Georgia: Georgia updates tax legislation

February 27, 2018

The government of Georgia is attempting to simplify the country's tax code after Georgia signed its association agreement (AA) deal with the 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 at 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 January 15. The state expects that the new system will result in additional surplus capital for the country.

Using a special system, entrepreneurs are able to pay VAT returns in five to seven business days by filling out an electronic application without any additional paperwork. Following the Estonian taxation model, VAT refunds will be issued if there is a surplus of VAT input over output, which is very beneficial for small and medium businesses with deficits in cash and limited working capital.

Vehicle property tax

The payment of property tax on automobiles will start for families with an annual income of more than GEL 40,000 ($16,300) in 2018. Families with an annual income of between GEL 40,000 and GEL 100,000 will have to pay between 0.02% and 0.05% of the vehicle cost. Families with an annual income of over GEL 100,000 will be paying between 0.8% and 1% of the vehicle cost.

Exemptions from personal income tax

Exemptions apply to the following cases:

Taxable income from the original delivery of an agricultural item produced in Georgia by a person hired in the field of agricultural production, and for the salary paid 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 GEL 200,000 for the reporting period.
Income received from the transferring of shares or securities issued in Georgia by a resident legal entity and recognised by the Georgian national bank as securities for which trading on an organised market is allowed.

Exemptions are in force from January 1 2018 and valid for the next five 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 fulfil 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.