Georgia: New corporate income tax rules in Georgia

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Georgia: New corporate income tax rules in Georgia

pushkaryova.jpg

Anna Pushkaryova

Georgia has introduced amendments to the corporate income tax (CIT) into the Tax Code through Law N5092-II, dated May 13 2016.

Most of amendments entered into force on June 1 2016. These include:

  • extending the term of import VAT payment on certain types of fixed assets up to 45 days as of the date of realisation of such assets;

  • exclusive power of tax authorities to exercise tax control over the company`s economic activities and, accordingly, carry out tax audits;

  • writing off the tax arrears of taxpayers, who do not carry out economic activities with respect to tax liabilities arisen and sanctions imposed up to a certain deadline;

  • the prohibition to freeze a taxpayer`s bank account during a tax dispute, except when the issue is based on a court ruling.

The law also introduces certain amendments relating to the removal of thin capitalization rules and introduction of CIT on distributed profits, which will enter into force on January 1 2017.

Based on the new rules, the rate of CIT remains unchanged. Additionally, the law includes a list of profits and activities that are subject to CIT, including (but not limited to):

  • Free of charge supply of goods and services;

  • Loan issuance to an individual or a non-resident;

  • Certain non-deductible expenses according to the Georgian tax legislation; and

  • Distributed profit to related parties or a person who is exempt from taxation, as well as transactions not conducted based on an arms-length principle.

Certain banking and non-banking financial institutions are exempt from the new CIT rules until January 1 2019.

Finally, the transition provisions of the law contain some specific rules regarding the profit distribution by a Georgian legal entity earned before the amendments entered into force.

Anna Pushkaryova (anna.pushkaryova@eurofast.eu)

Eurofast Georgia

Tel: +995 595 100 517

Website: www.eurofast.eu

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