.2.3. Exemptons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

2.2.4. Complance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192.3. Special Tax Regimes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19


2.3.2. Mcro Busness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

2.3.3. Small Busness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

2.4. Partnerships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

3. Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

3.1. Corporate Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23


3.1.2. Tax Base. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233.1.3. Exemptons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

3.1.4. Deductble Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

3.1.5. Non-Deductble Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

3.1.6. Deprecaton / Amortzaton . . . . . . . . . . . . . . . . . . . . . . . . . . 26

3.1.7. Taxaton o Dvdends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

3.1.8. Taxaton o Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

3.1.9. Taxaton o Royaltes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

3.1.10. Taxaton o Rental Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

3.1.11. Thn Captalsaton Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

3.1.12. Related Party Transactons . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

3.1.13. Transer Prcng Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30


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3.1.14. Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

3.1.15. Foregn Tax Rele . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

3.1.16. Complance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

3.1.17. Corporate Income Taxaton or Foregn Companes . . . . . . . . 31

3.1.17.1. General Prncples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

3.1.17.2. Permanent Establshment. . . . . . . . . . . . . . . . . . . . . . . 323.1.17.3. Wthholdng Taxaton. . . . . . . . . . . . . . . . . . . . . . . . . . . 33

3.2. Value Added Tax (VAT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

3.2.1. Taxable Transactons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

3.2.2. Place o Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

3.2.3. Invocng. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

3.2.4. VAT Regstraton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

3.2.5. VAT Deregstraton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

3.2.6. VAT Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

3.2.7. Exempt Supples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363.2.8. VAT Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

3.2.9. Specal Rule or VAT Taxaton o Import . . . . . . . . . . . . . . . . . 39

3.2.10. Reund o VAT Pad on Goods Purchased by

Ctzens o Foregn Countres. . . . . . . . . . . . . . . . . . . . . . . . . . 39

3.2.11. Reverse-Charge VAT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

3.2.12. Complance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

3.3. Excise Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

3.3.1. Taxpayers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

3.3.2. Taxable Transactons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403.3.3. Tax Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

3.3.4. Exempt Supples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

3.3.5. Invocng. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

3.3.6. Excse Tax Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

3.3.7. Complance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

3.3.8. Excse Stamps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

3.4. Import Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43


3.4.2. Tax Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

3.4.3. Exempt Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

3.5. Property Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

3.5.1. Taxpayers and Taxable Assets. . . . . . . . . . . . . . . . . . . . . . . . . 44

3.5.2. Tax Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

3.5.3. Exemptons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

3.5.4. Complance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

3.6. Benefcial Tax Regimes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

3.6.1. General Prncples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463.6.2. Internatonal Fnancal Company. . . . . . . . . . . . . . . . . . . . . . . 46

3.6.3. Free Warehouse Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48


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3.6.4. Free Industral Zone Company . . . . . . . . . . . . . . . . . . . . . . . . 49

3.6.5. Free Tourst Zone at the Black Sea Shore . . . . . . . . . . . . . . . . 51

4. Tax Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

4.1. Tax Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

4.2. Statute o Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

4.3. Late Payment Interest and Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . 524.4. Filing o Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

4.5. Measures to Ensure Fulflment o Tax Liabilities. . . . . . . . . . . . . . . . . . 53

4.6. Tax Control Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

4.6.1 Current Tax Control Procedures . . . . . . . . . . . . . . . . . . . . . . . 53

4.6.2 Tax Audt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

4.7. Tax Deal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

4.8. Tax Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

4.9. Tax Ombudsman. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

4.10. Advance Tax Ruling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574.11. Private Tax Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

4.12. E-services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

5. Movement o Goods in the Economic Territory o Georgia . . . . . . . . . . . . . . . 59

5.1. State Control Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

5.2. General Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

5.3. Formalization Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

5.4. Tari Value o Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

5.5. Operations on Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

5.6. Import and Export Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625.7. Returned Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

5.8. Simplifed Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

6. Agreements or the Avoidance o Double Taxation . . . . . . . . . . . . . . . . . . . . . 63

7. Establishing a Legal Presence in Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Tax Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Fxed Assets Deprecaton Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Excse Tax Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Double Tax Treaty Wthholdng Tax Rates . . . . . . . . . . . . . . . . . . . . . . . . 70

Illustrations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Tax Problems and Solutons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Case 1: Personal Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Case 2: Property Tax or Indvduals. . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Case 3: Corporate Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Case 4: Value Added Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Case 5: Excse Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77Case 6: Import Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Case 7: Property Tax or Companes. . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79


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Abbreviations

BO Branch Ofce

DRC Dsputes Resoluton Councl under the Mnstry o Fnance o Georga

EU European Unon

EUR Euro

GEL Georgan Lar

GDP Gross Domestc Product

GP General Partnershp

GSP Generalzed System o Preerences

GTA Georgan Tax Authortes

ID Identfcaton Number

IE Indvdual Enterprse

IFC Internatonal Fnancal Corporaton

IFRS Internatonal Fnancal Reportng Standards

JSC Jont Stock Company

LLC Lmted Lablty Company

LP Lmted Partnershp

MFNR Most Favoured Naton Regme

NBG Natonal Bank o Georga

NBV Net Book Value

OECD Organzaton or Economc Cooperaton and Development

PE Permanent Establshment

RCVAT Reverse Charge Value Added Tax

RS Revenue Servces

TCG Tax Code o Georga

USA Unted States o Amerca

USD Unted States Dollar

VAT Value Added Tax

WTO World Trade Organzaton


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1. Tax Rates at a Glance

There are only sx taxes n Georga, o whch fve (Personal Income Tax, Corporate

Income Tax, Value Added Tax, Excse Tax, and Import Tax) are state-wde, and one

(Property Tax) s a local tax. There are no captal gans, nhertance, wealth, property

transer, socal, branch remttance, or other taxes mposed n Georga.1.1 Standard Tax Rates

2011 2012 2013 2014

Personal Income Tax 20% 20% 18% 15

Personal Income Tax or Mcro Busness Exempt Exempt Exempt Exempt

Personal Income Tax or Small Busness 3% or 5% 3% or 5% 3% or 5% 3% or 5%

Corporate ncome tax 15%

Wthholdng tax or companes and ndvduals

Dvdends pad to ndvduals and non-resdents 5% (2014 - 0%)

Dvdends pad to resdent companes exempt

Dvdends pad on ree oatng securtes1 exempt

Dvdends pad by Internatonal Fnancal Company exempt

Dvdends pad by Internatonal Company exemptInterest pad 5% (2014 0%)

Interest pad to resdent banks exempt

Interest pad by lcensed fnancal nsttutes exempt

Interest pad on ree oatng securtes exempt

Interests pad by Internatonal Company exempt

Interest pad on debt securtes ssued by Georgan legal

enttes and lsted on a recognzed oregn stock exchange

exempt

Royaltes pad to resdent ndvduals 20% (2014 15%)Rental ncome (excludng fnance lease rentals)

pad to resdent ndvdualsv 20% (2014 15%)

Management ees pad 15%

Payment o ncome rom nternatonal transport

or nternatonal communcatons 10%

Insurance premums pad to non-resdents exempt

Fnance lease ncome pad to non-resdents exempt

Payment o ncome rom ol and gas operatons 4%Payments o other Georgan source ncome to non-resdents

not connected to ther PE n Georga

15%


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Value Added Tax 18%

Excse Tax Vares

Import Tax 0%, 5% or 12%

Property Tax Corporate Up to 1%

Property Tax Indvdual Up to 1%

Property Tax - Land Vares

Other Inormaton

Carry back o losses 0 years

Carry orward o losses

(or companes and ndvdual

entrepreneurs)

