TAX CODE OF GEORGIA

Law of Georgia

Tax Code of Georgia

SECTION I

GENERAL PROVISIONS

Chapter I – Georgian Tax System

Article 1 – Scope of regulation of the Tax Code of Georgia

This Code defines, in accordance with the Constitution of Georgia, the general principles of formation and operation of the tax system of Georgia, the legal status of tax payers and competent authorities, the types of tax offences, the liability for violating the tax legislation of Georgia, the procedure and conditions for appealing wrongful acts of competent authorities and their officials, the procedure for settling tax disputes, and governs the legal relations connected with the fulfilment of tax liabilities.

Law of Georgia No 5942 of 27 March 2012 – website, 12.4.2012

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Article 2 – Tax legislation of Georgia

1. The tax legislation of Georgia comprises the Constitution of Georgia, international treaties and agreements, this Code and subordinate normative acts adopted in compliance with them.

2. The tax legislation of Georgia in effect at the moment when tax liability arises shall be used for taxation.

3. The Government of Georgia or the Minister of Finance of Georgia shall adopt/issue subordinate normative acts for enforcing this Code.

4. (Deleted – 26.12.2013, No 1886).­­

5. To enforce the tax legislation of Georgia, the head of the Legal Entity under Public Law (LEPL) within the Ministry of Finance of Georgia – the Revenue Service (‘the Revenue Service’) shall issue orders, internal instructions and guidelines on application of the tax legislation of Georgia by tax authorities.

6. When regulating tax matters, the terms and concepts of the legislation of Georgia used in this Code shall have the same meanings as they have in the respective legislation, unless otherwise provided for by this Code.

7. Any international tax-related treaty that has been ratified by the Parliament of Georgia and that has entered into force shall prevail over this Code.

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Article 3 – Setting timeframes

1. The timeframes set by this Code shall be determined by a specific calendar date or a period calculated in years, months or days and/or by reference to the appropriate circumstance.

2. The timeframe set by this Code shall commence on the day following the performance of the relevant action. A day may be a business day or a calendar day. If not specified, a day shall be a calendar day. Unless otherwise provided for by the tax legislation of Georgia, a business day shall coincide with a calendar day, except for a Saturday, Sunday and the holidays determined by the Organic Law of Georgia on the Labour Code of Georgia.

3. The timeframe calculated in years shall end in the respective month and day of the last year of the timeframe.

4. The time frame calculated in months shall end on the respective day of the last month of the timeframe.

5. An action for which a timeframe is set may be performed by the end of the last business day of the timeframe, and if the action is performed through a bank transfer, mail and/or electronic means, the action may be performed by 24:00 of the last day of the timeframe.

6. If the last day of the performance of the action coincides with a non-business day, the timeframe for the action shall be extended to the end of the next business day, and where the action is performed through a bank transfer, mail and/or electronic means, the action may be performed by 24:00 of the next business day.

7. A calendar year shall be the period from 1 January through 31 December of any year; for a newly registered taxpayer a calendar year shall be the period from the registration date through 31 December of the same year, unless otherwise provided for by this Code.

8. A year (other than a calendar year) is a period consisting of any consecutive 12 calendar months.

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Article 4 – Period of limitation

1. The period of limitation for assessing taxes to a taxpayer and for submitting a notice of tax liability to the taxpayer shall be three years, unless otherwise provided for by this Code.

2. The period referred to in the first paragraph of this article shall commence from the end of the calendar year in which the respective tax liability arose.

3. The period of limitation for imposing sanctions (other than a penalty) under this Code on a taxpayer and for submitting a relevant tax notice to a taxpayer shall be three years, unless otherwise provided for by this Code.

4. The period referred to in the third paragraph of this article shall commence:

a) from the end of the calendar year in which the tax offence was committed, except as provided for by subparagraph (b) of this paragraph;

b) from the end of the calendar year in which the tax liability arose, if the calculation of the amount of the sanction provided for in this Code is related to the amount of the tax liability.

5. The period of limitation for a tax audit of taxpayers shall be three years, unless otherwise provided for by this Code.

6. The period referred to in the fifth paragraph of this article shall commence from the end of the calendar year in which the audit takes place.

7. The period of limitation referred to in the first, third and fifth paragraphs of this article shall be extended for one year if less than a year remains before the expiry of the period and the taxpayer has filed with a tax authority a taxpayer’s claim or a tax return (including an adjusted tax return) for the relevant period.

8. The period of limitation for a taxpayer to file a taxpayer claim with a tax authority shall be three years, which will be calculated from the end of a calendar year in which the right to refund for the sum of any overpaid tax and/or sanction (including customs sanction) arose.

9. The period of limitation for serving an individual administrative-legal act on  tax enforcement measures as provided for in  this Code to a taxpayer, registration authority or banking institution shall be three years, commencing from the end of the calendar year in which the tax arrears were incurred.

10. In the cases provided for in the ninth paragraph of this article, the period of limitation for serving an individual administrative-legal act shall be suspended:

a) upon entry into force of a court decision on admitting a person’s application for insolvency, or on initiating bankruptcy proceedings, or  from  the moment of entry into force of a court decision/ruling on rehabilitation up to the end of the relevant regime;

[a) from the entry into force of a court decision on recognising as admissible a person’s application for insolvency, and of the ruling on commencing the bankruptcy regime, or  of the ruling on commencing the rehabilitation regime till the end of an appropriate regime; (Shall become effective from 1 April 2021)]

b) during the period of restructuring a person’s tax arrears in accordance with the procedure laid down by the Law of Georgia on Restructuring Tax Arrears and State Loans;

c) during a tax dispute.

11. The periods of limitation under this article shall not apply where court/dispute resolution body decisions are enforced by a tax authority.

12. When the loss is carried forward for 3 years or more, the period of limitation under paragraphs 1, 3 and 5 of this article in relation to the tax liabilities of a calendar year the loss was incurred, the amount of which is affected by such loss shall be extended and it shall exceed the loss carry forward period by one year. In such a case, the period of limitation shall be counted from the end of the calendar year the loss was incurred.

13. The period of limitation under paragraphs 3 and 5 of this article for submitting a tax notice to a tax payer shall not be considered laches if a tax authority has posted the tax notice on the tax payer’s authorised user web page before expiry of the period of limitation.

Law of Georgia No 5942 of 27 March 2012 – website, 12.4.2012

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 189 of 28 December 2012 – website, 29.12.2012

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 3581 of 1 May 2013 – website, 15.5.2015

Law of Georgia No 3583 of 1 May 2013 – website, 15.5.2015

Law of Georgia No 4680 of 18 December 2015 – website, 29.12.2015

Law of Georgia No 1182 of 30 June 2017 – website, 13.7.2017

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Law of Georgia No 7169 of 18 September 2020 – website, 25.9.2020

Article 5 – Principles of the tax legislation of Georgia

1. A person shall pay national and local taxes established under this Code.

2. No tax obligation introduced in violation of this Code or not provided for in this Code may be imposed on a person. No person may be forced to pay taxes earlier than required by this Code.

3. A municipality representative body may introduce only the local tax provided for by this Code.

Law of Georgia No 6942 of 15 July 2020 – website, 28.7.2020

Article 6 – Concept and types of taxes

1. A tax is a mandatory, unconditional monetary payment to the budget made by a taxpayer in accordance with this Code, based on the necessary, non-equivalent and gratuitous character of the payment.

2. Taxes shall be national and local.

3. National taxes shall be the taxes provided for under this Code, the payment of which is mandatory across the whole territory of Georgia.

4. A local tax shall be a tax imposed by this Code  and introduced by a normative act of the municipality representative body – Sakrebulo (within marginal rates), the payment of which is mandatory within the administrative boundaries of the municipality concerned.

5. National taxes shall be:

a) income tax;

b) profit tax;

c) value added tax (VAT);

d) excise tax;

e) import duty;

6. A property tax shall be a local tax.

Law of Georgia No 6942 of 15 July 2020 – website, 28.7.2020

Article 7 – imposing and introducing a local tax; changing its payment conditions and abolishing the tax

1. A municipality representative body may introduce a local tax imposed by this Code as a flat rate tax within the administrative boundaries of the municipality and/or according to individual branches and/or types of businesses within the administrative boundaries of the municipality, within the marginal rates set by this Code.

2. A municipality shall forward information on introducing a local tax, changing its payment conditions or on abolishing the introduced local tax and a copy of the relevant normative act upon publication to the Revenue Service of Georgia and to the appropriate tax authorities.

Law of Georgia No 189 of 28 December 2012 – website, 29.12.2012

Law of Georgia No 6942 of 15 July 2020 – website, 28.7.2020

Chapter II – Terms and Concepts Used in This Code

Article 8 – Definition of terms

1. Non-depreciable fixed asset – a fixed asset not losing its value during the process of operation.

2. Intangible asset – an identifiable non-monetary asset without physical substance used by a person for manufacturing goods, supplying goods/rendering services, leasing it to others and/or for administrative purposes. Intangible assets include: copyright, patent, trademark, goodwill, software, licence, leasehold, franchise, mining rights, special import and export rights and other similar intangible assets.

3. Indirect tax – a tax (value added tax, excise tax, import duty) imposed as an addition to the price of goods supplied (imported) and/or services rendered and that is paid by a consumer (importer) when purchasing (importing) goods and/or services at the price increased by such tax. The obligation to pay an indirect tax to the budget is imposed upon the supplier (importer) of goods and/or services who is referred to as a taxpayer for the purposes of this Code.

4. Non-resident – a person who is not a resident.

5. Acknowledged tax arrears – tax arrears if:

a) the basis of tax assessment is a tax return/customs declaration;

b) a person has failed to appeal a tax notice issued by a tax authority, or the decision of a dispute resolution authority, within the timeframe set by this Code;

c) the Revenue Service and a taxpayer have signed an  agreement to reduce tax arrears;

d) a court decision on the lawfulness of the tax assessment has taken effect;

e) a person, by a written/electronic application, has refused to appeal against the decision of a tax dispute resolution body;

f) a person has submitted a written application to a tax authority under the procedure determined by the Minister of Finance of Georgia for refusing to appeal the tax notice.

6. Biological asset – an animal or a plant.

6¹. Agricultural activity – activity under International Accounting Standards 41.

6². Agricultural produce – produce obtained from agricultural activity. At the same time, changing of a commodity classification code as a result of biological transformation or harvesting product from a biological asset (detachment of produce or the cessation of the life process of a biological asset) shall not be considered as industrial processing (changing commodity classification code) of agricultural produce.

6³. Agricultural cooperative – a legal person that has been granted the status of an agricultural cooperative under the Law of Georgia on Agricultural Cooperatives.

7. International Accounting Standards (‘IAS’) – the standards approved by the International Accounting Standards Committee and introduced for application under the resolution of the Commission of Accounting Standards of the Parliament of Georgia.

8. Administration of taxes – a set of forms, methods and rules employed by tax authorities when enforcing the tax legislation of Georgia to ensure the computation, payment and declaration of taxes, as well as tax control, registration and notification of taxpayers, and the fulfilment of tax liabilities.

