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Taxation in Georgia made simple

There are only six taxes in Georgia:

*   Personal income tax

*   Corporate income tax

*   Value added tax

*   Excise tax 

*   Import tax

*   Property Tax ( Local Tax) 

taxation in Georgia

*Personal income tax 20%

*Personal income tax for micro business exempt

*Personal income tax for small business 3% or 5% .  If a small business has documented expenses (other than salary expenses) up to 60% of its total income, it is subject to taxation at 3%. Otherwise, it is taxed at the 5% rate. 

*Personal income tax for fixed taxpayer GEL1 to GEL2,0003 or 3%- The exact fixed rate is set by the Government of Georgia for each territorial unit and activity type within the range of GEL1 to GEL2,000

*Dividends paid to individuals, organizations and non-resident entities 5%

* Dividends paid to resident companies ————————————————- exempt
* Dividends paid on free floating securities———————————————  exempt
* Dividends paid by an international financial company—————————— exempt
* Dividends paid by a free industrial zone company———————————-  exempt
* Dividends paid by an agricultural cooperative—————————————– exempt
* Interest paid———————————————————————————— 5%
* Interest paid to residents of offshore countries—————————————- 15%
* Interest paid to resident banks————————————————————- exempt
* Interest paid by licensed financial institutions—————————————— exempt
* Interest paid on free floating securities————————————————–  exempt
* Interests paid by a free industrial zone company————————————– exempt
* Interest paid on debt securities issued by Georgian companies and listed on a recognized      foreign stock exchange————————————————————————exempt
* Interest paid by resident companies to the Government—————————— exempt
* Royalties paid to resident individuals——————————————————- 20%
* Royalties paid to resident companies—————————————————— exempt
* Royalties paid to non-residents————————————————————– 10%
* Royalties paid to residents of offshore countries—————————————–15%
* Royalties paid to the Government———————————————————– exempt
* Management fees paid to non-residents—————————————————-10%
* Management fees paid to residents of offshore countries—————————— 15%
* Payment of income from international transportation and
   international communication to non-residents———————————————-10%

* Insurance premiums paid to non-residents————————————————– exempt

* Lease income paid to non-residents———————————————————– exempt
* Payment of income from oil and gas operations to nonresident ————————–4%
* Payments of other Georgian source income to non-residents—————————–10%
* Payments of other Georgian source income to residents of offshore countries——-15%
* Corporate income tax——————————————————————————- 15%
* Value added tax————————————————————————————– 18%
* Excise tax———————————————————————————————- varies
*  Import tax————————————————————————————- 0%, 5% or 12%
*Property tax  companies Up to ——————————————————————— 1 %
*Property tax — leasing companies Up to  ——————————————————–0.6%
*Property tax — individuals Up to——————————————————————– 1%
*Property tax — land ————————————————————————————varies

 

Special Taxation Systems

* Corporate income tax (financial operations or financial services, gain from sale of securities issued by non-resident persons) ——————————————Exempt
* Value added tax (financial operations or financial services)——————- Exempt

  More Information Can be found Here 

Corporate income tax (allowable activities) exempt
Value added tax (supply within free industrial zone) exempt
Import tax (goods produced in free industrial zone) exempt
Property tax (including on land) exempt

A comprehensive overview about Free Industrial Zones be found here. 

Corporate income tax (allowable activities other than supply of fixed assets used in economic activities for more than 2 years) ——————————————-Exempt
Value added tax (supply of foreign goods in a customs warehouse) ———-Exempt
Import tax ———————————————————————————–  Exempt

More information about Special Trade Companies

Georgia has two unique Free Tourism Zones Anaklia and Kobuleti. Exemptions from Property and Profit Taxes – hotel activities are exempted from Profit and Property taxes until 2026. Value of land plots received by a tourist zone entrepreneur, where such land spots are supplied to investors free of charge, income of a gambling club, gaming machines saloon, as well as totalizator organizing persons received from the noted activities, except income received from system-electronic games. Notably, a person organizing totalizator in the system-electronic form will be taxed at a fixed 5% rate on its total income

 

Special Taxation Regimes

• Conducts certain economic activities independently without hiring
employees
• Receives annual income not exceeding GEL30,000
• Maintains an inventory balance not exceeding GEL45,000
• Undertakes activities that are not banned for micro business as
defined by the Government of Georgia

Tax benefits and compliance

* Exempted from personal income taxation.

* Exempted from obligation to withhold tax at the source upon payment of service fees. Micro businesses must keep all primary tax
documentation.

  

 

 

• Receives annual income from certain business activities not exceeding GEL100,000
• Maintains an inventory balance not exceeding GEL150,000

 

Tax benefits and compliance

* Personal income tax at a 5% rate.  applicable personal income tax rate further reduces to 3% if the Small Business has documentary proof of expenses (except salary expenses)
related to the receipt of income in the amount of 60% of total income.
* A small business is not obliged to withhold tax at sources upon payment

of:
• Salaries within 25% of total income for the calendar year
• Service fees

 

A small business should keep all primary tax documentation. However, it may keep records of expenses in the simplified register according to the  rules defined by the Minister of Finance of Georgia. Small businesses are not entitled to loss carry forward.