5 years or 10 years

(n the latter case the statute o lmtaton

ncreases rom 6 to 11 years)

Carry orward o losses(or Small Busness)

0 years

1.2 Tax Rates or an International Financial Company

Corporate Income Tax (fnancal operatons and/or fnancal ser-

vces, gan rom sale o securtes ssued by non-resdent persons)

exempt

Value Added Tax (fnancal operatons and/or fnancal servces) exempt

Other Inormaton


Carry orward o losses 0 years

. Dvdends wthholdng tax rate wll be reduced rom 5% to 3% by 1 January 2013 and wll be annulled

startng 1 January 2014

. Interest wthholdng tax rate wll be annulled startng 1 January 2014

. Royaltes wthholdng tax rate wll be reduced rom 20% to 18% by 1 January 2013 and urther to 15%

startng 1 January 2014

v. Rental ncome wthholdng tax rate wll be reduced rom 20% to 18% by 1 January 2013 and urther to15% startng 1 January 2014

1 Debt or equty securtes lsted on stock exchange wth ree oat rate n excess o 25% as o 31 December

o the current and precedng reportng year, pursuant to the normaton provded by the ssuer o these

securtes to the stock exchange


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1.3 Tax Rates or a Free Warehouse Company

Corporate Income Tax (re-exportng o goods rom Free Warehouse) exempt

Value Added Tax (supply o goods to a VAT payer n Free Warehouse) exempt

Import Tax exempt

Other Inormaton



1.4 Tax Rates or a Free Industrial Zone Company

Corporate Income Tax exempt

Value Added Tax (supply wthn Free Industral Zone) exempt

Import Tax (goods produced n Free Industral Zone) exempt

Property Tax (ncludng on land) exempt

Other Inormaton



. Corporate ncome tax exempton apples only to a Free Industral Zone Company that has obtaned thestatus o an Internatonal Company


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2. Individuals

2.1 Personal Income Tax

2.1.1 General Principles

Indvduals, who are resdent n Georga or tax purposes, pay Georgan personal

ncome tax on ther worldwde ncome under Georgan tax law. However, as outlnedbelow (see secton Exemptons), ncome receved rom oregn sources s exempt

rom personal ncome taxaton.

Indvduals who are not resdent n Georga or tax purposes are subject to Georgan

tax only on ncome receved rom the source n Georga.

Indvduals are consdered resdent n Georga or tax purposes they:

are actually present n Georga or 183 or more cumulatve days n any perod o

12 consecutve calendar months endng n the tax year;

are n Georgan State Servce abroad durng the tax year.

The tme o actual presence consttutes the tme beng n Georga, and the tme spent

abroad, or medcal treatment, vacaton, busness trp and/or educatonal purposes.

Indvduals n the above categores are not resdent n Georga or tax purposes they:

have dplomatc or consulate status or are amly members o such ndvduals ;

are not ctzens o Georga, but are sta members o an nternatonal not-or-proft

entty under Georgan nternatonal agreements, or n the State Servce o a oregn

country, and/or are amly members o such ndvduals;

are movng rom one oregn country to another through the terrtory o Georga;

resde n Georga or medcal treatment or vacaton/toursm purposes only.

The status o resdency or non-resdency s determned or each tax year. Days based

on whch an ndvdual was qualfed as a tax resdent or the prevous tax year are not

taken nto account n determnng resdency or the current tax year.

The tax year s a calendar year.

Tax rate s a at 20% that wll be reduced to 18% startng 1 January 2013, and

urther to 15% startng 1 January 2014. For wthholdng taxaton rates or ndvduals

see secton Tax Rates at a Glance. Those rates are appled on ncome receved rom

sources n Georga wthout expense deducton.

Indvduals startng economc actvtes are requred to regster wth the GTA pror

ther start-up and to obtan a Tax ID.

Georgan ctzen non-entrepreneur ndvduals may use Personal ID whle declarng

and payng taxes wthout pror regstraton. They are regstered or tax, based on the

normaton provded n fled tax returns and/or tax payment orders presented to the

bank. However, oregn ctzen non-entrepreneur ndvduals have to regster wth the

GTA pror to flng ther annual personal ncome tax returns, and obtan a Tax ID.


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2.1.2 High Net Worth Individuals Becoming Residents of Georgia

There s a specal rule establshed or hgh net worth ndvduals to become resdents

o Georga, wthout satsyng the above outlned general resdency crtera.

A hgh net worth ndvdual s an ndvdual that holds property wth a value n

excess o GEL 3 mllon, or who has receved an annual ncome n excess o GEL 200

000, or the last 3 years.

A hgh net worth ndvdual can become a tax resdent o Georga :

he/she holds a resdence permt or a local Personal ID card; or

he/she proves that hs/her Georgan source ncome amounts to GEL 25 000 or

more per tax year.

Provded that the above condtons hold, tax resdency or a tax year s granted to

hgh net worth ndvduals by the Mnster o Fnance o Georga (the Mnster)

wthn 9 days o submsson o applcaton. No actual presence n Georga s requred.

2.1.3 Income

For Georgan personal ncome tax purposes, ncome s dvded nto the ollowng

categores:

Income rom employment;

Income rom economc actvtes not related to employment;

Other ncome not related to employment and economc actvtes.

Income rom Employment

Taxable ncome rom employment ncludes all remuneraton receved rom employ-

ment, ncludng benefts n knd (non-monetary benefts). Non-monetary benefts are

ncluded n gross ncome at ther market prce, reduced by any payments made by

employee to employer or those benefts.

Taxable benefts may nclude:

Prvate use o employer owned or provded car;

Interest ree or low nterest loan rom the employer;

Recept o goods or servces rom the employer;

Recept o housng and rental allowances rom the employer;

Rembursement o personal expenses by the employer;

Le or health nsurance plans pad by the employer or the employee;

Busness trp allowances pad by the employer n excess o the statutory lmts.

Remuneraton and benefts pad by a Georgan employer are generally taxed through

perodc (monthly or quarterly) payroll wthholdng taxaton.


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Income rom Economic Activities

Income rom economc actvtes nclude:

Income receved rom supply o goods/servces;

Realzed captal gans (unrealzed gan s not subject to taxaton);

Income receved as a result o lmtng economc actvtes or close o an enterprse;

Income receved rom sale o fxed assets;

Dvdends, royalty and nterest ncome except or nterest receved by ndvduals on

the unds exstng on accounts at the banks;

Rental and leasng ncome;

Beneft receved as a result o debt wrte o, etc.

In case o gratutous supples the ncome s measured at market prces.

Other Income not related to Employment and Economic Activities

Other ncome ncludes any type o ncome not classfed as ether ncome rom em-

ployment or ncome rom economc actvtes. Ths may nclude any property or ben-

eft receved n-knd rom other partes. Such benefts are ncluded n gross ncome at

ther market prces, reduced by any payments made by the recpent to other partes

or those property or benefts, smlarly to n-knd benefts receved rom employer.

2.1.4 Deductible Expenses

To arrve at a tax base, taxpayers are allowed to deduct all expenses contrbutng

to generaton o taxable ncome except or non-deductble or partally deductble

expenses. Busness deductons are structured smlarly as deductons or the purpose

o corporate ncome tax (see secton Corporate Income Tax).

Expenses ncurred or the recept o employment ncome cannot be deducted rom an

ndvduals taxable ncome.

2.1.5 Allowances and Thresholds

For personal ncome tax there are no personal allowances. No martal status, depen-

dency or other types o allowances are taken nto consderaton when calculatng thetaxable ncome o an ndvdual. Smlarly, there are no threshold lmts, e.g. thresh-

olds or non-taxable ncome, etc.