9. Taxpayer identification number – a number allocated to a taxpayer under the tax legislation of Georgia.

10. Long-term contract – a contract that is not completed in the same calendar year in which the services under the contract commence and when it contracts for the manufacture, installation, construction or delivery of services related to those activities, except for  a contract that expires within six months after the commencement of the services under the contract.

11. Shortage – shortage of inventory and/or fixed assets identified during the comparison (including by means of stock-taking) of inventory and/or fixed assets with a taxpayer's accounting records. Shortage in connection with inventory that cannot be physically warehoused (electric and thermal energy, gas and water) shall be the difference between the purchased (according to proof of purchase documents) and the sold (actually released from a taxpayer) inventory, provided that the customer (payer) and/or the person misappropriating the inventory and/or fixed assets cannot be identified. At the same time, a competent authority may set a maximum amount of loss. In such case, the loss in excess of that amount shall be deemed as shortage. In the case of stamping/marking of the goods in immaterial form in accordance with procedures determined by the tax legislation of Georgia, the loss identified by the manufacturer in the process of manufacturing shall not be deemed as shortage.

12. Dividend – any income (including interest from preference shares) earned by a shareholder/interest-holder from shares or rights (interests) as a result of a distribution of profits made by a legal person to its shareholders/interest-holders in proportion, or not in proportion, to their shares/rights in the capital. Where a repo agreement, securities lending and financial collateral are involved, a compensatory amount received by a seller/lender from a buyer/lendee, which is the dividend actually received from the securities during the validity period of such transaction. In addition, dividends shall not include:

a) payments (disbursements) made in cash or in kind at the time of liquidation of a legal person or at the time of buying out shares/interest, which does not exceed the amount of the contribution made by a shareholder/interest-holder to the capital (authorised and additional paid-in capital);

b) payment made to a shareholder/interest-holder of a legal person by transferring the shares/interest of the same legal person into ownership, except for transferring by a resident legal person the equity securities issued through a public offering in Georgia and allowed for trading on an organised market recognised by the National Bank of Georgia.

13. (Deleted – 23.12.2017, No 1935).

14. Compensation – property and/or benefit received by a person in compensation for the supply of goods, rendering of services, costs, loss or shortage.

15. Tangible asset – any asset that is not an intangible asset.

16. Family – a person, his/her spouse, minor children and step-children, as well as parents, children and step-children, sisters, brothers, grandmothers, grandfathers, grandchildren permanently living with the person while maintaining a common household. For the purposes of this Code, a taxpayer shall unconditionally define the circle of persons (from the above ones) who live with him/her permanently and maintain a common household.

17. Partner – a partner, a shareholder, a limited partner, a general partner, a member of a cooperative under the Law of Georgia on Entrepreneurs.

18. Person – a natural or legal person under the Civil Code of Georgia, an enterprise, or an organisation under the Tax Code of Georgia.

19. Interest – any pre-declared (established) income (including that received as a discount) from any debt claim related to cash investments or debt obligations (whether backed by mortgage or securitised in any other way). At the same time, for the purposes of this paragraph:

a) debt obligations shall not include debt obligations arising from the supply of goods and/or rendering of services, or obligations arising from guarantee and/or surety and/or other similar transactions;

b) the following shall be regarded as interest:

b.a) insurance compensation (amount) paid by the insurer to the insured under a pension insurance contract minus the insurance premiums paid for receiving such compensation;

b.b) an amount payable in respect of a credit (loan), deposit, bond;

b.c) income from government securities and bonds, including the premiums and profits accrued on them;

b.d) part of the sum of a difference between the securities supply price and purchase price, in the amount of an unpaid interest accrued on the securities before the moment of their supply;

b.e) within a repo agreement, a difference between the loan securities selling price and a pre-agreed redemption price of this or other equivalent loan securities;

b.c) within a repo agreement, securities lending or financial collateral, a sum of payment received by a seller/lender from a buyer/lendee, which is an interest accrued on the securities within the validity period of this transaction and actually received by the buyer;

c) a penalty for delayed payment or delayed delivery shall not be regarded as interest.

20. Resident – a resident natural or legal person (a Georgian enterprise or a Georgian organisation).

21. Royalty:

a) a fee for the right to use subsoil in the course of extracting minerals and processing anthropogenic formations;

b) income received for the right to use copyrights, software, patents, drawings, models, trademarks or other intellectual property  or for transferring the right to another person;

c) income received for the right to use industrial, trade or research equipment or for transferring the right to another person;

d) income received for the use of know-how;

e) income received for the right to use cinematograph films, video films, audio records or other recording devices or for transferring the right to another person;

f) income received for the right to use a secret formula or process, as well as information containing industrial, commercial or scientific experience or for transferring the right to another person;

g) income received for providing technical assistance in connection with the rights provided for in this paragraph or from the waiver of these rights.

22. Accounting documents – source documents (including tax source documents), ledgers and other documents on the basis of which objects of taxation and objects related to taxation are determined and tax liabilities are established.

23. Tax arrears – the difference between the amount of taxes and/or sanctions (including a customs sanction) not paid within the set time limit by a taxpayer and the overpaid amount of taxes and/or sanctions (including a customs sanction).

24. Foreign Economic Activity Commodity Nomenclature – a system of commodity classification codes, adopted under the International Convention on Harmonization of Commodity Description and Coding System.

25. International carriage – any carriage of passengers, goods (including mail), by road, rail, sea, river or air, between two points located in different States, one of which is Georgia. At the same time, international carriage shall not include:

a) carriage performed only between the points outside the territory of Georgia or only between the points within the territory of Georgia;

b) transportation of goods through pipelines or power transmission lines.

26. additional paid-in capital – the difference between the amount received or receivable by an enterprise from an initial public offering of shares and the total nominal value of those shares, as well as the excess of the value of non-cash contributions made at the moment of founding of an entrepreneurial company over the agreed upon amount.

27. Profit received from a person engaged in gambling business – income that is a positive difference between the amount received by a natural person (player) from one ticket, counter, coin and/or other means of gambling and games of chance and the amount of the stake and/or the cost of the item.

28. Inventory – raw materials, materials, semi-finished goods, spare parts, containers and finished products (goods) used by a person in the ordinary course of business under International Accounting Standards.

29. Bad debt – claim or part of it recognised by a taxpayer as a result of the sale of goods and/or services or as a result of the prepayment made in respect of such sale, the due date of which has expired and which has not been paid by the end of the current tax year, and at the same time one of the following documents are available:

a) a legally effective court/arbitration decision on refusal to satisfy the claim;

b) a notice issued by an enforcement agency regarding the non-receipt or partial receipt by a creditor of the amount payable to him/her as a result of the enforcement of a writ of execution;

c) a court’s legally effective ruling on admitting an application for insolvency proceedings, initiating bankruptcy proceedings and/or rehabilitation in relation to the relevant person, unless the judge has recognised the creditor’s claim;

[c) a legally effective court ruling on recognising as admissible an application for insolvency, on commencing the bankruptcy or the rehabilitation regime in relation to a person in question, unless the judge has recognised the creditor’s claim; (Shall become effective from 1 April 2021)]

d) a notice of revocation of registration issued by the Register of Entrepreneurial and Non-entrepreneurial (Non-commercial) Legal Entities or a death certificate.

30. Property – assets of every kind both tangible and intangible, which can be purchased, possessed, managed and used by persons without limitation.

31. Fixed asset – a tangible asset that a person uses for manufacturing goods, supplying goods/rendering services, for renting out (including leasing out) and/or for administrative purposes, the useful life of which is longer than a year.

32. Fixed asset repair costs – costs, which increase the initial (original, standard) efficiency of fixed assets (including, modification (reconstruction) of the elements of buildings and structures to prolong their useful life and increase their efficiency; improvement of the parts of equipment and machinery to increase their efficiency, and introduction of new production processes), other than current maintenance costs, which are incurred in relation to restoring and maintaining the initial efficiency of the fixed assets.

33. Entertainment expenses – expenses incurred by a person within the scope of economic activity, which include:

a) expenses (for juices, mineral waters, soft drinks, tea, coffee, breakfast, lunch, dinner, banquet) related to events (presentations, receptions) arranged on behalf of a person;

b) expenses for excursions and cultural and entertainment events;

c) souvenir costs;

d) guest service costs, including:

d.a) consular service (visa processing and extension) costs;

d.b) costs of meeting and departure at an airport (VIP Hall service);

d.c) transportation costs;

d.d) hotel service (reservation, accommodation) costs;

d.e) costs related to receptions and parties (juices, mineral waters, soft drinks, tea, coffee, breakfast, lunch, dinner, and banquets).

34. Net assets –difference between a person's assets and liabilities.

35. A virtual zone person – a legal person engaged in IT activities and holding an appropriate status.

36. Information Technologies (IT) – studying, supporting, developing, designing, producing and introducing computer information systems, as a result of which software products are obtained.

37. Tourist zone entrepreneur – a person (entrepreneurial entity) who builds a hotel and ensures its operation under the Law of Georgia on Promoting the Development of Free Tourist Zones.

38. Leasing – leasing within the meaning of the Civil Code of Georgia, if the leased item is a depreciable asset.

39. Leasing Company – an enterprise whose income from leased out property during a calendar year is at least 70% of its income.

40. Donation – goods/services, including funds received by an organisation as gifts.

41. High-mountain settlement – a high-altitude settlement as defined by the Law of Georgia on the Development of High-mountain Areas.

42. High-mountain settlement enterprise – an enterprise/individual entrepreneur that carries on business in a high-mountain settlement and enjoys the status of a high-mountain settlement enterprise under the Law of Georgia on the Development of High-mountain Areas.

43. Net profit – any profit that can be distributed as dividend, under the procedure established by the legislation of Georgia.

44. Income – any income according to the international accounting standards.

45. Loan provider – an entity providing loans under the Organic Law of Georgia on the National Bank of Georgia.

46. Taxation year – a calendar year.

47. Import – placement of goods under the Release for free circulation procedure in accordance with the Customs Code of Georgia.

48. Temporary admission – placement of goods under the temporary admission procedure in accordance with the Customs Code of Georgia.

49. Customs sanction – a measure of liability for a customs offence provided for by the Customs Code of Georgia.

50. Export – placement of goods under the export procedure in accordance with the Customs Code of Georgia;

51. Repo agreement, reverse repo agreement – a transaction defined by the Law of Georgia on Financial Collateral, Mutual Deduction and Derivatives, if the transaction has been concluded in compliance with market principles, securities are redeemed during 12 months from their sale and this transaction provides for payment by the buyer to the lender of an interest accrued on the securities and actually received during the validity period of the agreement, a dividend (voucher) or any other distribution, which means the equivalent payment thereof.

52. Securities lending – a transaction defined by the Law of Georgia on Financial Collateral, Mutual Deduction and Derivatives, if the transaction has been concluded in compliance with market principles, securities are returned during 12 months from their primary supply and this transaction provides for payment by the lendee to the lender of an interest accrued on the securities and actually received during the validity period of the agreement, a dividend (voucher) or any other distribution, which means the equivalent payment thereof.