 

activities conducted by bakeries and beautiful salons (such as: hair cutting, hair-coloring, curling, make-up, massage, epilation, manicure-pedicure, etc.).

*Flat rate income tax payers exempted from liability to use cash-registers

* While taxpayer is subject to flat rate income tax, he is not liable to report to tax authority neither income tax nor corporate income tax returns. Simultaneously, taxpayer is exempted from liability to pay current charges.

Personal income tax

For Georgian personal income tax purposes, total income comprises any
income received in any form and from any activity that is divided into
the following categories:
• Income from employment
• Income from economic activities
• Other income not related to employment and economic activities.

Property Tax

Taxable assets of individuals include immovable property (including construction in progress, buildings or their parts), yachts, motor boats, planes and helicopters in their ownership. Taxable assets of individuals also include property leased in from non-residents. Individuals conducting economic activities in Georgia are subject to property tax on fixed assets and un-installed equipment. Their taxable assets also include leased out property. Further, land plots held by an individual are subject to property taxation. The tax period for property tax is a calendar year.

Annual family income for the preceding
tax year, GEL

                     <100,000

                     ≥100,000

Property tax rate, %

                        0.05 to 0.2

                         0.8 to 1

Individuals submit annual property tax returns either on their own property, or the property of all their family members no later than 1 November of a calendar year

Corporate income tax

   Tax rate is a flat 15%. Income subject to corporate income tax (i.e., tax base) is currently computed on the basis of IFRS and modified by certain tax adjustments.  Foreign companies are subject to tax on Georgian source income only, subject to double taxation treaty relief. A foreign company, carrying out business activities through a permanent establishment in Georgia, generally has to assume the same tax obligation as a Georgian company
generating Georgian source income only.

   Corporate income tax returns can be filed either personally, electronically (see section “E-services”, p. 78) or sent via insured mail within three months of the end of the tax period.

Corporate income taxation for foreign companies

       A company is treated as a foreign company if it is not a Georgian company (i.e., neither incorporated nor has its place of management in Georgia). Foreign companies are generally subject to Georgian tax on income generated in Georgia. This Georgian source income is
taxed by applying either a regular taxation scheme (i.e., applicable to Georgian companies, that is 15% of taxable income) if it is earned through a permanent establishment of a foreign company in Georgia or is subject to withholding taxation if it is not earned through a permanent establishment.

Value added tax (VAT)

The VAT rate is 18% for all taxable transactions and imports, unless a specific provision allows an exemption.

 

VAT taxable transactions
include:

• Supply of goods or services within the scope of economic activities that is considered as carried out in the territory of Georgia (including barter and gratuitous supplies)
• Use of VAT taxable goods and services for non-economic purposes, if
the taxpayer has obtained a VAT credit for these goods and services
• Upon cancellation of VAT registration, the balance of goods for which the taxpayer has obtained a VAT credit
• Use of self-constructed buildings as fixed assets
• Transfer of ownership on goods/services in exchange for a share in a legal entity or partnership
• Upon expiry or early termination of a rental agreement, supply of leasehold improvement to the lessor
• Upon expiry or early termination of the status of tourist enterprise, the difference between the compensation for the supply of the hotel’s assets or parts thereof and the declared VAT taxable amount in the result of hotel operations
• Supply of goods or services by a taxpayer to its employees with or without compensation
• Export or re-export of goods outside Georgia
• Import or temporary import of goods into Georgia.

    As previously noted, supplying goods or services is subject to VAT taxation if it is considered to be carried out in the territory of Georgia. Thus, it is crucial for VAT taxation to define the place of supply of goods and services.

   * Place of supply is wherever the goods are actually supplied or where transportation of goods starts, if the supply of goods requires transportation.

  • Place of supply of electrical or thermal energy, gas and water is the place of receipt of these goods Place of supply for services Depending on the nature of a service, the place of supply is:  The location of immovable property if the service is related to this property

  • The place of actual supply if the service is related to movable property or is rendered in the sphere of culture, art, education, tourism, recreation, gymnastics or sport; the location of passengers or cargo upon start of their transportation, if the service is related to this transportation 

  • The place of registration or management of a service recipient or location of its permanent establishment (if the service is related to the latter), if the service provider and the service recipient are located in different countries; this provision applicable for the supply of intangible assets; consultation, legal, accounting, engineering and similar services; staff provisioning services; advertising services; financial, insurance and re-insurance operations; renting movable property except means of transportation; telecommunication, radio 3. Companies 81 and television services; services provided electronically (e.g., web sites, web hosting, software support, distance learning, etc.); if the place of supply does not fit in any of the aforementioned categories, the place of supply is the place of economic activities of the service provider. If a particular service qualifies for more than one of the above cases, the place of its supply is defined based on the first case. For example, if consulting services are provided with respect to immovable property located in Georgia, then such a service would qualify for the first, as well as the forth, case. However, as the first case prevails, Georgia may be considered as a place of supply. 