2.1.6 Losses

Indvdual entrepreneurs (ndvduals who are engaged n regular tradng/commer-

cal actvtes) may carry orward operatng losses or up to 5 years aganst uture

operatng profts. A taxpayer can elect a 10-year loss carry orward perod, where the

statute o lmtaton s ncreased rom 6 to 11 years. A 10-year carry orward perod

can stll be changed to a 5-year carry orward perod when the losses carred orwardare used up.

Indvdual entrepreneurs can carry orward captal losses up to 5 years (or 10 years)

only aganst ncome rom a smlar busness actvty.


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Non-entrepreneur ndvduals can oset losses rom sale o assets aganst gans re-

ceved, rom sale o the same type o assets n the current tax year. No carry orward

o the loss s possble.

Losses may not be carred back.

2.1.7 Exemptions

Income exempted rom personal ncome tax ncludes:

Gan receved rom dsposal o apartment (house) together wth the attached land

plot held or more than 2 years;

Gan receved rom dsposal o assets held or more than 2 years and not used or

economc actvtes;

Gan receved rom dsposal o vehcles held or more than 6 months;

Gan receved on transer o real estate n exchange or a partners share held or

more than 2 years;

Grants, state stpends, state compensatons, state scholarshps, etc;

Almony;

Property nherted or gted by I and II level legatees;

Property wth the value up to GEL 1,000 gted, except or property gted by

employer;

Gan receved rom sale o securtes ssued by Internatonal Fnancal Company;

Gan receved rom the sale o ree oatng securtes;

Georgan source ncome o a non-resdent receved rom nsurance, re-nsurance

and fnance lease servces, not related to hs/her PE n Georga;

Interest ncome and gan receved rom the sale o Government and/or NBG bonds,

and nterest accrued on accounts wth the NBG;

Income (ncludng benefts) o resdent ndvduals receved rom oregn sources.

Income receved by non-resdent ndvduals rom employment n the terrtory

o Georga, up to 30 calendar days throughout a tax year pad by non-resdentemployers, provded that salary expenses are not attrbutable to the PEs o non-

resdents n Georga, rrespectve o whether the payment s made by the PE or not;

Income receved by non-resdent ndvduals rom employment at oregn dplomatc

and equal representatve ofces;

Up to 1 January 2014 ncome receved rom ntal supply o agrcultural products

beore ther reproducton (.e. change o code) and salary payments to employees,

such ncome does not exceed GEL 200,000 durng a calendar year;

Lottery wnnngs up to GEL 1,000;

Income receved rom transer o property by the partnershp to ts members pro-

vded that by the moment o the transer () the members o the partnershp are


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ndvduals only; () the members have not changed snce the establshment o the

partnershp and () the partnershp s not a VAT payer (or taxaton o Partner-

shps see secton Partnershps).

2.1.8 Compliance

All ndvduals who receved ncome n Georga not taxed at source must fle an annual

personal ncome tax return ether personally, electroncally (see secton E-servces)

or send t va nsured mal and pay tax ether va bank or e-payng system (see secton

E-servces) by 1st Aprl o the year ollowng a reportng year. A tax return should

be submtted to the GTA n accordance wth the ndvduals place o resdence.

The submsson date can be extended or up to a urther three months the GTA

are notfed beore the deadlne expres and the ndvdual has made the advance tax

payments (or has no oblgaton to make advance tax payments) due or the current

tax year (see secton Flng o Tax Returns). Personal ncome tax return can be

amended wthn the statute o lmtaton (see secton Statute o Lmtaton).

Personal ncome tax s pad drectly by the lable taxpayer. Alternatvely, the tax s

wthheld by the payer o the ncome (.e. tax agent) except or non-entrepreneur

ndvduals, at the moment o payment or the ollowng types o ncome: employment

(salary) ncome, nterest ncome, dvdend ncome, royalty ncome, operatng lease

ncome, busness ncome o ndvduals not regstered or tax, gamblng wnnngs, etc

(or the wthholdng taxaton rates see secton Tax Rates at a Glance).

A Free Industral Zone Company s exempt rom the oblgaton to wthhold tax at the

source on salary payments to resdent ndvduals (or taxaton o Free Industral ZoneCompany, see secton Benefcal Tax Regmes).

A non-resdent person makng salary payments that are not attrbutable to ts PE n

Georga s also exempt rom the oblgaton to wthhold tax at the source o payment.

In ths case the employee hmsel/hersel may calculate the tax lablty, fle the annual

tax return, and pay tax.

Tax agents who wthhold personal ncome tax submt monthly returns. Certan tax

agents submt quarterly returns accordng to the resoluton o the Government o

Georga by the 15th o a month ollowng the reportng perod, showng ncome padand taxes wthheld n ths reportng perod. From 1 January 2013 all tax agents

wll fle quarterly tax returns. Further, a tax agent fles an annual orm ncludng the

normaton about the ncome recpents, ncome pad, and taxes wthheld wthn 30

calendar days ollowng the tax year.

Indvduals engaged n economc actvtes n Georga must make advance personal

ncome tax payments. Each payment s equal to 25% o the ncome tax lablty or the

precedng tax year. Due dates or the payments are 15 May, 15 July, 15 September

and 15 December. Advance payments o tax are appled aganst the ncome tax labl-

ty or the current tax year. Balancng payment should be made beore 1 Aprl o the

subsequent tax year. I total advance payments exceed the tax due or the tax year,

the excess s appled aganst any outstandng labltes or other taxes, or s reunded.


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Taxpayers who dd not have taxable ncome durng the prevous tax year are not

requred to make advance tax payments durng the current tax year.

Indvduals who are not oblged to submt a personal ncome tax return may do so

voluntarly to clam overpad personal ncome tax.

2.2 Property Tax

2.2.1 Taxable Assets

Taxable assets o ndvduals nclude owned mmovable property (ncludng construc-

ton n progress, buldngs or ther parts), yachts, motor boats, planes, helcopters and

assets receved rom non-resdent under fnance lease.

Indvduals conductng economc actvtes n Georga are subject to property tax

on fxed assets, non-assembled equpment, ntangble assets lsted on ther balance

sheet, and property leased out under fnance lease.

2.2.2 Tax Rates

Annual property tax rate or an ndvdual on taxable property (excludng land) vares

accordng to the annual amly ncome o the ndvdual.

For property taxaton purposes annual amly ncome comprses all ncome ncludng

benefts and exempt ncome, but excludng:

value o property nherted, gted or receved upon dvorce rom amly members;

gan receved rom dsposal o an apartment (house) held or more than 2 years;

Annual ncome o Georgan ctzen, but not a tax resdent o Georga, wll ncludencome receved rom Georgan sources only.

The annual property tax rates are appled to the market values o taxable property

and are set as ollows:

Annual Family Income Property Tax Rate

Exceeding GEL Not Exceeding GEL %

100 000

100 000 0.05 to 0.20.8 to 1

As property tax s a local tax, the exact rate wthn the above range s fxed by the

local government where the property s located.

Annual property tax rate or agrcultural land vares accordng to the admnstratve

unt and the land qualty. The annual base tax rate per 1 hectare vares rom GEL 1.5

to GEL 100. The exact rate or land s fxed by the local government up to 150 % o

the above annual base tax rate.

The annual base tax rate or non-agrcultural land s GEL 0.24 per 1 square meter,whch s urther adjusted by the terrtoral coefcent up to 1.5 fxed by the local

government.


