The Government of Georgia is attempting to simplify the country’s Tax Code after Georgia signed its Association Agreement (AA) deal with the European Union (EU) in mid-2014. While major tax reforms regarding corporate income tax took place in 2017, Georgia continues to modify and update its tax system, bringing several updates into force as of the beginning 2018.
VAT Returns Georgia has further improved its tax legislation by introducing an automatic system of value-added tax (VAT) returns starting from 15th of January. The state expects that the new system will result in additional surplus capital for the country.
Using a special system, the entrepreneurs are able to pay VAT returns in 5-7 business days by filling out an electronic application without any additional paperwork. Following the Estonian taxation model, VAT refunds will be done if there is a surplus of VAT inputs over outputs, which is very beneficial for small and medium businesses with deficit in cash and limited working capital.
Vehicle Property Tax Payment of property tax on automobiles will start for families with an annual income of more than 40,000 GEL in 2018. Families with an annual income of 40,000-100,000 GEL will have to pay 0.02-0.05% of the vehicle cost. Families with an annual income of over 100,000 GEL will be paying 0.8-1% of the vehicle cost.
Exemptions from Personal Income Tax Exemptions apply to the following cases: • Taxable income from original delivery of an agricultural product produced in Georgia by a person hired in agricultural production and for the salary given to the person employed in this production, if the gross income from this supply or the gross income of the employer from this supply does not exceed 200,000 GEL for the reporting period. • Income received from transferring of shares or securities issued in Georgia by a resident legal entity and recognized by Georgian national bank as securities for which trading on an organized market is allowed. Exemptions are in force from 1st January 2018 and valid for the next 5 years.
The updates in the Tax Code are aimed at improving the investment climate, attracting more investors and increasing the capital in the country. We advise clients receiving revenue financial instruments that fulfill the above criteria to seek advice on whether they may benefit from tax exemptions and to ensure their VAT return filing practices are compliant with the new approach.