Taxpayers are liable to register as a VAT payer if they:

• Carry out economic activity and the aggregate value of their VAT taxable transactions exceeds GEL100,000 in any continuous period of 12 calendar months; a taxpayer must file an application for VAT registration to the GTA within 2 working days of exceeding the
82 Pocket Tax Book. Georgia threshold. Notably, a person supplying only in the territory of a
special trade zone does not have an obligation to register as a VAT payer.
• Produce or import excisable goods into Georgia (except excisable goods exempt from VAT taxation upon import); a taxpayer must file an application for VAT registration to the GTA before supplying excisable goods in Georgia.
• Represent entities established as a result of a reorganization and at least one of the parties to the reorganization is a VAT payer; a taxpayer must file an application for VAT registration to the GTA before a VAT taxable transaction is carried out, but no later than 10
calendar days from the completion of the reorganization.
• Represent legal entities or partnerships and a VAT payer shareholder or partner contributed goods or services into their capital; a taxpayer must file an application for VAT registration to the GTA before a VAT taxable transaction is carried out, but no later than 10 calendar days
from such a contribution

Transactions exempt with the entitlement to credit – VAT TAX Free Status

 

• Export or re-export of goods
• Supply of goods or services intended for the official use of foreign diplomatic and equal representative offices, as well as for the personal use of staff of such agencies (or their family members)
• Transportation of passengers and luggage and supply of related services, provided that either the departure or destination point is Located outside Georgia
• Transportation of goods placed in export, re-export, external processing or transit operations, and supply of related services
• Transportation of goods not yet placed in import, warehouse, temporary import, internal processing or free zone operations between the two points located in Georgia, and supply of related services (except storage services)
• Transportation of goods placed in import, warehouse, temporary import, internal processing or free zone operations before entering into the territory of Georgia, from the customs border of Georgia to the destination point, and supply of related services (except storage
services)
• Supply of services related to transportation, loading, unloading and storage of empty transportation means (e.g., containers, carriages) used in transportation
• Import or supply of goods to be provided on international flights and international sea passages
• Supply of Georgian goods for sale in a duty free zone
• Supply of goods or food services in a duty free zone
• Supply of assets under reorganization
• Contribution of assets into the capital of a legal entity/partnership, where the latter has theoretically credited VAT on these assets upon the contribution
• Supply of gold to the NBG
• Organized foreign tours into Georgia by tour operators and the supply of tourist packages by the latter
• Supply of business as a going concern by one VAT payer to another, provided that both parties notify the GTA within 15 calendar days from such supply
• Supply of foreign goods in a customs warehouse, (In case of future importation of goods, please refer to section “Reverse charge VAT”, p. 94) initial supply of agricultural products (except eggs) produced in Georgia before their processing (i.e., change of code), other than
supply by persons engaged in agricultural activities 
• Supply of beef, pork, sheep and goat meat, as well as industrially processed cheese produced from local materials, other than supply by persons engaged in agricultural activities 

 

Transactions exempt without the entitlement to credit

 

• conduct of financial operations and/or supply of financial services
• import and/or supply of goods and services under the Law of Georgia on Oil and Gas

• Import or temporary import of goods intended for the personal use of citizens of foreign countries employed at oil and gas exploration and extraction works
• Import or supply of certain medicines, passenger cars, yachts, publications and mass media, and baby products
• Supply of educational and medical services
• Supply of land plots
• Supply of betting and gaming services (except by a person with more than 50% state ownership)
• Import of goods by an issuer or a recipient of a grant as defined by the grant agreement
• Transfer of assets under leasing, where these assets are exempt from VAT without the entitlement to credit
• Import of most food products by an individual (including via mail) not
intended for economic activity with a value up to GEL500 and weighing up to 30 kg during a calendar day, as well as non-food productsduring 30 calendar days (except import from a free industrial zone), import of 400 cigarettes or 50 cigars or 50 cigarillos (slim cigars) or
250 grams of other tobacco products (except tobacco raw materials) or combination of all mentioned products up to 250 grams via mail, or during a calendar day by air transport and during 30 days by other means of transportation in case of import by an individual,
also import of 4 liters of alcoholic beverages (except import of goods from a free industrial zone)
• Import of non-food products not intended for economic activity with the value up to GEL300 via mail (or GEL3,000 in case of import by an individual) and weighing up to 30 kg (except imports from a free industrial zone)

• Import of non-food products (except vehicles other than railway or tramway rolling stock) by air transport by an individual staying outside Georgia for more than six months not intended for economic activity with a value up to GEL15,000 (except imports from a free
industrial zone)
• Supply of goods or services between free industrial zone companies
• Supply of shares (not attached with the property) in partnership, except receiving the property in individual ownership in exchange for the shares 
• Supply of property by the partnership to its members, provided that the members are individuals only, the composition of the partnership has not changed since its establishment and the partnership is not a registered VAT payer 
• Temporary import of fully exempt goods from VAT taxation

 

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