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2.2.3 Exemptions

Certan types o assets, except or land plots transerred under operatng lease, usu-

ruct or any smlar arrangement, are exempt rom property tax, such as:

Property (except or land) belongng to an ndvdual wth annual amly ncome up

to GEL 40,000 or a year precedng the current calendar year;

Porton o co-owned property (.e. land plot) at the apartment house wth an area

up to 50 square meters;

Agrcultural land plots receved by ndvduals and requrng cultvaton or 5 years;

Agrcultural land plots up to 5 hectares n the ownershp o an ndvdual as o

1 March 2004;

Property located n Free Industral Zones;

Bologcal assets (anmals and plants), etc.

2.2.4 Compliance

Indvduals submt annual property tax returns ether personally, electroncally (see

secton E-servces) or send t va nsured mal no later than 1st May o a calendar

year. The submsson date can be extended or up to a urther three months the

GTA are notfed beore the deadlne expres (see secton Flng o Tax Returns).

Property tax returns can be amended wthn the statute o lmtaton (see secton

Statute o Lmtaton).

The data reected n the tax return on taxable property s accordng to the precedng

tax year and on taxable land - accordng to the current tax year.

Indvduals pay property tax ether va bank or e-payng system (see secton E-servc-

es) not later than 15 November o a calendar year.

Flng o property tax return s not requred :

an ndvdual has no tax lablty n the current tax year. I an ndvdual was a prop-

erty tax payer n the prevous perods, than he/she must noty the GTA about the

decson o not flng a tax return pror to 15 May o a current tax year;

the quantty and qualty o taxable objects has not changed snce flng o the taxreturn, and accrual o tax n the prevous tax year.

2.3 Special Tax Regimes


Indvduals may obtan a specal status o Mcro Busness and ndvdual entrepreneurs

the status o Small Busness. Upon obtanng these statuses they become elgble

or certan smplfed accountng rules and tax exemptons.

The rules o assgnng the status o Mcro Busness and Small Busness and ssuanceo the certfcates, as well as the rules or the cancellaton o the mentoned statuses,

are establshed by the Mnster.


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2.3.2 Micro Business

Granting and Cancellation o the Status

Based on the applcaton fled to the GTA accordng to the place o regstraton, the

status o Mcro Busness can be assgned to an ndvdual who:

conducts economc actvtes ndependently wthout hrng employees; receves annual gross ncome up to GEL 30 000;

mantans nventory balance up to GEL 45 000;

undertakes actvtes that are not banned or Mcro Busness as defned by the

Government.

The status o Mcro Busness s cancelled or the current tax year any o the above

requrements or Mcro Busness are volated. Further, the status o Mcro Busness s

cancelled an ndvdual wth a status o Mcro Busness apples to the GTA or cancel-

laton o the status o Mcro Busness or assgnng the status o Small Busness.

Wthn 30 days rom the cancellaton o the status o Mcro Busness the ncome o an

ndvdual accrued by the moment o cancellaton shall be taxed:

accordng to the rules applcable to taxaton o Small Busness, the status o Small

Busness s obtaned;

accordng to the rules applcable to standard personal ncome taxaton.

Tax Benefts and Compliance

Mcro Busness s exempt rom personal ncome taxaton. Mcro Busness shall keep allprmary tax documentaton.

The rules o tax complance or Mcro Busness are same as or ndvduals wth the

excepton o Mcro Busness operatng n the terrtory o the Specal Trade Zone. The

latter s exempt rom oblgaton to fle personal ncome tax return and pay tax, but

the Specal Trade Zone Organzer1 bears all tax complance oblgatons (except or

property tax complance) on behal o a Mcro Busness.

An ndvdual fles a personal ncome tax return and pays tax accrued by the moment

o cancellaton o the status o Mcro Busness wthn 30 calendar days rom cancella-ton o the status .

2.3.3 Small Business

Granting and Cancellation o the Status

Based on the applcaton fled to the GTA accordng to the place o regstraton, the

status o Small Busness can be assgned to an ndvdual entrepreneur who:

receves annual gross ncome rom economc actvtes up to GEL 100 000;

mantans an nventory balance up to GEL 150 000;

1 A legal entty wth a status o Specal Trade Zone rentng space to ndvduals ncludng Small and Mcro

Busnesses on the terrtory o the zone.


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s not a regstered VAT payer;

undertakes actvtes that are not banned or Small Busness as defned by the

Government;

uses a cash machne and has not been penalzed or not usng the latter more than

3 tmes durng a calendar year.

The status o Small Busness s cancelled or the current tax year any o the above

requrements are volated. Further, the status o Small Busness s cancelled an nd-

vdual entrepreneur apples to the GTA or cancellaton the status o Small Busness.

An ndvdual entrepreneur may re-obtan the status or the year ollowng the 12

calendar months rom cancellaton o the status, the ndvdual entrepreneur:

has receved total gross ncome up to GEL 100 000 durng the 12 calendar months

ollowng the cancellaton the status; and

s not a regstered VAT payer n the year ollowng the 12 calendar months rom thecancellaton o the status.

Tax Benefts and Compliance

A Small Busness s lable or personal ncome tax at a 5% rate o total gross ncome.

The applcable personal ncome tax rate urther reduces to 3% the Small Busness:

has documentary proo o expenses (except or salary expenses) related to the

recept o gross ncome n the amount o 60% o gross ncome; and/or

conducts actvtes only n the terrtory o the Specal Trade Zone.

Small Busness may beneft wth the ollowng smplfed accountng rules:

keep records o expenses only n the orm o a specal regster (ncludng electronc

ormats) accordng to the rules defned by the Mnster;

keep all prmary tax documentaton.

However, the loss cannot be carred orward.

Upon cancellaton o the status o a Small Busness an ndvdual entrepreneur:

may record the balance o nventory n the respectve document at ts market prcebut only up to GEL 30,000. Ths document s a proo o nventory expenses;

shall nclude the value o the balance o nventory n the gross ncome;

may credt the VAT on the balance o nventory regsters or VAT and the docu-

ments that shall accompany the VAT recovery exst.

The rules o tax complance or Small Busness are the same as or ndvdual entre-

preneurs, wth the excepton o a Small Busness operatng n the terrtory o the Spe-

cal Trade Zone. As or Mcro Busness, the tax oblgatons (except or property tax

complance) o a Small Busness operatng n the terrtory o ths Zone, wll be ulflledby the Specal Trade Zone Organzer.


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An ndvdual entrepreneur fles a personal ncome tax return and pays tax accrued

up to the moment o cancellaton o the status o the Small Busness, wthn 30 calen-

dar days rom cancellaton o the status.

A Small Busness s lable to make personal ncome tax advance payments by the

15th o the month ollowng each quarter. Further, a Small Busness has no oblgaton

to wthhold taxes on salary payments n an amount not exceedng 25 % o ts grossncome and on compensaton payments or receved servces.

2.4 Partnerships

In the case o a jont ownershp and/or a jont actvty arrangement that nvolves more

than one person, but wthout the establshment o a legal person, proft shall be at-

trbuted to members on a pro rata bass accordng to ther share porton. Such proft

shall be ncluded nto ther gross ncome and taxed respectvely. Ths shall be done

even the Partnershp does not dstrbute ncome receved durng a tax year to ts

members.

The Partnershp s lable to wthhold tax at the source o payment when dstrbutng

ncome to the members not regstered or tax.

The loss ncurred by the Partnershp s attrbutable to ts members on a pro rata

bass n accordance to ther share porton. The mentoned loss cannot be deducted

rom the gross ncome o the member. It can be deducted only rom a members part

o taxable ncome n the Partnershp n the ollowng years. The loss can be carred

orward or up to 5 or 10 years.

The takng o the Partnershps property nto prvate ownershp by a member, or

recept o servces, s consdered as supply o goods/servces by the Partnershp at

market prces (For detals o VAT taxaton o Partnershps, see secton Value Added

Tax).