53. Financial collateral – a transaction defined by the Law of Georgia on Financial Collateral, Mutual Deduction and Derivatives.

54. Derivative – a transaction defined by the Law of Georgia on Financial Collateral, Mutual Deduction and Derivatives.

Law of Georgia No 4061 of 15 December 2010 – LHG III, No 75, 27.12.2010, Art. 469

Law of Georgia No 4705 of 20 May 2011 – website, 1.6.2011

Law of Georgia No 4754 of 14 June 2011 – website, 28.6.2011

Law of Georgia No 5118 of 13 October 2011 – website, 31.10.2011

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 5452 of 9 December 2011 – website, 22.12.2011

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 5942 of 27 March 2012 – website, 12.4.2012

Law of Georgia No 189 of 28 December 2012 – website, 29.12.2012

Law of Georgia No 817 of 12 July 2013 – website, 5.8.2013

Law of Georgia No 906 of 30 July 2013 – website, 20.8.2013

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 3581 of 1 May 2015 – website, 15.5.2015

Law of Georgia No 4037 of 16 July 2015 – website, 28.7.2015

Law of Georgia No 4680 of 18 December 2015 – website, 29.12.2015

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 1182 of 30 June 2017 – website, 13.7.2017

Law of Georgia No 1935 of 23 December 2017 – website, 29.12.2017

Law of Georgia No 4225 of 27 December 2018 – website, 31.12.2018

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Law of Georgia No 5677 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Law of Georgia No 7169 of 18 September 2020 – website, 25.9.2020

Article 9 – Economic activity

1. Any activity shall be considered economic activity if it is performed to gain income or compensation, irrespective of the result of the activity, unless otherwise provided for by this Code.

2. The following shall not be economic activity:

a) activity of public authorities, national regulatory and municipality bodies, which is directly related to the performance of the functions assigned to them under the legislation of Georgia, other than the delivery of paid services under a contract;

b) charitable activity;

c) religious activity;

d) hired work;

e) placement of funds by natural persons into deposit accounts with banks and other credit institutions;

f) types of activities and/or operations and/or a set of operations defined by order of the Minister of Finance of Georgia, in agreement with the Financial-Budget Committee of the Parliament of Georgia.

3. Free delivery of goods/services shall be deemed as economic activity if performed by:

a) an enterprise;

b) an entrepreneur natural person within the framework of the activity specified in Article 1(2) and (3) of the Law of Georgia on Entrepreneurs.

Law of Georgia No 1588 of 20 November 2013 – website, 3.12.2013

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Law of Georgia No 6942 of 15 July 2020 – website, 28.7.2020

Article 10 – Charitable activity

1. Charitable activity includes:

a) disinterested and voluntary assistance rendered directly or through a third person, to persons who need such assistance, including:

a.a) to natural persons in need of social protection, medical assistance, as well as low-income natural persons, including: persons with disabilities, the elderly, orphan children, those that have lost breadwinners, persons with international protection and internally displaced persons – ill persons, large families and their members, victims of wars, armed conflicts, accidents, natural disasters, catastrophes, epidemics and/or epizooties.

a.b) to organisations providing services to children, the elderly and persons with disabilities, including fostering institutions, residential schools, boarding schools, early and preschool fostering and educational institutions and other children facilities, soup kitchens for serving the elderly, medical institutions, and rehabilitation centres;

a.c) to charitable organisations;

a.d) to religious organisations;

a.e) to specially gifted natural persons – to develop their talent;

a.f) to penitentiary institutions – to improve care and medical services of persons placed in these institutions;

a.g) to persons engaged in the activity provided for in paragraph 1(b) of this article;

b) the performance of socially beneficial activities by organisations in the following spheres: protection of human rights, protection of environment, development of democracy and civil society; culture, education, science, healthcare, social protection, physical education, amateur sports, and art.

2. Charity shall not include activities referred to in the first paragraph of this article if the activities are:

a) performed by the state and municipality bodies;

b) performed to support an enterprise, a political party or any other person participating in elections;

c) performed by a natural person for his/her own relatives or by a legal person for the heads of its management bodies and their relatives;

d) regarded as sponsorship by the Law of Georgia on Advertising.

Law of Georgia No 5371 of 6 December 2011 – website, 20.12.2011

Law of Georgia No 3530 of 1 May 2015 – website, 18.5.2015

Law of Georgia No 5372 of 8 June 2016 – website, 24.6.2016

Law of Georgia No 57 of 1 December 2016 – website, 15.12.2016

Law of Georgia No 499 of 23 March 2017 – website, 27.3.2017

Law of Georgia No 6942 of 15 July 2020 – website, 28.7.2020

Article 11 – Religious activity

1. Religious activity shall be the activity of duly registered religious organisations (associations) aimed at disseminating religion and belief, including by means of:

a) organising and holding religious rites, ceremonies, prayers and other religious acts;

b) giving opportunity to believers to have or use buildings of worship or ceremonial structures to satisfy religious needs, both jointly and individually;

c) organising reception and departure of religious delegations, pilgrims, representatives of different confessions, organising national and international religious conferences, congresses and seminars, providing hotel (or other) accommodation, transport, food and cultural services to the participants  during such events;

d) maintaining monasteries, minsters, theological educational institutions, teaching students and listeners of those theological educational institutions, maintaining charitable organisations (hospitals, shelters, nursing homes for the elderly and disabled), as well as other similar statutory activities under canonical rules.

2. The activity of the enterprises of those religious organisations (associations) that publish religious (religious service) literature or produce objects of religious significance shall be treated as religious activity; the activity of these organisations (associations) or of their enterprises that is related to the sale (dissemination) of religious (religious service) literature or objects of religious significance; as well as the use of funds derived from such activity to perform religious activity.

Article 12 – Hired work

1. Hired work shall mean:

a) performance of obligations by a natural person within the scope of the relations governed by the labour legislation of Georgia and/or of a foreign country;

b) performance of an obligation by a natural person, which is related to his/her service in the defence forces, law enforcement bodies of Georgia and other equivalent bodies;

c) holding the position  the head (director) of an enterprise (organisation) by a natural person or carrying out the duties of the head (director) of an enterprise or an organisation;

2. For the purposes of this Code, a hired natural person shall be referred to as an employee, a person paying compensation for the work performed by such natural person shall be referred to as an employer and such compensation shall be referred to as a salary.

3. The employer shall enter information about the hired persons provided for in this article into the register of hired persons, which is maintained by the Revenue Service.

4. The list of information to be entered into the register of hired persons and the procedure for entering information shall be defined by an order of the Minister of Finance of Georgia.

Law of Georgia No 3600 of 31 October 2018 – website, 21.11.2018

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 13 – Goods

1. Goods shall be a tangible or an intangible property, including electric and thermal energy, gas and water.

2. (Deleted – 14.7.2020, No 6817).

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 14 – Service

1. Activity that is not a supply of goods shall be regarded as service. Unless otherwise provided for by the tax legislation of Georgia, service shall include:

a) construction and installation;

b) repair;

c) restoration;

d) development;

e) geological and exploratory activities;

f) transportation, including transportation of gas, oil, oil products, electric and thermal energy;

g)  property letting, renting  or leasing;

h) intermediary’s activities;

i) personnel selection;

j) transfer of the right to use patents, certificates, licenses, trademarks, service marks, intellectual property and other personal non-property rights;

k) fulfilment of obligations – acting or refraining from action;

l) communication service, household and public utility services;

m) advertising services;

n) innovative services;

o) financial transactions and/or financial service;

p) insurance service;

q) consulting, legal, accounting, audit and marketing services;

r) data processing and information support services;

s) service for preparing goods for sale, including breaking down of a consignment, forming for shipment, sorting, packing, repacking, bottling;

t) service for storing goods or other property;

u) security service;

v) production of goods or other property with the client's raw materials (materials);

w) cargo-handling service, including forwarding, loading, unloading and transhipment services;

x) service for seagoing ships, including port service, port vessels service;

y) service for aircraft, including air navigation services provided in Georgian airports, airspace and cosmic space;

z) other services.

2. Production of goods with the client's raw materials (materials) shall be any  production of goods, including preparation, processing, treatment of goods or other transformation of the raw materials (materials), in the process of which the owner of both the raw materials (materials) and of the final product is the person who supplied the raw materials (materials) and paid, in cash or in kind, the cost of the service related to the production of goods with such raw materials (materials) (irrespective of whether in the production of such goods the producer used its own raw materials (materials), component or other parts, the cost of which was included in the cost of the service related to such production).

Law of Georgia No 5118 of 13 October 2011 – website, 31.10.2011

Law of Georgia No 5503 of 22 June 2016 – website, 12.7.2016

Article 15 – Financial instruments, financial transactions, financial services

1. A financial instrument shall be an agreement (contract) that gives rise to both financial asset of one person and financial liability of another person. It shall include: funds (cash or non-cash), loans (credits), loan obligations, promissory notes and securities, shares in capital, shares, bonds and such derivatives as: options, futures, forwards, swaps, etc. Financial instruments shall also include any agreement between two entities (contracting parties) that is denominated in money and permitted by the legislation of Georgia. At the same time, if goods and/or services, except for financial transactions and supply of services, are supplied under that agreement or at any stage of the operation of that agreement, between the holders of that financial instrument and/or for/from third persons, the agreement shall no longer be considered a financial instrument after such supply.

2. The following shall be considered financial service/transaction:

a) opening, managing, closing any type of account (including current, settlement, deposit, brokerage, etc. accounts), as well as using any payment instrument, including processing/executing transfer orders in the payment system, as well as carrying out clearing and cash or non-cash settlements (including collection services);

b) circulation of financial instruments and cash or non-cash transactions relating to the circulation, as well as the use of any payment instrument;

c) obtaining/issuing/transferring, syndicating,  structuring, managing and using a credit (loan), including actions taken to secure a credit (loan) (pledging property/assets, re-selling the credit risk to a third person in whole or in part, issuing/certifying/managing/using guarantees or similar financial instruments or acquiring/being the beneficiary of such instruments), credit (loan) servicing (payment of interest and principal), factoring, and receiving interest and credit (principal) payments on a credit (loan);

d) transactions related to the issue, acquisition, circulation and/or supply (including in the future) of shares in capital, shares, bonds, certificates, promissory notes and other securities, including transactions carried out to ensure their circulation;

e) issue of funds, securities and/or other financial instruments, their management (including formation of pension and investment funds or other collective or individual savings plans, as well as accumulation of financial instruments in them), use, placement (including with the third persons on a guaranteed or non-guaranteed basis), receipt/transfer into nominal holding, lending/borrowing on temporary (repo) basis, administration, including registration (opening/maintenance of a register), transfer, blocking/unblocking, encumbering/releasing of encumbrance, other depositary (including of a special depositary) and custodian (safekeeping and recording) transactions, establishing their fair value, and issue/receipt/management of financial collaterals;

f) acting as a guarantor (including as a third party) for the transaction terms and settlements of financial instruments;

g) corporate transactions, in particular, splitting or consolidation of stocks and shares in capital, increase/reduction of capital (including issuing, acquiring/alienating and circulating the right of participation in the increase of capital), merger of two or more legal persons, division of a legal person into two or more legal entities, liquidation of a legal entity, services related to accrual/accounting for and payment of dividends (in monetary or any other form allowed by law);

h) insurance and/or re-insurance, including the accompanying services provided by an insurance broker and/or an insurance agent;

i) service of a payment service provider and a payment system operator in accordance with  the Law of Georgia on Payment System and Payment Service;

j) service directly linked with any financial service/transaction provided for in this paragraph.

