General Information
Country Name: Georgia
Currency: Georgian Lari (GEL)
Primary Tax Authority: Revenue Service of Georgia
Key Legislation:
- The Constitution of Georgia: Establishes general principles of taxation.
- Tax Code of Georgia: Governs tax procedures, personal and corporate income tax, VAT, excise, and property taxes.
- Law on Local Self-Government: Defines local tax authority.
- Customs Code of Georgia: Regulates customs procedures and duties.
Tax Authority and Collection Competence
Fiscal Authority Allocation:
Georgia operates under a centralized tax system where most taxes are collected by the national government. Local governments may impose certain property taxes.
Taxes Collected by Federal Authorities:
- Corporate income tax
- Personal income tax
- Value-added tax (VAT)
- Excise tax
Taxes Collected by Local Authorities:
- Property tax
Corporate Income Tax (CIT)
Standard CIT Rate: 15%
Taxable Income Definition: Worldwide income of resident companies is taxed. Non-residents are taxed on Georgian-sourced income.
Deductible Expenses: Expenses incurred wholly for business purposes are deductible, with some restrictions on interest, entertainment, and depreciation.
Loss Carryforwards/Carrybacks: Loss carryforwards are available for up to 10 years.
Tax Incentives: Incentives exist for businesses operating in free industrial zones, IT firms, and special tourism areas.
Value-Added Tax (VAT)
Standard VAT Rate: 18%
Scope of VAT: VAT applies to the supply of goods and services in Georgia and the import of goods.
Exemptions: Financial services, educational services, and healthcare services.
International VAT Treatment: Exports are zero-rated, while imports are subject to VAT.
Personal Income Tax (PIT)
PIT Rate: 20% flat rate.
Taxable Income Thresholds: All income is subject to the flat rate, with no specific exemptions based on income levels.
Deductions and Exemptions: Limited personal deductions are available for pension contributions and charitable donations.
Treatment of Foreign Income: Worldwide income is subject to tax, though double taxation agreements (DTA) may provide relief.
Additional Mandatory Contributions
Social Security Contributions:
Georgia does not have a comprehensive social security tax system like many European countries. Pension contributions are the main form of mandatory contributions, currently set at 6% of income, divided between the employer, employee, and state.
Withholding Taxes
Dividends: 5% withholding tax.
Interest: 5% withholding tax.
Royalties: 10% withholding tax.
Payments to Non-Residents: Rates may be reduced under double taxation agreements (DTA).
Transfer Pricing Rules
Documentation Requirements: Georgia follows OECD guidelines for related-party transactions.
Arm’s Length Principle: All transactions must follow the arm’s length principle, and documentation should be maintained for verification.
Penalties for Non-Compliance: Fines and tax adjustments are imposed for non-compliance, with potential penalties reaching significant levels for under-reporting.
Special Tax Regimes
Free Trade Zones: Georgia has established Free Industrial Zones (FIZ) that offer tax incentives for companies operating within them.
Industry-Specific Tax Incentives: Special tax treatment is available for IT firms and investments in strategic tourism zones.
Other Taxes
- Property Tax: Local municipalities levy property tax, typically at rates of up to 1% of the property’s market value.
- Excise Tax: Applies to specific goods, including fuel, alcohol, and tobacco.
- Capital Gains Tax: Capital gains are taxed at the standard income tax rates.
- Inheritance and Gift Tax: Georgia does not impose inheritance or gift taxes.
Double Taxation Agreements (DTAs)
Key Partner Countries: Georgia has over 55 DTAs, including treaties with Germany, the United States, and Russia.
Reduced Withholding Tax Rates under DTAs: Generally, dividends, interest, and royalties are taxed at reduced rates of 5-10% under most treaties.
Tax Treaty Benefits Application Process: DTA benefits can be claimed by filing the appropriate forms and providing a certificate of residency.
Local Taxes
Property Tax: Levied by municipalities, with rates varying by location.
Compliance and Reporting
Corporate Tax Filing Deadlines: Annual corporate tax returns must be submitted by March 31 of the following year.
VAT Filing Requirements: VAT returns are filed on a monthly basis.
Penalties for Late Filing/Non-Compliance: Late filings are subject to penalties, which can be significant if there is underpayment of taxes.
Recent Developments
Recent Tax Law Changes: Georgia has introduced reforms to improve tax compliance and reporting, including adopting the OECD’s automatic exchange of information for tax purposes.
Upcoming Reforms: The government is exploring options for simplifying the VAT refund process and reducing the administrative burden for small businesses.
Global Tax Initiatives: Georgia is actively participating in global tax transparency initiatives, including the OECD’s BEPS framework.
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