The Partnershp s lable to fle tax returns beore 1 Aprl o the year ollowng the

reportng year, ndcatng normaton on the amount o taxable ncome (loss) and ts

dstrbuton to the members.


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3. Companies

3.1 Corporate Income Tax


A company s treated as a Georgan company t s ether ncorporated or has ts

place o management n Georga. Georgan companes are lable to Georgan cor-

porate ncome tax on ther worldwde ncome, subject to double taxaton or other

nternatonal treaty reles. In general, any eectve nternatonal agreement has

precedence over domestc Georgan legslaton, ncludng the TCG.

Foregn companes are subject to tax on Georgan source ncome only, subject to

double taxaton treaty rele. A oregn company, carryng out busness actvtes

through a PE n Georga, generally has to assume the same tax oblgaton as a Geor-

gan company (see secton Corporate Income Tax or Foregn Companes).

Consoldated tax returns cannot be fled under Georgan legslaton, and each group

member company must report ts taxes separately. Branches and other unts o

Georgan companes do not report and pay corporate ncome tax ndependently, but

consoldate ther taxable ncome (or loss) wth the man company, whch pays the

total corporate ncome tax.

The tax perod or corporate ncome tax s a calendar year.

Tax rate s a at 15%. See rates or wthholdng taxaton or companes n secton Tax

Rates at a Glance.

Companes are requred to obtan a tax regstraton together wth a legal regstraton

at the Entrepreneural and Non-Entrepreneural (Non-Commercal) Regstry o Legal

Persons, whch s a Publc Law Legal Entty the Natonal Agency o Publc Regster

under the Mnstry o Justce o Georga (the Agency).

3.1.2 Tax Base

Income subject to corporate ncome tax (.e. tax base) s currently computed on the

bass o IFRS, modfed by certan tax adjustments.

The tax base ncludes the ollowng: tradng ncome, captal gans, ncome romfnancal actvtes, dvdend ncome, gratutously receved goods and servces, etc.

Income receved n oregn currency s converted nto GEL at the daly exchange rate

publshed by the NBG or the date o recept o the ncome.

Generally, a deducton s allowed or all documented expendtures contrbutng to the

generaton o taxable ncome, except or specal non-deductble or partally deduct-

ble expenses. The Mnster s authorsed to defne specal cases when documentng o

the expendture s not oblgatory.

Realsed captal gans are ncluded n taxable ncome and are subject to tax at theregular corporate ncome tax rate. Captal losses together wth other losses can be

carred orward or up to 5 or 10 years aganst uture profts (see secton Losses).


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3.1.3 Exemptions

Income exempt rom corporate ncome tax ncludes:

Income o budgetary, nternatonal and chartable not-or-proft enttes, except or

ncome receved rom economc actvty;

Grants, membershp ees, and donatons receved by a not-or-proft entty; Porton o ncome o medcal establshments (rrespectve o legal orm) receved

rom medcal actvtes whch has been renvested (rehabltaton o the establsh-

ment, provson or techncal base);

Up to 1 January 2014 ncome receved rom ntal supply o agrcultural products

beore ther reproducton (.e. change o code), such ncome does not exceed GEL

200,000 durng a calendar year;

Up to 1 January 2014 ncome ganed rom agrcultural actvtes renvested n

agrculture;

Income o an Internatonal Fnancal Company receved rom perormance o fnan-

cal operatons and/or provson o fnancal servces and/or sale o securtes ssued

by non-resdent persons (or taxaton o Internatonal Fnancal Company see sec-

ton Benefcal Tax Regmes);

Gan receved rom sale o securtes ssued by an Internatonal Fnancal Company;

Gan receved rom sale o ree oatng securtes;

Georgan source ncome o a non-resdent receved rom nsurance, re-nsurance

and leasng servces not related wth ts PE n Georga;

Interest ncome and gan receved rom sale o the Government and/or the NBG

bonds and nterest accrued on accounts wth the NBG;

Income o a Free Warehouse Company receved rom re-exportng o goods rom

Free Warehouse (or taxaton o Free Warehouse Company see secton Benefcal

Tax Regmes);

Income o an Internatonal Company receved rom the supply o goods and ser-

vces to other Internatonal Companes n the terrtory o a Free Industral Zone oroutsde the economc terrtory o Georga (or taxaton o Internatonal Company

see secton Benefcal Tax Regmes);

Income o an nvestment und receved rom supply o fnancal nstruments,

perormance o fnancal operatons and/or provson o fnancal servces, the

nvestment und s an Internatonal Fnancal Company;

Income receved rom supply outsde Georga o IT produced by a Vrtual Zone

Person1.

1 A legal entty havng obtaned a status o Vrtual Zone Person and conductng IT actvtes


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3.1.4 Deductible Expenses

Generally, tax-deductble expenses are those that the taxpayer ncurs to contrbute to

the generaton o ts taxable ncome. Documentaton, such as recepts and nvoces,

must be kept to support the tax deductblty o the expenses, except or certan cases

defned by the Mnster where no documentaton s requred. For tax audt purposes, a

Georgan translaton o the documents may be requred.

Tax-deductble expenses nclude the ollowng:

Cost o goods sold;

Consumables, ncludng uel and lubrcants;

Salary expenses;

Expenses or employee busness trps;

Advertsng expenses;

Interest pad and/or payable, ncludng nterest on oregn loans, up to an annual

lmt o nterest rate establshed by the Mnster and pro rated or respectve perod;

deducton o nterest s urther lmted or those companes n whch at least 20%

o shares s owned by enttes exempt rom corporate ncome taxaton or resdents

o low tax jursdctons/oshore countres; thn captalzaton rules may apply n

certan cases (see secton Thn Captalzaton Rules);

Royaltes and servce ees ncurred;

Bad debts, they have been ncluded n taxable ncome o the prevous perods and

then subsequently wrtten o n the accounts;

Imparment on outdated or deectve nventory tems (mparment on fxed assets s

not deductble), provded that pror approval rom the GTA has been obtaned, etc.

Further to the above, banks may deduct provsons on loans wthn the lmts estab-

lshed by the NBG. Insurance companes may deduct () the ncrease n ncurred but

not reported reserves created accordng to the rules establshed by the NBG, and ()

net clams ncurred over a tax year, excludng ncome rom regresson and subroga-

ton.

A Vrtual Zone Person may deduct the expenses related to the recept o gross

ncome rom supplyng IT servces n and outsde Georga n proporton to the ncome

receved rom supples made n Georga n ts total gross ncome.

A taxpayer may deduct ncome rom recept o gratutous supples o goods/servces

rom ts gross ncome n a tax year when these goods/servces where used n eco-

nomc actvtes.

3.1.5 Non-Deductible Expenses

The tax law restrcts deductons o certan expenses (qualfed accordng to the ac-countng legslaton n Georga IFRS). Generally, these are expenses regarded as not

related to generaton o taxable ncome. The ollowng expenses are nondeductble:


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Corporate ncome tax;

Entertanment expenses;

Representaton expenses n excess o 1% o taxable ncome beore deductons;

Contrbutons to non-proft charty unds n excess o 10% o taxable ncome beore

deducton o chartable expenses; Expenses related to the generaton o ncome exempt rom corporate ncome tax;

Expenses on goods/servces that are outsde the scope o corporate ncome taxa-

ton, except or gratutous supples to the state and/or local governments;

Penaltes and late payment nterest pad or payable to the Georgan state budget;

Interest expenses above the establshed lmt and subject to thn captalzaton rules

n certan cases;

Expenses on goods/servces purchased rom Mcro Busness; Fxed asset captal repar expenses n excess o 5% o the balance value o the

correspondng tax deprecaton group o fxed assets at the end o the prevous

tax year (see secton Tax Deprecaton). Ths excess amount o the captal repar

expenses s captalzed and added to the balance value o the correspondng group

o fxed assets.