3. (Deleted – 14.7.2020, No 6817).

4. In the case of a joint ownership (partnership) provided for by this Code, an owner’s interest in the joint ownership shall be treated as a financial instrument if no property is attached to it or if the property is not registered in the owner’s name; also, if the right to a property is registered in advance, the right shall be a financial instrument.

Law of Georgia No 6312 of 25 May 2012 – website, 12.6.2012

Law of Georgia No 5677 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 16 – Supplying goods, delivering services

1. Transfer of title to goods to another person for consideration or free of charge (including sale or exchange of goods, reimbursement by wages or in kind) shall be deemed as supply of goods.

2. Performance by a person of an action, which is not a supply of goods, for another person on his/her own will, for consideration, or for free shall be considered provision of services.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 17 – (Deleted)

Law of Georgia No 5118 of 13 October 2011 – website, 31.10.2011

Article 18 – Principle of determining the price of goods/services

1. The actual price of goods/services in a transaction shall be used for taxation purposes, unless this Code provides for the application of a market price or any other price.

2. The market price of goods/services shall be the price formed as a result of interaction of demand for and supply of identical (in the absence of such – similar) goods/services on the market of goods/services and on the basis of a transaction between the persons on the relevant market who are not related parties under Article 19 of this Code. The transaction between related parties shall be taken into account only if the existence of related parties does not affect the results of the transaction.

3. The market price of goods/services shall be determined on the basis of information on transactions made on the market on identical (similar) goods/services at the moment of supply of these goods/services (in the absence of such, on the calendar day closest to the moment of sale that precedes or follows, the moment of sale of such goods/services by maximum 30 calendar days), including the information on the prices fixed at international and other exchanges.

4. The market of goods/services shall be the area of circulation of these goods/services that is determined by a seller's/buyer's ability to sell/buy, without significant costs, goods/services in the territory nearest to the seller/buyer within or outside the borders of Georgia.

5. If there is no transaction on identical (similar) goods/services on the market of goods/services or there is no supply of such goods/services on that market, the market price of goods/services shall be determined by the prices established on the basis of transactions concluded on identical (similar) goods/services on the calendar day closest to the moment of sale of goods/services. The calendar day must precede or follow the moment of sale of such goods/services by maximum 30 calendar days.

6. Where the provisions of paragraphs 1 through 5 of this article cannot apply, the market price of goods/services shall be established using methods for determining expenditure, possible sales price or receivable benefit.

7. Official sources of information on the market prices of goods/services, the database of the relevant government authorities, the information submitted to tax authorities by taxpayers, as well as other reliable information shall be used to calculate the market price of goods/services. 

8. From 1 September 2007, when supplying natural gas under the Law of Georgia on Energy and Water Supply, the market price for tax purposes shall be the price determined (including under the concluded agreement) by the Government of Georgia.

9. Market price of goods/services may be wholesale or retail.

10. An exchange (barter) transaction on goods/services shall be regarded as the sale of goods/services at market price for each party supplying goods/services, and for each recipient of goods/services an exchange (barter) transaction on goods/services shall be regarded as the purchase of goods/services at the same market price.

11. A tax authority may apply a market price for taxation purposes, if:

a) a transaction is carried out between related parties except where the existence of related parties does not affect the results of such transaction;

b) a tax authority proves, in the manner prescribed by the Minister of Finance of Georgia, that the price stated between the parties to the transaction differs from the actual price;

c) a person delivers goods and/or services to a tourist zone entrepreneur.

12. Identical goods are various goods having similar characteristics, in including physical characteristics, quality, reputation on market, country of origin and/or manufacturer.

13. Similar goods are various goods, which are not identical but have like characteristics and like component materials, which enable them to perform the same functions and be commercially interchangeable.

14. For the purposes of paragraph 11(a) of this article, the Minister of Finance of Georgia may specify the cases, where the existence of related parties does not affect the results of a transaction concluded between them.

15. For the purposes of the eleventh paragraph of this article, the existence of related parties shall be deemed not to have affected the outcome of a transaction, if the supply of foreign goods between a special trading company and its related party was performed in a customs warehouse at customs value.

Law of Georgia No 4061 of 15 December 2010 – LHG III, No 75, 27.12.2010, Art. 469

Law of Georgia No 5120 of 13 October 2011 – website, 19.10.2011

Law of Georgia No 5942 of 27 March 2012 – website, 12.4.2012

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 5651 of 20 December 2019 – website, 27.12.2019

Article 19 – Related parties

1. Parties shall be regarded as related if the existence of a special relationship between them may affect the conditions or economic results of their activity or the activity of the persons that they represent.

2. Special relationships shall be the relationships, where:

a) persons are the founders (participants) of one enterprise, provided their combined share is at least 20%;

b) one person has a direct or indirect interest in another person’s enterprise, provided such participation  is at least 20%;

c) a person controls the enterprise;

d) a natural person is subordinated to another natural person;

e) one person directly or indirectly controls another person;

f) the persons are controlled, directly or indirectly, by a third person;

g) the persons jointly control, directly or indirectly, a third person;

h) the persons are relatives;

i) the persons are members of a partnership.

3. For the purposes of the tax legislation of Georgia, a natural person’s relatives shall be:

a) the first line of relatives: spouse, parent, child, sister, brother;

b) the second line of relatives: spouse, parent, child, sister, brother of each relative in the first line, except for the natural person who already belongs to the first line;

c) persons who are related to one other as parents and children as a result of long-term guardianship.

4. In determining kinship, step sisters (brothers) shall be treated as equal to full sisters (brothers) and adoptees shall be treated as equal to biological children. At the same time, guardianship relations shall be regarded as equal to a family unity (where persons are related to one another as parents and children) which, in turn, shall be deemed equal to kinship relationship. Termination of family unity between these persons shall not be taken into account if a parent-and-child relationship between them is maintained under paragraph 3(c) of this article.

5. For the purposes of this article, control shall mean: a supervisory board membership, directorship and the right to appoint persons to such offices; holding 20% of voting share or interest.

6. For the purposes of this article, a natural person shall be an indirect holder of the interest if his/her relative holds this interest.

SECTION II

TAXPAYERS, WITHHOLDING AGENTS, ENTERPRISES, ORGANISATIONS, NATURAL PERSONS

Chapter III – Natural Persons, Enterprises, Organisations

Article 20 – Taxpayers, withholding agents

1. A taxpayer shall be a person who is obligated to pay taxes provided for by this Code.

2. A withholding agent shall be a person who must fulfil a taxpayer's tax obligation in the cases and in the manner provided for by this Code.

3. For the purposes of this Code, a withholding agent shall be treated as equal to a taxpayer.

Article 21 – Enterprise

1. The following entities conducting or created to conduct economic activities shall be regarded as enterprises:

a) legal entities established under the legislation of Georgia;

b) corporations, companies, firms and similar entities established under the legislation of a foreign country, irrespective of whether they have legal entity status, as well as a permanent establishment of a foreign enterprise.

c) associations, partnerships and similar entities not provided for in subparagraphs (a) and (b) of this paragraph.

2. An individual entrepreneur shall not be regarded as an enterprise.

Article 22 – Georgian enterprises and foreign enterprises

1. A Georgian enterprise shall be an enterprise whose place of business and/or management is based in Georgia.

2. A foreign enterprise shall be an enterprise that is not a Georgian enterprise under this article.

Article 23 – International company

1. An international company shall be an enterprise of Georgia, which performs activities defined by an ordinance of the Government of Georgia and earns income solely from these activities.

2. The status of international company shall be granted to an entity by the Government of Georgia.

3. Performance by an international company of the activities not defined by an ordinance of the Government of Georgia shall entail cancellation of the status of international company for it as of the date the status was granted.

4. An international company may not be set up within a Free Industrial Zone (FIZ).

5. (Deleted – 14.7.2020, No 6817).

6. (Deleted – 14.7.2020, No 6817).

7. The income earned as a result of working for hire at an international company shall be taxed at 5%.

8. A dividend paid by an international company shall not be taxed at the source and shall not be included in the gross income of a person receiving the dividend.

9. The object of profit taxation for an international company shall be defined under Article 97(1) of this Code.

10. The profit tax rate for an international company shall be 5%.

11. The amount of taxable profit of an international company shall be calculated by dividing the amount of payment made/cost incurred according to the object of taxation by 0.95.

12. If the expenses defined by an ordinance of the Government of Georgia are borne in Georgia, an international company may, under the procedure determined by the Minister of Finance of Georgia, reduce the sum subject to profit taxation by the amount of the expenses.

13. An international company shall be exempt from property (except for land) tax if that property is intended or used for the performance of activities allowed by the ordinance of the Government of Georgia.

14. The procedure for communicating information about employees to a tax authority, and for enjoying the privilege provided for by paragraph 7 of this article shall be established by the Minister of Finance of Georgia.

15. The procedure for granting and cancelling the status of international company for an entity, and the types of activities allowed for an international company shall be determined by the Government of Georgia.

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

23¹ – Investment funds

1. An investment fund shall be an enterprise established in accordance with the Law of Georgia on Investment Funds as a joint investment fund or investment company.

2. On the basis of the Law of Georgia on Investment Funds, activities related to the management and administration of an investment fund, and the provision of depositary services to an investment fund shall be deemed a financial service.

3. Profit and loss of a joint investment fund shall be deemed the profit and loss of each owner of a joint investment fund unit beyond the joint investment fund, in proportion to the value of the unit (units) he/she owns. The loss assigned to the owner of a joint investment fund unit on the basis of this paragraph must not exceed the amount of contribution he/she has paid to the investment fund and the expenses and commission charges paid to an asset management company.

4. The asset management company of the joint investment fund shall open an investment account for each unit owner under the procedure established by a joint order of the Ministry of Finance of Georgia and the National Bank of Georgia, and shall keep records of the profit and loss of a unit owner.

5. Surplus income earned by the owner of a joint investment fund unit by selling or redeeming the unit shall be reduced by as much as the surplus income included in the taxable income of the same unit owner on the basis of paragraph 3 of this article.

6. Owners of joint investment fund units shall independently keep tax reports. The joint investment fund and its asset management company shall not be liable to act as a tax agent provided for Article 154 of this Code.

7. Performance of the activity by an owner of a joint investment fund unit or on his/her behalf under the Law of Georgia on Investment Funds shall not oblige this unit owner to have a permanent institution in Georgia.

8. The profit distributed by a joint investment fund within the activity defined by the Law of Georgia on Investment Funds and the expenses/paid sums provided for by Article 97(1)(b-d) of this Code shall not be subject to profit taxation.

9. The dividend paid by an investment company to a natural person or a non-resident enterprise shall not be taxed at source and shall not be included in the gross revenue of a recipient of income.

10. The expenses/paid sums provided for by Article 97(1)(b-d) of this Code envisaged by an investment company within the activity defined by the Law of Georgia on Investment Funds shall be exempt from profit tax.

11. Distribution of profit by an investment company, if a recipient of dividend is a non-resident or a natural person, shall be taxed in accordance with Article 97(1)(a) of this Code:

a) at a 15% rate, except as provided for in sub-paragraph b) of this paragraph;

b) at a 5% rate if the investment company makes an investment only in bank deposits and/or financial instruments, except for the distribution of profit gained from a resident enterprise.

12. The distribution of profit by an investment company to a non-resident or a natural person shall be exempt from profit tax if the income from which the dividend is paid:

a) does not belong to income received from a Georgian source;

b) belongs to income received by a resident legal person from the sale of the equity securities issued through a public offering in Georgia and allowed for trading on an organised market recognised by the National Bank of Georgia;

c) belongs to income received by a resident legal person from  the sale of the loan securities issued via a public offering in Georgia and allowed for trading on an organised market recognised by the National Bank of Georgia, or to income earned as an interest from the securities;

d) belongs to surplus income received from the sale of the loan securities issued by the Government of Georgia or an international financial institution, or to income earned as an interest from the securities or from a deposit placed in a commercial bank.

13. Surplus income received by a non-resident or a natural person through the supply or redemption of an investment fund unit shall be taxed:

a) at a 15% rate, except as provided for in sub-paragraph b) of this paragraph;

b) at a 5% rate if the investment fund makes an investment only in bank deposits and/or financial instruments, except when the investment fund makes an investment in the equities/shares (holds equities/shares) of a resident enterprise.

14. The income shall be exempt from income and profit taxes if it is received:

a) from the sale of an investment fund unit issued through a public offering in Georgia and allowed for trading on an organised market recognised by the National Bank of Georgia;

b) from the sale of an investment fund unit or the redemption of an investment fund unit if the investment fund makes an investment only in the deposits placed in Georgian commercial banks or in the securities issued by the Government of Georgia and/or an international financial institution, or in the loan securities issued by a resident legal person through a public offering in Georgia and allowed for trading on an organised market recognised by the National Bank of Georgia.

15. For the identification of the profit sum exempt from profit tax under paragraph 12 of this article it shall be deemed that, at the time of distribution of dividends by the investment company, this sum will be paid out in the first place.

16. For the purposes of paragraphs 2-15 of this article, each sub-fund of an umbrella fund provided for by the Law of Georgia on Investment Funds shall be deemed an independent investment fund.

17. Apart from the grounds provided for by paragraphs 12 and 14 of this article, additional grounds for the exemption from income or profit taxation shall be defined in accordance with the general rules established by this Code.

Law of Georgia No 6815 of 14 July 2020 – website, 22.7.2020

Article 24 – (Deleted)

Law of Georgia No 4963 of 24 June 2011 – website, 30.6.2011

Law of Georgia No 5120 of 13 October 2011 – website, 19.10.2011

Article 24¹ – Special trading company

1. A special trading company shall be a company that has been accorded the status of a special trading company under this article in order to exempt it from profit tax.

2. The status of a special trading company may be accorded at the time of registration only to a company that is set up for that purpose, for the current and following calendar years. When granting the status of a special trading company, a certificate confirming the status shall be issued. A foreign enterprise conducting economic activity through a permanent establishment in Georgia may additionally register a separate permanent establishment in order to acquire the status of a special trading company and to conduct only those activities that are permitted by this article.

3. The status of a special trading company shall be accorded to an enterprise by a tax authority. The procedure for according the status of a special trading company shall be determined by an order of the Minister of Finance of Georgia.

4. An enterprise having the status of a special trading company may:

a) re-export foreign goods from a customs warehouse;

b) supply foreign goods in a customs warehouse both to special trading companies and other enterprises that do not have the status of a special trading company;

c) purchase foreign goods from enterprises that do not have a special trading company status at not less than their customs value for subsequent re-export and/or supply in a customs warehouse;

d) in addition to the income earned from the activities referred to in subparagraphs (a) – (c) of this paragraph, earn other income, including:

d.a) income that is exempt from profit tax under this Code;

d.b) income from the supply of fixed assets used by the special trading company for economic activity for over two years;

d.c) income, other than that referred to in subparagraphs (d.a) and (d.b) of this paragraph, which from a Georgian source, according to a tax period (year) must not exceed GEL 1 000 000 and 5% of the customs value of the foreign goods brought by such company into Georgia.

5. An enterprise having the status of a special trading company may not:

a) import goods into Georgia, other than goods intended  as fixed assets of the company;

b) buy Georgian goods within the territory of Georgia for subsequent supply;

c) deliver services to a Georgian enterprise/individual entrepreneur and/or  permanent establishment of a foreign enterprise in Georgia;

d) have a customs warehouse.

6. If a taxpayer buys foreign goods from a special trading company, the costs deductible by the buyer from the total annual income shall not exceed the customs value of such goods. That restriction shall not apply to the costs incurred by the buyer, which under this Code are attributed to the value of the asset and are not related to the payments made to the special trading company.

7. The status of a special trading company shall be cancelled for that calendar year which the authorised representative of the company indicates in an application for cancellation of the status of a special trading company. The application has to be submitted not later than five business days before commencement of the relevant year.

Law of Georgia No 5120 of 13 October 2011 – website, 19.10.2011

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 5942 of 27 March 2012 – website, 12.4.2012

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Article 24² – A special enterprise

1. A special enterprise shall be a person who has been granted the status of special enterprise under this article.

2. A person having the status of special enterprise may, along with the activities permitted by the legislation of Georgia, with the special consent under Article 6(2) of the Law of Georgia on Occupied Territories, conduct the following activities:

a) supply of goods originated or produced in the occupied territory of Georgia from the mentioned territory to another territory of Georgia, and/or their placement under the export procedure from the territory of Georgia (except for the occupied territory of Georgia), in accordance with law. In the case under this subparagraph, supply of excise goods (except for alcoholic beverages and tobacco products) shall be prohibited;

b) supply of Georgian goods (except for goods originated or produced in the occupied territory of Georgia) to the occupied territory of Georgia;

c) production of goods in the occupied territory of Georgia solely for the purpose under subparagraph a) of this paragraph.

3. The status of special enterprise shall be granted to a person by a tax authority.

4. A person having the status of special enterprise may supply the goods under paragraph 2(a) and (b) of this article only:

a) within/from the territory of the Autonomous Republic of Abkhazia – from/to Zugdidi municipality;

b) within/from the territory of Tskhinvali region (former Autonomous Region of South Ossetia) – from/to Gori municipality.

5. Procedures for granting the status of special enterprise to and revoking it for a person, for identifying the goods originated or produced in the occupied territory of Georgia, and the operating procedures for a person having this status shall be determined by the Government of Georgia.

Law of Georgia No 2476 of 6 June 2018 – website, 21.6.2018

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Article 25 – Free Industrial Zone Enterprise

1. A Free Industrial Zone Enterprise (‘FIZ Enterprise’) shall be a company established under the Law of Georgia on Free Industrial Zones.

2. If a FIZ Enterprise supplies goods to a person (other than a FIZ Enterprise) registered under the legislation of Georgia, the FIZ Enterprise shall pay 4% of the revenue received/receivable from the supply of such goods (if the supply of goods is made free of charge – 4% of the market price of such goods) not later than the 15^th day of the month following the month in which the goods are supplied.

3. If a person (other than a FIZ Enterprise) registered under the legislation of Georgia supplies goods (other than electricity, water and natural gas intended for local consumption and/or production) to a FIZ Enterprise, the FIZ Enterprise shall pay 4% of the market price of the supplied goods not later than the 15^th day of the month following the month in which the goods are supplied.

4. If a person (other than a FIZ Enterprise) registered under the legislation of Georgia delivers goods to a FIZ Enterprise, the market price of the supplied goods shall be used for taxation purposes.

5. A FIZ Enterprise may not:

a) purchase services from a person (other than a FIZ Company) registered under the legislation of Georgia, except for:

a.a) security services and/or services related to letting or leasing out property provided by an organiser and/or administration of the Free Industrial Zone;

a.b) transport, communication, sewage, audit and/or consulting services, execution of financial transactions and/or delivery of financial services by a licensed financial institutions, as well as services relating to installation, assembly and/or construction of fixed assets.

a.c) services as determined by the Government of Georgia.

b) delivering services to a person (other than a FIZ Enterprise) registered under the legislation of Georgia.

6. Tax reporting rules for FIZ Enterprises shall be determined by an order of the Minister of Finance of Georgia.

7. The Government of Georgia shall be entitled to determine the types of services to be provided to non-resident persons (except for permanent offices of non-resident persons in Georgia) by FIZ Enterprises, which, for the purposes of taxation, shall be deemed as permitted activities carried out by FIZ Enterprises in the free industrial zone.

Law of Georgia No 4963 of 24 June 2011 – website, 30.6.2011

Law of Georgia No 6015 of 10 April 2012 – website, 30.4.2012

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 2946 of 12 December 2014 – website, 24.12.2014

Law of Georgia No 4680 of 18 December 2015- website, 29.12.2015

Article 26 – The Special Trade Zone

1. The status of the Special Trade Zone (‘STZ’) may be granted on its own initiative to a legal person engaged in the organisation of the market (trade) in Georgia.

2. Renting out trade outlets and/or trading places located within the territory of a market and/or building owned/possessed by a person and/or group of persons shall not be regarded as the organisation of trade.

3. (Deleted – 10.4.2012, No 6015).

4. A person, if granted the status of the STZ, shall, from 1 January of a year following the year when the status of the STZ was granted, be obligated to:

a) ensure the inventory of the movement of goods intended for economic activity  within the STZ area;

b) pay, as prescribed by Article 133¹ of this Code, income/profit taxes of the taxpayers renting trade outlets and/or trading places. These income/profit taxes shall be paid in respect of the activities carried out within the STZ;

c) mark each item of goods in the STZ with a security marking and ensure settlement with customers for the goods sold in the STZ through centrally managed cash registers.

5. (Deleted – 10.4.2012, No 6015).

6. A legal person renting a trade outlet in a STZ and selling goods through a fixed trade outlet, may carry out tax reporting and fulfil its tax obligations independently.

7. The rules of operation of the STZ shall be determined by resolution of the Government of Georgia.

8. (Deleted – 23.12.2017, No 1935).

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 6015 of 10 April 2012 – website, 30.4.2012

Law of Georgia No 1935 of 23 December 2017 – website, 29.12.2017

Article 26¹ – Tourist enterprise

1. A tourist enterprise shall be a legal person that builds a hotel, supplies hotel assets/part of the assets to another person (with or without the right to buy back the assets), and on the basis of a commutative contract (including on the basis of a lease, right of use, right of administration, trusteeship, intermediary and/or other contract terms) concluded with the buyer of this property ensures that the hotel assets/ part of the assets are used as hotel rooms/apartments.