3.1.6 Depreciation/Amortization

Deprecaton charges or fxed assets used n economc actvtes are deductble or

tax purposes n accordance wth the rates and condtons set out n the Georgan taxlegslaton. The deprecaton method used or corporate ncome tax purposes s the

dmnshng balance method (.e. current deprecaton charges are calculated apply-

ng underlyng deprecaton rate to the net value, reduced by prevous deprecaton

charges, o the respectve fxed assets group).

Tangible fxed assets

Deprecatons are not assessed on land, works o art, museum tems, hstorcal

objects (except or buldngs), fxed assets wth a value below GEL 1,000, bologcal

assets, etc. Fxed assets wth a value below GEL 1,000 can be ully deducted romgross ncome n the year o ther explotaton and expendture on bologcal assets

n the year when t was ncurred.

Fxed assets are allocated to groups, whch are deprecated as whole unts. Each buld-

ng represents a separate group. The value o a partcular group at the end o a tax year

equals ts value at the end o the prevous tax year, ncreased by cost o added fxed

assets and other captal expendtures defned by the TCG, and reduced by tax depreca-

ton charges o the prevous tax year, and the sales prce o sold fxed assets (market

prce n case o gratutous supply). I at the end o a tax year all fxed assets n a group

are realzed or lqudated or a balance value o the group s less than GEL 1,000, then

the entre balance value o the group can be clamed as tax deductble. I the amount

receved upon the sale o fxed assets o a group n the course o a tax year exceeds the


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book value o the group at the end o the tax year, the surplus amount s ncluded n the

gross ncome and the book value o the group s equal to zero.

The amount o deprecaton or each group s calculated by applyng the depreca-

ton rate or the group to the value o the group at the end o the tax year. Notably,

ull annual deprecaton can be charged to all assets o the group rrespectve o the

purchase date (or deprecaton rates see Table Fxed Assets Deprecaton Rates nAppendx).

Taxpayers may apply accelerated deprecaton rates or groups 2 and 3, but these

rates can not be more than twce the amount o the rates set or the respectve

groups.

Intangible fxed assets

Intangble assets wth a value below GEL 1,000 can be ully deducted rom gross

ncome n the year when the respectve expense was ncurred.

Intangble assets are amortzed over ther useul lves or at 15% rate per annum t

s mpossble to defne the useul le o a partcular ntangble asset. Intangble assets

are recorded as a separate group. The amortzaton expenses on ntangble assets are

tax-deductble.

Expenses ncurred to purchase or produce amortzed fxed assets are not captalzed

they had prevously been deducted rom gross ncome.

Alternative depreciation method

Taxpayers may use an alternatve method to compute the deducton o expendtureon fxed assets, other than non-amortzed fxed assets or fxed assets contrbuted

nto the captal o a company or suppled under fnance lease. A company may ully

deduct the cost o such assets n the year o ther explotaton, ncludng ther captal

repar expenses. Those fxed assets are not urther ncluded n the asset groups or

deprecaton. I such assets are sold later, the sales prce (market prce n case o

gratutous supply) s ncluded n the gross ncome. I a company elects the alterna-

tve method, t must be used or all purchased (produced) fxed assets or at least 5

years.

Assets leased out under fnance lease

Each fxed asset suppled under fnance lease s recorded as a separate group by the

lessor. The balance value o the group s the cost o the asset, except or the cases

when the asset was prevously deprecated through the dmnshng balance method.

In the latter case, a lessor s lable to recalculate the deprecaton on the leased asset

rom the moment o ts explotaton. The amount receved as a result o recalcula-

ton s deducted rom the balance value o the group to whch the asset prevously

belonged. I the recalculated amount exceeds the balance value o the group, the

book value o the group s equal to zero and the surplus amount s ncluded n thegross ncome . On the other hand, the asset was deprecated usng the alternatve

method, then total recalculated amount s ncluded n the gross ncome.


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Fxed assets suppled under fnance lease are amortzed accordng to the dscounted

value o lease payments, but the total deprecaton amount should not exceed the

balance value o the group, as defned n the above paragraph. The detaled amortza-

ton rule o assets leased out under fnance lease s establshed by the Mnster.

Leasehold improvements on rented fxed assets

Leasehold mprovements ncurred on assets rented under operatng lease that do

not reduce the rental payments are captalzed as a separate tax deprecaton group.

Such mprovements are deductble rom the gross ncome over the lease perod ap-

plyng the 15% dmnshng balance method.

Upon expry or early termnaton o the rental agreement when the leased asset s

returned to the lessor, the book value o the group s equal to zero and the remanng

balance s not deducted rom the gross ncome.

3.1.7 Taxation of Dividends

Dvdends pad to ndvduals (ncludng non-resdent ndvduals) and non-resdent

companes are subject to wthholdng taxaton;

Dvdends pad to resdent companes are not subject to wthholdng taxaton and

are not urther ncluded n taxable ncome;

Dvdends receved rom an Internatonal Fnancal Company are not subject to

wthholdng taxaton and are not urther ncluded n taxable ncome;

Dvdends receved rom ree oatng securtes are not subject to wthholdng taxa-

ton and are not urther ncluded n taxable ncome; Dvdends receved rom an Internatonal Company are not subject to wthholdng

taxaton and are not urther ncluded n taxable ncome.

For dvdends wthholdng taxaton rates see secton Tax Rates at a Glance.

3.1.8 Taxation of Interest

Interest sourced n Georga and pad by a Georgan tax resdent ncludng PE o non-

resdent s subject to wthholdng taxaton;

Interest pad to resdent banks s not subject to wthholdng taxaton;

Resdent companes and PEs o oregn companes can credt wthheld tax on nter-

est pad n Georga aganst corporate ncome tax lablty;

Interest ncome receved rom fnancal nsttutes lcensed accordng to the

Georgan legslaton s not subject to wthholdng taxaton. At the same tme, such

nterest s not urther ncluded n taxable ncome o the recpent, unless the latter

s tsel a lcensed fnancal nsttuton;

Interest ncome receved rom ree oatng securtes s not subject to wthholdng

taxaton and s not urther ncluded n taxable ncome;


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Interest ncome receved rom debt securtes ssued by Georgan enterprses and

lsted on a recognzed oregn stock exchange s not subject to wthholdng taxaton

and s not urther ncluded n taxable ncome;

Interest ncome receved rom an Internatonal Company s not subject to wthhold-

ng taxaton and s not urther ncluded n taxable ncome.

For nterest wthholdng taxaton rates see secton Tax Rates at a Glance.

3.1.9 Taxation of Royalties

Royaltes pad by a Georgan tax resdent ncludng PE o non-resdent to resdent

ndvduals are subject to wthholdng taxaton.

For royaltes wthholdng taxaton rates see secton Tax Rates at a Glance.

3.1.10 Taxation of Rental Income

Rental payments (except or fnance lease payments) by a Georgan tax resdent

ncludng PE o non-resdent to resdent ndvduals are subject to wthholdng taxa-

ton.

For rental ncome wthholdng taxaton rates see secton Tax Rates at a Glance.

3.1.11 Thin Capitalisation Rules

Thn captalsaton occurs when the debt to equty rato exceeds 3/1. In case o

thn captalzaton a company s not allowed to deduct pad and/or payable nterest

expenses rom ts gross ncome. At the same tme, thn captalzaton rules do not

restrct deducton o nterest expenses on the debt below the establshed rato o 3/1.