2. After the completion of the hotel construction, a tourist enterprise shall:

a) designate a fixed amount of space to be used for hotel rooms/apartments;

b) make sure that during a maximum of 10 calendar years after the acceptance of the building (hotel) for operation, the total (including amounts additionally charged by the tax authority with respect to the given facility in the relevant period) VAT taxable turnover (other than transactions exempt from VAT) from a specific facility (hotel) declared by a tourist enterprise and/or by a person(s) invited under a relevant agreement for the functioning/operation of the facility/part of the facility as a hotel, is not less than the amount obtained as a result of dividing the turnover exempt from VAT with the right of deduction defined by Article 172(4)(v) of this Code as a result of supplying the hotel assets/part of assets by 1.18.

3. The status of tourist enterprise shall be granted to a person by the Revenue Service according to a specific facility (hotel). The Revenue Service may request the tourist enterprise to present guarantees, the value of which must not exceed 18% of the amount obtained as a result of dividing the turnover exempt from VAT with the right of deduction under Article 172(4)(v) of this Code.

4. The procedure for awarding the status of a tourist enterprise to a person, the procedure for its operation and cancellation, as well as the minimum amount of space from the total space of the building to be used as hotel rooms/apartments according to the municipalities shall be determined by the Government of Georgia.

Law of Georgia No 5791 of 13 March 2012 – website, 23.3.2012

Law of Georgia No 6446 of 12 June 2012 – website, 25.6.2012

Law of Georgia No 2946 of 12 December 2014 – website, 24.12.2014

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Law of Georgia No 6942 of 15 July 2020 – website, 28.7.2020

Article 26² – Organisation of a market

1. A person engaged in the organisation of a market (trade) in Georgia (except for the organisation of an agricultural market) shall apply to a tax authority for granting it the status of organiser of a market, except when this person has already been granted the status of the STZ under Article 26 of this Code.

2. Organisation of a market (trade) shall be the renting out of a trade outlet and/or trading place located within the territory of a market owned/possessed by a person and/or group of persons.

3. A market shall be a parcel of land on which permanent trade outlets and mobile trading places, or only mobile trading places (at least 10 mobile trading places) are located, which are designated for selling goods.

4. A mobile trading place (temporary building or structure) shall be a collapsible and/or mobile building system made of prefabricated units, which is connected to the ground with its own weight and/or dry nonsolid fixing and which has no underground placements; also, a transportation vehicle used for this purpose.

5. A person having the status of organiser of a market shall:

a) under the procedure established by the Minister of Finance of Georgia, submit to a tax authority information about the persons conducting economic activities within the territory of the market;

b) only rent out a trade outlet and/or a trading place to a person registered with the Registry of Entrepreneurs and Non-entrepreneurial (Non-commercial) Legal Persons;

c) provide a permanent trade outlet located within the territory of the market with a cash register;

[6. A tax authority shall, based on the information submitted by a person having the status of organiser of a market, grant a natural person renting a trade outlet and/or trading place located within the market territory the status of person conducting trade within the market territory.

7. The register of natural persons having the status of person conducting trade within the market territory shall be maintained by a tax authority.

8. The income gained by a natural person conducting trade within a market territory by selling goods within the market territory shall be taxed at 3%, excluding deductions. In this case, declaration and payment of the tax shall be made not later than the 15^th day of the month following the accounting month, under the procedure established by the Minister of Finance of Georgia.

9. The income gained by a natural person conducting trade within a market territory by selling goods within the market territory shall not be included into the total income and shall not be subsequently subject to taxation.

10. A natural person conducting trade within a market territory shall:

a) use a cash register when supplying goods;

b) have the right to refuse to use the income taxation scheme provided for in paragraph 8 of this article, for which he/she must apply to a tax authority not later than 31 December of the year preceding the accounting year. In this case, the income of the person shall be taxed in accordance with Articles 79-81 and Article 82 of this Code. (Shall become effective from 1 January 2022)]

11. A tax authority may, on its own initiative, grant a person engaged in the organisation of a market in Georgia the status of organiser of a market.

12. Procedures for the operation of a market and the performance of obligations under this Code by a natural person conducting trade within the market shall be defined by an order of the Minister of Finance of Georgia.

Law of Georgia No 1935 of 23 December 2017 – website, 29.12.2017

Law of Georgia No 5627 of 19 December 2019 – website, 26.12.2019

Article 26³ – Pharmaceutical enterprise

1. A pharmaceutical enterprise shall be a legal person producing and supplying pharmaceutical products in Georgia.

2. The status of pharmaceutical enterprise shall be granted to a person by the Government of Georgia.

3. The procedure for granting the status of pharmaceutical enterprise to a person, for operating and cancelling it shall be defined by an ordinance of the Government of Georgia.

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Article 27 – Place of business of an enterprise

1. A place of business of an enterprise shall be the place of its state registration, and in the absence of such place, the legal address indicated in the founding documents (charter, agreement, regulations) of the enterprise.

2. If an enterprise conducts business without state registration and its founding documents do not specify a place of business of the enterprise, the place of business of the enterprise shall be its principal place of business. The principal place of business of an enterprise shall be determined by a tax authority on the basis of data submitted by the enterprise. If the enterprise fails to submit such data or presents questionable data, a tax authority shall determine the principal place of business of the enterprise on the basis of available information.

3. If no relevant information is available and the principal place of business of an enterprise cannot be determined, the place of business of an enterprise shall be the place of management of the enterprise.

4. The place of business of an enterprise provided for in Article 21(1)(c) of this Code shall be the place of business of the party to the agreement who is responsible for managing the business affairs under the joint activities agreement. If one of the parties to an agreement is a Georgian enterprise or a resident natural person, that party shall keep record of the results of the joint activities for taxation purposes, irrespective of who is responsible for managing the business affairs. If business affairs are not managed by one or several parties to the joint activities agreement but rather jointly by all the parties to the agreement, the place of business of the enterprise shall be the place of business of the Georgian enterprise participating in the joint activities agreement. If the parties to the joint activities agreement are only resident natural persons who jointly run the business, the place of business of the enterprise shall be determined by a tax authority on the basis of data presented by the parties to the joint activities agreement. If the parties to the joint activities agreement do not submit such data or present questionable data, a tax authority shall determine the place of business on the basis of available information.

Article 28 – Place of management of an enterprise

1. The place of management of an enterprise shall be place of effective management of the enterprise, i.e. the place where, under the founding documents (charter, agreement, regulations) of the enterprise, the board of directors (or any other management body) of the enterprise exercises managerial functions irrespective of the place of business of the enterprise’s top controlling bodies or the place of receipt of income from its activities, unless otherwise provided for in this article.

2. The place of management of an enterprise provided for in Article 21(1)(c) of this Code shall be the place of business of the enterprise.

3. If an enterprise is managed by a manager (another enterprise or natural person) who acts under an agreement or resolution of appointment, the place of management of the enterprise shall be the place of business of the managing enterprise or the place of residence of the managing natural person, respectively. The place of management of an enterprise shall be determined similarly if the enterprise is actually managed by another enterprise or natural person without a relevant agreement or resolution.

4. If an enterprise has no management body or the management body of an enterprise has no permanent place of business or if the manager does not directly manage the enterprise, the place of management of the enterprise shall be the place of business of the management body (administration, directorate, board of directors, central accounting office or other similar body) of the enterprise.

Article 29 – Permanent establishment

1. A permanent establishment of a foreign enterprise or of a non-resident natural person in Georgia is a fixed place of business through which the economic activity of the entity is wholly or partly carried on in Georgia, including the activity of an authorised agent, except as provided for by the sixth, ninth and twelfth paragraphs of this article.

2. The following shall be treated as equal to a permanent establishment:

a) a construction site, installation or construction project  and the controlling activities related to them;

b) installation or constructions, drilling rig or vessels used for prospecting minerals, and the controlling activities related to them;

c) a permanent base where a non-resident natural person carries on economic activity;

d) a place of management, branch, representative office, department, bureau, office, agency, workshop, mine or quarry or any other place of extraction of natural resources, or any other subunit or any other place of business of a foreign enterprise.

3. The provisions of the first and second paragraphs of this article shall not apply to the services rendered by non-resident subcontractors in performing oil and gas operations under the Law of Georgia on Oil and Gas.

4. Notwithstanding the provisions of the first and second paragraphs of this article, a permanent establishment of a foreign enterprise in Georgia shall be the management of this enterprise by another person (another enterprise, subunit of this or of another enterprise or by a natural person who is not the person specified in the fifth paragraph of this article) on behalf and/or in the interest of the  enterprise for over three months, except as provided for in the sixth and fifth paragraphs of this article.

5. If a foreign enterprise or a non-resident natural person carries on economic activity in Georgia through a professional intermediary, agent or broker as prescribed by law and if such intermediary, agent or broker is not authorised to conduct negotiations or sign agreements on behalf of the foreign enterprise or non-resident natural person, then the activity of the intermediary, agent or broker shall not  constitute a permanent establishment of the foreign enterprise or non-resident natural person in Georgia.

6.  Mere possession by a foreign enterprise or non-resident natural person of securities or shares in the capital of a Georgian enterprise or of any property on the territory of Georgia shall not constitute a permanent establishment of the foreign enterprise or non-resident natural person in Georgia if such possession does not have the characteristics of a permanent establishment set forth in the first and second paragraphs of this article.

7. The mere fact of secondment of staff by a foreign enterprise to another enterprise or organisation based in the territory of Georgia shall not constitute a permanent establishment of the foreign enterprise or non-resident natural person in Georgia, provided that the employees are under the control of the enterprise or organisation to which they were seconded.

8. The mere control by a foreign enterprise or non-resident natural person of a Georgian enterprise or a Georgian organisation shall not constitute a permanent establishment of the foreign enterprise or non-resident natural person in Georgia.

9. A permanent establishment of a foreign enterprise or non-resident natural person in Georgia shall not include an establishment in the territory of Georgia that is used only for:

a) storing or displaying goods belonging to the foreign enterprise or non-resident natural person;

b) storing a stock of goods belonging to the foreign enterprise or non-resident natural person so that another person could process it;

c) purchasing goods or gathering information for the foreign enterprise or non-resident natural person;

d) performing preparatory or any other ancillary activity in the interests of the foreign enterprise or non-resident natural person;

e) preparing and/or signing agreements on granting loans, supplying goods or providing technical services on behalf of the foreign enterprise or non-resident natural person.

f) conducting any combination of the activities set forth in subparagraphs (a)-(e) of this paragraph.

10. A permanent establishment of a foreign enterprise or of a non-resident natural person in Georgia shall be deemed as such from the moment when it is registered under the eleventh paragraph of this article, is granted appropriate powers or commences representative activity.

11. The obligation to register a permanent establishment of a foreign enterprise or of a non-resident natural person in Georgia shall rest with a tax authority, which shall maintain the relevant register. The registration procedure and the procedure for maintaining the register shall be determined by the Minister of Finance of Georgia.

12. The mere transfer of property by a foreign enterprise or non-resident natural in the territory of Georgia by lease, usufruct, rent, letting and/or any other similar form shall not constitute a permanent establishment of this foreign enterprise or non-resident natural person in Georgia, except where a person systematically performs, in person, through a representative or hired personnel, the service and supervision of the activities of the property recipient.

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Article 30 – Organisations

1. The following entities shall be regarded as organisations:

a) non-entrepreneurial (non-commercial) legal persons, public or religious organisations (associations), institutions that are non-entrepreneurial (non-commercial) legal persons established or acting under the legislation of Georgia or under the legislation of a foreign country; also Georgian-based branches and other similar sub-units of the organisations established under the legislation of a foreign country, through which these organisations conduct business, wholly or partly, (including the activity of an authorised agent), also budgetary organisations, legal entities under public law, corporations, institutions;

b) international (inter-state, inter-governmental, diplomatic) organisations – organisations, diplomatic missions and consular offices, or foreign non-entrepreneurial organisations governed by international law.

2. A place of business and a place of management of an organisation shall be determined according to procedures established for enterprises by this Code.

3. An organisation shall be deemed as a Georgian organisation or as a foreign organisation according to procedures established for enterprises by this Code.

4. If an organisation conducts economic activity, the part of its property and activity that is directly related to its economic activity shall be deemed to be the property and activity of the enterprise, and where such distinction cannot be made, the property and activity related to the economic activity of an organisation shall be calculated according to the specific share of the income from economic activity in the income earned by the organisation.

Law of Georgia No 6439 of 12 June 2012 – website, 22.6.2012

Article 31 – Budgetary organisations

A budgetary organisation is an organisation defined in Article 6(r) of the Budget Code of Georgia.

Law of Georgia No 5173 of 28 October 2011 – website, 7.11.2011

Law of Georgia No 2938 of 12 December 2014 – website, 24.12.2014

Article 32 – Charitable organisations

1. A charitable organisation shall be an organisation that has been accorded with the status of a charitable organisation under this article.

2. The status of a charitable organisation shall be accorded to an organisation that is established to carry out charitable activity, is registered in a prescribed manner, has at least one year experience in charitable activity and complies with the requirements set forth in this article.

3.  Ancillary economic activity that serves the main purposes of an organisation shall not change the organisation’s charitable character.

4. The status of a charitable organisation is accorded, cancelled and deprived by the Head of the Revenue Service in agreement with the Minister of Finance of Georgia upon a recommendation of the relevant tax authority.

5. The status of a charitable organisation is accorded on the basis of a written application of the organisation. The application shall indicate the following information on the organisation:

a) name;

b) organisational and legal form;

c) main goals;

d) main areas of activity in the last year;

e) addresses of the management body and of branches.

6. The following shall be attached to the application:

a) a copy of the charter of the organisation

b) a copy of the civil and/or tax registration certificate

c) an activity report for the last year, including the description of activities (projects, services)

d) the last year’s financial documents (balance sheet and income statement) certified by an independent auditor.

7. The Head of the Revenue Service shall make a reasonable decision in connection with the application within one month. If no decision is made within this period, the status shall be deemed to have been accorded. The status shall be accorded permanently. The status shall take effect upon being accorded.

8. An organisation that has been accorded with this status shall be given a certificate confirming the status. The certificate shall indicate:

a) name and organisational and legal form of the organisation

b) status

c) address of the management body

d) date of according the status and the status number

e) identification number of the organisation.

9. Upon obtaining the status, the organisation shall undertake the obligations and responsibilities provided under this Code. In particular, before 1 April each year a charitable organisation shall file with the relevant tax authority:

a) a program report on its last year's activity, which shall include a description of the activity (including economic activity);

b) a financial report on earned revenues, indicating sources and the purpose of the expenditure;

c) last year’s financial documents (balance sheet and income statement) certified by an independent auditor.

10. The program report of the last year's activity and last year’s financial documents (balance sheet and income statement) shall be published and made available for all interested persons.

11. The profits and assets of a charitable organisation shall not be distributed among its members, founders, board of directors or supervisory board members. If a charitable organisation is liquidated, its property shall be transferred to a charitable organisation with similar goals under a decision of an authorised body or person, or if no such organisation exists, the property shall be transferred to another charitable organisation. If a legal entity under public law having the status of a charitable organisation was established on the basis of state property, in the case of its liquidation its assets shall be transferred to the state.

12. The status of a charitable organisation shall be cancelled:

a) on the initiative of the organisation;

b) if the status has been deprived.

13. A charitable organisation shall be deprived of its status if:

a) it fails to comply with the requirements of this Code;

b) its state and/or tax registration has been cancelled.

14. If the status is deprived for non-compliance with the requirements of this Code, the charitable organisation shall return that part of profits received as a result of tax privileges due to the status, which is related to non-compliance with the above requirements.

15. If a charitable organisation does not comply with the requirements of this Code, before submitting to the Revenue Service an application for depriving the charitable organisation of its status, a tax authority shall send the charitable organisation a notice, setting an additional one-month period for the fulfilment of the requirements of this Code.

16. A charitable organisation that has been deprived of its status may apply for restoration of the status not earlier than one year after eliminating the cause for deprivation of the status.

17. The Revenue Service shall maintain the Unified Register of Charitable Organisations. The Register shall specify:

a) name of the organisation;

b) addresses of the management body, branches and representations;

c) main goals;

d) date of according the status and the status number;

e) identities and addresses of all members of the management body.

18. If any of the data entered into the Unified Register of Charitable Organisations is changed, the organisation shall notify the relevant tax authority in writing of such changes as soon as they occur.

19. The Unified Register of Charitable Organisations shall be available for any interested person.

Article 33 – Religious organisations

A religious organisation shall be an organisation established for conducting religious activity and registered as such in the prescribed manner.

Article 34 – Resident natural persons and non-resident natural persons in Georgia

1. Natural persons shall be:

a) citizens of Georgia;

b) foreign citizens;

c) stateless persons.

2. A Georgian resident for the entire current tax year shall be a natural person who has actually stayed in the territory of Georgia for 183 or more days in any continuous 12-calendar-month period ending in that tax year, or a natural person who was in a foreign country in the public service of Georgia during that tax year.

3. The time of actual stay in the territory of Georgia shall be the time, during which a natural person stayed in Georgia, as well as the time he/she spent outside Georgia specifically for treatment, leisure, business trip or education.

4. The time of actual stay in the territory of Georgia shall not include the time, during which a natural person stayed in Georgia:

a) as a person having a diplomatic or consular status or as a family member of such person;

b) as an employee of an international organisation acting under an international agreement of Georgia or as a person in the public service of a foreign country in Georgia or as a family member of such person, other than Georgian citizens;

c) when moving from one foreign country to another via the territory of Georgia;

d) for treatment or leisure.  

5. The day of actual stay in the territory of Georgia shall be the day, during which a natural person stayed in Georgia irrespective of the length of the stay.

6. Georgian residency, except as provided for in paragraph 2 of this article, may be accorded to a high net worth individual under the procedure and conditions determined by the Minister of Finance of Georgia. A high net worth individual shall be a person as defined by the Law of Georgia on Securities Market.

6¹. If the residency of a natural person cannot be established in relation to any country, such natural person shall be deemed to be a Georgian resident if he/she applies to a tax authority, provided he/she is a Georgian citizen.

6². The residency of Georgia, except for cases provided for in paragraphs 2, 6 and 6¹ of this article, may be granted to a foreign natural person in the case and under the procedure defined by the Minister of Finance of Georgia.

7. A non-resident in Georgia shall be a person who is not a resident under this article.

8. The status of a resident or of a non-resident is established for each tax period. At the same time, the days, according to which the natural person was deemed as a resident in the previous tax period, shall not be taken into account in establishing the status of residency in the following tax periods.

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 1935 of 23 December 2017 – website, 29.12.2017

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 35 – Place of residence and place of actual stay of a natural person

1. A place of residence of a natural person shall be the person’s usual place of residence or the place of his/her actual stay unless otherwise provided for by this article.

2. A place of residence of a minor shall be the place of residence of the person having parental rights with respect to the minor, and a place of residence of the person who has a guardian or custodian shall be the place of residence of the guardian or custodian.

3. A place of actual stay of a natural person shall be the place of his/her temporary residence, unless otherwise provided for in this article.

4. A place of actual stay of military personnel, also of persons permanently relocating due to the nature or conditions of their job shall be the place where they actually live or are registered in the prescribed manner (including, the place of deployment of military units or the location of the respective enterprise).

5. If a natural person has several residences (homes or other residence), his/her place of residence or place of actual stay shall be determined by a tax authority in agreement with the natural person.

Article 36 – Entrepreneur natural person and his/her place of business

1. Entrepreneur natural person shall be:

a) an individual entrepreneur – a natural person, provided he/she is an individual entrepreneur under Article 2 of the Law of Georgia on Entrepreneurs;

b) a natural person, provided he/she performs the activity specified in Article 1(3) of the Law of Georgia on Entrepreneurs.  

2. If the natural person defined in the first paragraph of this article performs economic activity without registration, license or permit, this shall not serve as the basis for not recognising this natural person as an entrepreneur natural person for taxation purposes.

3. The place of business of an entrepreneur natural person shall be the place of his/her economic activity.

Article 37 – Taxpayer’s representative

1. A taxpayer may participate in tax matters through its legal or authorised representative. Personal participation of a taxpayer in tax matters shall not deprive it of the right to have a representative, nor shall the participation of the representative deprive it of the right to personally participate in the said relations.

2. Legal representatives of an enterprise/organisation shall be its bodies and/or other authorised persons under the legislative acts of Georgia or foundation documents of the enterprise/organisation. A legal representative of a natural person shall be the person who exercises relevant rights under this Code and other legislative acts of Georgia.

3. An action of a taxpayer’s legal representative, in particular the participation of the representative in tax matters, shall be deemed the action of the taxpayer.

4. A taxpayer’s legal representative shall be a person who is authorised by the taxpayer to represent its interests before tax authorities and/or in dealings with other participants of tax matters or in court.

5. An authorised representative of an enterprise/organisation shall act under a power of attorney granted by that enterprise/organisation, and the authorised representative of a natural person shall act under a notarised power of attorney granted by that natural person or under any other document deemed equal to a power of attorney under the Civil Code of Georgia, within the scope of such power of attorney or other document.

Chapter IV – Legal Protection of Taxpayers

Article 38 – Right to request information

1. Taxpayers may obtain from tax authorities information on the application of the tax legislation of Georgia, on protection of taxpayer’s rights, and may access information on them in the possession of tax authorities.

2. Taxpayers may withhold from law-enforcement and other controlling authorities, other than tax authorities, documents related to the determination of objects of taxation, computation and payment of taxes, except where such powers are granted to other authorities under this Code. 