Thn captalzaton rules do not apply:

to fnancal nsttutons;

to enttes wth gross ncome not exceedng GEL 200,000;

nterest expenses do not exceed 20% o the taxable ncome beore deducton o

nterest expenses.

Thn captalzaton s determned accordng to the average annual rato, n lne wth

the rules determned by the Mnster.

Notably, thn captalzaton rules apply only to cases when the Investgaton Servces

o the Mnstry o Fnance o Georga (the Mnstry) proves that thn captalzaton s

used as a delberate tax evason mechansm.

3.1.12 Related Party Transactions

The GTA can adjust the tax base there s evdence that arms length prces were

not used n transactons between related partes. Partes are recognzed as related

specal relatons between them may aect the condtons or economc results o ther

actvtes. Such specal relatons nclude, n partcular, relatons where:

Persons are ounders (partcpants) o the same enterprse and ther total share

amounts to at least 20%;


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A person has a drect or ndrect nterest n an enterprse, where such nterest s at

least 20%;

An enterprse s under control o another person;

An ndvdual s subordnated to another ndvdual n terms o hs poston;

A person s under drect or ndrect control o another person; Persons are under drect or ndrect control o another person;

Persons jontly drectly or ndrectly control another person;

Indvduals are relatves;

Indvduals are members o a partnershp.

For the purposes o determnng the exstence o specal relatons between the per-

sons, control means

beng a member o a supervsory board, drector, or a person authorsed to appontothers to these postons;

havng 20% o votng rghts.

3.1.13 Transfer Pricing Rules

The Georgan transer prcng rules generally apply to cross-border transactons

between related partes. In specal cases these rules may also apply to transactons

between related Georgan enttes or transactons between unrelated enttes where

one o the partes s a resdent o low tax jursdcton/oshore country, or s regstered

n the Free Industral Zone.

The ollowng are the generally accepted transer prcng methods:

Comparable uncontrolled prce method;

Resale prce method;

Cost plus method;

Net proft margn method;

Proft splt method.

A detaled descrpton o transer prcng methods, ther applcaton rules, and other

procedural matters are defned by the order o the Mnster.

3.1.14 Losses

Losses can be carred orward or up to 5 years aganst uture profts. Further, a tax-

payer can elect a 10-year loss carry orward perod. In the latter case, the statute o

lmtaton s 11 years. A 10-year carry orward perod can stll be changed to a 5-year

carry orward perod when the losses carred orward are used up.

Losses cannot be carred orward by an Internatonal Fnancal Company, Free Ware-house Company, and Internatonal Company (or taxaton o Internatonal Fnancal


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Company, Free Warehouse Company and Internatonal Company see secton Benef-

cal Tax Regmes).

No carry back s allowed.

3.1.15 Foreign Tax Relief

Foregn corporate ncome tax pad on ncome generated rom a oregn source may becredted aganst the Georgan tax mposed on the same ncome, lmted to the amount

o such Georgan tax (.e. only up to the amount o the corporate ncome tax whch

would be payable on such ncome n Georga). For the purpose o credtng oregn tax

pad abroad, the oregn source shall provde the GTA wth payment evdence.

3.1.16 Compliance

Corporate ncome tax return can be fled ether personally, electroncally (see secton

E-servces) or sent va nsured mal wthn three months ollowng the end o the tax

perod. The submsson date can be extended or up to a urther three months theGTA are notfed beore the deadlne expres, and a taxpayer has made the advance

tax payments (or has no oblgaton to make advance tax payments) due or the cur-

rent tax year (see secton Flng o Tax Return). Corporate ncome tax return can be

amended wthn the statute o lmtaton (see secton Statute o Lmtaton).

Georgan companes, ncludng PEs o oregn companes n Georga conductng

economc actvtes, must make advance corporate ncome tax payments ether va

bank or e-payng system (see secton E-servces) at 25% o the tax lablty or the

precedng tax year. The due dates or the payments are 15 May, 15 July, 15 Septem-

ber, and 15 December o the current tax year.

Advance payments o tax are appled aganst the corporate ncome tax lablty or the

current tax year. The balancng payment or the current perod shall be made beore

1 Aprl o the year subsequent to the current tax year.

The excess o the total advance payments over the tax due or the tax year can be

appled aganst any outstandng or uture tax labltes, or be reunded accordng to

specfed procedures.

I the tax rate changes n the current tax year, a taxpayer s authorsed to calculate

and make advance corporate ncome tax payments applyng the current tax rate to

the taxable ncome o the precedng tax year.

A taxpayer wth no taxable ncome durng the prevous tax year does not have to

make advance corporate ncome tax payments durng the current tax year.

3.1.17 Corporate Income Taxation for Foreign Companies

3.1.17.1 General Principles

A company s treated as a oregn company t s not a Georgan company (.e.

nether ncorporated nor has ts place o management n Georga). Foregn companesare generally subject to Georgan tax on ncome generated n Georga. Ths Georgan


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source ncome s taxed applyng ether a regular taxaton scheme (.e. applcable to

Georgan companes, that s 15% o a taxable ncome) t s earned through a PE o

a oregn company n Georga, or s subject to wthholdng taxaton t s not earned

through a PE.

Georgan law allows oregn nvestment n varous orms, ncludng nvestment

through 100% oregn-owned subsdares, share partcpaton n Georgan compa-nes, and n jont ventures wth Georgan legal enttes and ndvduals, PEs (aflates,

branches), and other types o partcpaton.

3.1.17.2 Permanent Establishment (PE)

Income earned through a PE n Georga, reduced by tax-deductble expenses, s taxed

at the regular at corporate ncome tax rate o 15%. A PE s defned as any fxed loca-

ton or busness actvtes o a oregn company n Georga through whch ths oregn

company carres out, n ull or n part, an economc actvty n the terrtory o Georga,

ncludng actvty carred out by an authorzed person. The ollowngs are equvalentto PE n Georga:

Constructon stes, assembly or buldng acltes, and the exercse o controllng

actvtes connected wth them;

Installatons, structures, drllng equpment, shps used or surveyng o natural

resources, as well as the exercse o controllng actvtes connected wth such acl-

tes;

A permanent base where a non-resdent ndvdual carres out economc actvty;

The place o management o a oregn company, branch, representatve ofce, de-

partment, bureau, ofce, agency, workshop, mne, pt, other place or extracton o

natural resources, or any other separate unt or place o actvty o such company.

Domestc tax law and applcable double taxaton treates lst actvtes that do not

result n a taxable PE, ncludng:

Storage or demonstraton o goods belongng to a oregn company or non-resdent

ndvdual;

Keepng a stock o goods belongng to a oregn company or non-resdent ndvdu-al, only or the purpose o processng by another person;

Purchase o goods or collecton o normaton or a oregn company or non-res-

dent ndvdual;

Perormance o any other actvtes that are preparatory or auxlary n nature on

behal o a oregn company or non-resdent ndvdual;

Preparaton and/or sgnng o contracts or grantng loans, supplyng goods or

renderng techncal assstance on behal o a oregn company or non-resdent

ndvdual;

Executon o any combnaton o the above actvtes.


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Further, the transer o property under operatng lease, fnance lease, usuruct or un-

der any smlar substance n the terrtory o Georga does not result n PE o a oregn

company or a non-resdent ndvdual.

Smply holdng ordnary shares n Georgan companes, securtes ssued by the latter,

or ownng the property n the terrtory o Georga wthout havng any characterstcs

o PE mentoned above, does not result n PE o a oregn company or a non-resdentndvdual.

3.1.17.3 Withholding Taxation

Income earned by oregn companes and non-resdent ndvduals rom Georgan

sources wthout a PE n Georga s subject to wthholdng taxaton at the source o

payment (or wthholdng taxaton rates see secton Tax Rates at a Glance). How-

ever, double taxaton treates may reduce the tax rates.

A resdent payer o ncome (legal entty o ndvdual entrepreneur) s responsble or

wthholdng the tax rom the ncome pad, wthout takng nto consderaton assoc-ated expenses, and transerrng t to the state budget upon the payment (on the last

day o the month or non-monetary payments) to the oregn person ether va bank

or e-payng system (see secton E-servces). Returns are fled ether personally, elec-

troncally (see secton E-servces) or va nsured mal by the 15th o the month ol-

lowng the reportng perod (monthly or quarterly) n whch the payment was made.

Further, the normaton about payments made to non-resdents and taxes wthheld

shall be submtted to the GTA annually wthn 30 days ollowng the tax year. A non-

resdent taxed at the source o payment n Georga may wsh to fle a tax return or

the purpose o tax recalculaton and reund beore 1 Aprl o the year ollowng the

reportng year. In ths case, a non-resdent wll be taxed as recevng ncome through

ts PE n Georga, assocated expenses beng deductble.

Currently Georga has eectve double taxaton treates wth 30 countres (see Table

Double Tax Treaty Wthholdng Tax Rates n Appendx). The rules on utlzaton o

benefts granted by the double taxaton treates are establshed by the Instructon o

the Mnster. Accordng to these rules, a Georgan resdent payng to a non-resdent

must fle to the GTA a respectve applcaton orm or avodance or reducton o

wthholdng tax. The applcaton orm must be fled beore the payment or wthnsx months o the payment. I the applcaton orm s submtted ater the mentoned

sx-month perod, the penalty or the alure to submt normaton to the GTA wll

apply. I the tax was wthheld upon the payment, a non-resdent can clam the reund

by flng a respectve applcaton orm (see secton Agreements or the Avodance o

Double Taxaton).


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3.2 Value Added Tax (VAT)

3.2.1 Taxable Transactions

VAT taxable transactons nclude:

Supply o goods/servces made n the terrtory o Georga (ncludng barter and/or

gratutous supply); Use o VAT taxable goods/servces or non-economc purposes, taxpayer has

obtaned a VAT credt or these goods/servces;

Upon cancellaton o VAT regstraton, the balance o goods or whch taxpayer has

obtaned a VAT credt;

Use o sel-constructed buldngs as fxed assets;

Transer o ownershp on goods/servces n exchange or share n legal entty/part-

nershp;

Upon expry or early termnaton o rental agreement, supply o leasehold mprove-

ment, any, to the lessor;

Supply o goods/servces by a taxpayer to ts employees wth or wthout compensa-

ton;

Export o goods outsde Georga;

Import and/or temporary mport o goods nto Georga.

3.2.2 Place of Supply

Place o supply or goods

The place o supply s wherever the goods are actually suppled or where transpor-

taton o goods starts, supply o goods requre transportaton;

The place o supply o electrcal or thermal energy, gas and water s the place o

recept o these goods;

The place o supply o exported goods s Georga.

Place o supply or services

Dependng on the nature o servce, the place o supply s:

the locaton o mmovable property the servce s related to ths property;

the place o actual supply the servce s related to movable property or s ren-

dered n the sphere o culture, art, educaton, toursm, recreaton, gymnastc or

sport;

the locaton o passengers or cargo upon start o ther transportaton, the servce

s related to ths transportaton;

the place o regstraton or management o servce recpent or locaton o ts PE the servce s related to the latter, when the servce provder and servce recpent

are located n derent countres. Ths provson stands or the ollowng servces:


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supply o ntangble assets, consultaton, legal, accountng, engneerng and smlar

servces, stafng servces, advertsng servces, fnancal, nsurance and re-nsur-

ance operatons, rentng movable property except or means o transportaton,

telecommuncaton, rado- and televson servces, servces provded electroncally

(e.g. web-stes, web-hostng, sotware support, dstance learnng, etc.).

I place o supply s not descrbed under any o the above categores, the place osupply s the place o economc actvtes o a servce provder.

3.2.3 Invoicing

I taxpayer s a VAT regstered taxpayer, they must ssue a tax nvoce on VAT taxable

transactons to the customers upon ther request no later than 30 calendar days

rom the request. A tax nvoce s ssued ether n paper n the ormat approved by the

Mnster or n electronc orm.

3.2.4 VAT Registration

Taxpayer can regster or VAT voluntarly. However, they are lable to regster they:

carryout economc actvtes and the total amount o VAT taxable transactons

carred out n any contnuous perod o 12 calendar months exceeds GEL 100,000.

Taxpayer must fle an applcaton or VAT regstraton to the GTA no later than 2

workng days rom ths moment;

produce and/or mport excsable goods nto Georga (except or excsable goods

exempt rom VAT taxaton upon mport). Taxpayer must fle an applcaton or VAT

regstraton to the GTA beore supply o excsable goods n Georga;

ntend to carry out a sngle VAT taxable supply, or a set o VAT taxable supples n

one day wth a total amount exceedng GEL 100,000. Taxpayer must fle an appl-

caton or VAT regstraton to the GTA beore the supply s made;

are an entty establshed as a result o reorganzaton and at least one o the par-

tes to reorganzaton s a VAT payer. Taxpayer must fle an applcaton or VAT

regstraton to the GTA beore VAT taxable transacton s carred out, but no later

than 10 calendar days rom reorganzaton;

are a legal entty/partnershp and a VAT payer shareholder/partner contrbutedgoods/servces nto ther captal. Taxpayer must fle an applcaton or VAT regstra-

ton to the GTA beore a VAT taxable transacton s carred out, but no later than 10

calendar days rom such contrbuton.

The regstraton procedure s straghtorward and the taxpayer can regster or VAT

normally wthn one workng day.

3.2.5 VAT Deregistration

VAT regstraton s cancelled

upon lqudaton o a busness;

upon decease o an ndvdual;


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a one-tme supply exceedng GEL 100,000 leadng to mandatory VAT regstraton

s not carred out.

Taxpayer may also deregster though flng an applcaton or VAT deregstraton the

sum o ther taxable transactons, excludng VAT durng the last 12 calendar months,

does not exceed GEL 100,000, provded they have been regstered or at least one

year. The GTA may also request the cancellaton o VAT regstraton and deregster ataxpayer the latter agrees.

VAT regstraton s cancelled rom the frst day o a month ollowng the reportng

perod when (a) oblgaton to deregster arses or (b) taxpayer submts an applcaton

or (c) taxpayer agrees to the de-regstraton request rom the GTA.

3.2.6 VAT Rates

VAT rate s 18% or all taxable transactons and mports unless a specfc provson

allows an exempton.

Same rate apples to RCVAT.

VAT rate o 0.54% apples to temporarly mported goods or each complete/ncom-

plete calendar month whlst they are located n the economc terrtory o Georga, but

only up to VAT amount calculated at 18%.

3.2.7 Exempt Supplies

VAT exempt supples are not subject to VAT taxaton; however, taxpayer makes

such supples they may or may not be enttled to reclam nput VAT deducton.

Transactions exempt with the right to reclaim input VAT

The lst o exempt tems wth the rght to reclam nput VAT ncludes:

Export o goods;

Supply o goods/servces ntended or the ofcal or personal use o oregn dplo-

matc and equal representatve ofces;

Transportaton o passengers and luggage and related servces provded that ether

departure or destnaton pont s located outsde Georga;

Import and/or supply o avato

Georgia Pocket Tax Book 11

Documents

Transcript of Georgia Pocket Tax Book 11