Article 39 – Tax secret

1. Any information received by a tax authority on a taxpayer (except for the information specified in paragraph 1¹ of this article) shall be the tax secret.

1¹. The following information on a tax payer shall not be a tax secret and shall be public:

a) information on registration as a tax payer;

b) information on registration as a VAT payer;

c) the status;

d) the name;

e) the address;

f) the identification number;

g) the date of granting the identification number;

h) the registering body;

i) tax arrears;

j) the persons with the right of representation/administration;

k) the founders;

l) information on the tax lien/the right of pledge and on the seizure of property;

m) other public information registered in the Registry of Entrepreneurs and Non-Entrepreneurial (Non-Commercial) Legal Entities;

n) public information registered in the Registry of Citizens’ Political Unions (Parties);

o) about the suspension of making out/issuing a tax invoice to a person.

2. A tax authority, its employee, invited expert and/or expert shall protect the confidentiality of taxpayer information that became known to them in the performance of official duties.  They may disclose personally identifiable information on certain taxpayers only to the following persons: 

a) employees of the system of the Ministry of Finance of Georgia and members of the Council of Tax Appeals within the Ministry of Finance of Georgia – in order for them to fulfil their official duties;

b) law-enforcement authorities – in connection with the criminal cases prosecuted by them;

b¹) the State Inspector’s Service – when performing an audit under the Law of Georgia on State Inspector’s Service;

b²) the Ministry of Internal Affairs of Georgia – for exercising powers provided for by the legislation of Georgia;

c) court – to determine tax obligations or liabilities of a taxpayer in connection with a case pending in the court;

d) a competent body of a foreign state – under an international agreement of Georgia;

e) the Legal Entity Under Public Law (LEPL) within the Ministry of Justice of Georgia – National Bureau of Enforcement) (‘National Bureau of Enforcement’) and to a private enforcement officer – in the course of executing decisions under the Law of Georgia on Enforcement Proceedings and/or in exercising the powers provided for in an agreement between a tax authority and National Bureau of Enforcement;

f) the National Statistics Office of Georgia (GeoStat) – under procedures established by the Government of Georgia;

g) the State Audit Office of Georgia – on the basis of a court order, to exercise powers under the Organic Law of Georgia on State Audit Office;

h) the Legal Entity under Public Law (LEPL) within the Ministry of Justice of Georgia -  National Agency of Public Registry (‘National Agency of Public Registry’) – in exercising the powers under an agreement between a tax authority and the National Agency of Public Registry; 

i) persons determined by the Government of Georgia, to inform a taxpayer of its tax arrears as prescribed by the Minister of Finance of Georgia;

j) (Deleted – 1.5.2015, No 3581);

k) the Legal Entity under Public Law (LEPL) within the Ministry of Justice of Georgia – Public Service Development Agency – in exercising powers provided for by the legislation of Georgia;

l) the Legal Entity under Public Law (LEPL) – Financial Monitoring Service of Georgia – in exercising powers provided for by the legislation of Georgia;

m) the state sub-agency institution of the Ministry of Environment and Agriculture of Georgia – the Environmental Supervision Department, in exercising powers provided for under the legislation of Georgia; also, to the Legal Entity under Public Law (LEPL) within the Ministry of Environment and Agriculture of Georgia – the Nuclear and Radiation Safety Agency, and to the Standing Commission for Military-Technical Issues of the Ministry of Defence of Georgia – the information provided for under the Law of Georgia on Nuclear and Radiation Safety;

n) the Ministry of Internally Displaced Persons from the Occupied Territories, Labour, Health and Social Affairs of Georgia and to administrative bodies within its system – for exercising the rights and duties under the legislation of Georgia;

o) the Legal Entity under Public Law (LEPL) – the Georgian National Competition Agency – in exercising powers provided for by the legislation of Georgia;

p) the Legal Entity under Public Law (LEPL) within the Ministry of Environment and Agriculture of Georgia – the National Food Agency – under the procedure prescribed by the Government of Georgia;

q) Business Ombudsman/Deputy Business Ombudsman of Georgia – in exercising powers under the legislation of Georgia;

r) the Legal Entity under Public Law operating under the Ministry of Justice of Georgia – the Digital Governance Agency – in order for the Agency to transfer this information to the Legal Entity under Public Law – the Civil Service Bureau – for exercising powers under the Law of Georgia on Conflicts of Interest and Corruption at Public Institutions and subordinate legal acts issued on the basis of it, for operating the electronic data exchange system;

s) the Legal Entity under Public Law operating under the Ministry of Justice of Georgia – the Digital Governance Agency – information necessary for the operation of the electronic exchange system of documentation between the entities engaged in the international commerce;

t) the Ministry of Environment and Agriculture of Georgia, information under the Law of Georgia on Waste Import, Export and Transit;

u) (Deleted – 5.7.2018, No 3109);

v) the Legal Entity under Public Law within the Ministry of Economics and Sustainable Development of Georgia – the National Mining Agency, in exercising powers under the legislation of Georgia;

w) the Legal Entity under Public Law – the Pension Agency, for exercising powers under the Law of Georgia on Accumulative Pension and subordinate normative acts of Georgia issued on the basis of the Law of Georgia on Accumulative Pension;

x) the Legal Entity under Public Law within the system of the Ministry of Economics and Sustainable Development of Georgia – the Market Surveillance Agency, in exercising the power under the legislation of Georgia;

y) the Ministry of Justice of Georgia, for exercising the power of an agent of the state, as vested in it by the legislation of Georgia, in the arbitration or a foreign court, and the power of an agent of the state in an international court, in particular in the European Court of Human Rights, in the Human Rights Committee set up on the basis of the United Nations International Covenant on Civil and Political Rights and in the committees set up on the basis of other United Nations conventions, and in the United Nations International Court of Justice;

z) To ensure control of the legal regime of the Georgian maritime space, the Joint Maritime Operations Centre of the executive authorities of Georgia related to the protection of the national border control entities and the national boundary regime, in exercising the power defined by the legislation of Georgia;

z1) the Legal Entity under Public Law (LEPL) subject to the control of the Ministry of Internally Displaced Persons from the Occupied Territories, Labour, Health and Social Affairs of Georgia – the Labour Inspection Service, in exercising powers provided for by the legislation of Georgia.

3. Employees of a tax authority shall protect the confidentiality of information obtained in the course of their official duties, and shall not use it for personal goals or disclose it to another person. Such actions shall be regarded as disclosure of a tax secret. The loss of documents containing a tax secret or disclosure of such information shall carry liability under the legislation of Georgia. 

3¹. Legal entities under public law referred to in paragraph 2(o) and (p) of this article and their employees, who have received information specified in this article may not divulge such information.

4. Information held by a tax authority and containing a tax secret shall be stored and processed in a special manner. Only authorised officials designated by the Minister of Finance of Georgia under the procedure established by the same ministry may have access to the information containing a tax secret. 

5. If there is a written/electronic permission of a taxpayer, information on the taxpayer may be communicated to another person. Publication and/or dissemination by the taxpayer of this information in the mass media shall be deemed as the taxpayer’s permission for a tax authority to communicate information to a third party within the scope of the above information.

6. This article shall not apply to the public notice provided for in Article 44 of this Code or the information spread by the Revenue Service about persons who conduct economic activity with false tax documents.

Law of Georgia No 4206 of 22 February 2011 – website, 10.3.2011

Law of Georgia No 4963 of 24 June 2011 – website, 30.6.2011

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 6330 of 25 May 2012 – website, 8.6.2012

Law of Georgia No 6317 of 25 May 2012 – website, 19.6.2012

Law of Georgia No 6446 of 12 June 2012 – website, 25.6.2012

Law of Georgia No 6444 of 12 June 2012 – website, 25.6.2012

Law of Georgia No 6550 of 22 June 2012 – website, 29.6.2012

Law of Georgia No 491 of 25 March 2013 – website, 5.4.2013

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 2160 of 21 March 2014 – website, 27.3.2014

Law of Georgia No 3581 of 1 May 2015 – website, 15.5.2015

Law of Georgia No 3613 of 28 May 2015 – website, 4.6.2015

Law of Georgia No 3673 of 29 May 2015 – website, 4.6.2015

Law of Georgia No 4368 of 27 October 2015 – website, 11.11.2015

Law of Georgia No 4458 of 28 October 2015 – website, 11.11.2015

Law of Georgia No 4493 of 11 November 2015 – website, 24.11.2015

Law of Georgia No 4680 of 18 December 2015 – website, 29.12.2015

Law of Georgia No 4958 of 13 April 2016 – website, 26.4.2016

Law of Georgia No 5144 of 27 May 2016 – website, 4.6.2016

Law of Georgia No 195 of 22 December 2016 – website, 29.12.2016

Law of Georgia No 1182 of 30 June 2017 – website, 13.7.2017

Law of Georgia No 1701 of 7 December 2017 – website, 14.12.2017

Law of Georgia No 3109 of 5 July 2018 – website, 11.7.2018

Law of Georgia No 3308 of 21 July 2018 – website, 6.8.2018

Law of Georgia No 3279 of 21 July 2018 – website, 9.8.2018

Law of Georgia No 3383 of 5 September 2018 – website, 24.9.2018

Law of Georgia No 4260 of 27 December 2018 – website, 29.12.2018

Law of Georgia No 4599 of 8 May 2019 – website, 8.5.2019

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Law of Georgia No 5691 of 20 December 2019 – website, 26.12.2019

Law of Georgia No 5758 of 17 March 2020 – website, 23.3.2020

Law of Georgia No 6301 of 12 June 2020 – website, 26.6.2020

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Law of Georgia No 7132 of 16 September 2020 – website, 21.9.2020

Law of Georgia No 7183 of 29 September 2020 – website, 5.10.2020

Article 40 – (Deleted)

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Article 41 – Taxpayer rights

1. Taxpayers may:

a) in the prescribed manner, become familiar with information held by a tax authority about them;

b) represent their interests before a tax authority directly or through a representative; 

c) not present any documents related to tax administration to any controlling or law-enforcement body (other than a tax authority), unless such body has authority under this Code;

d) enjoy tax privileges;

e) obtain a refund for the sum of any overpaid tax and/or sanction (including a customs sanction), and/or keep it as a credit against future tax liabilities;

f) request information about the grounds for exercising tax control over them;

g) provide appropriate explanations to a tax authority when subjected to a tax control;

h) attend tax field audits conducted in relation to them, receive from a tax authority original or certified copies of any decision pertaining to them, and demand compliance with the legislation of Georgia during these activities;

i) appeal actions or decisions of a tax authority as provided by law;

j) not fulfil an illegal act issued or request made by a tax authority;

k) demand reimbursement of damages incurred as a result of unlawful decisions or action of a tax authority;

l) enjoy any other rights under the legislation of Georgia.

2. Protection of taxpayer rights and legitimate interests shall be guaranteed in administrative and judicial proceedings.

3. Violation of taxpayer rights and legitimate interests shall carry liability as prescribed by law.

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Article 42 – (Deleted)

Law of Georgia No 3613 of 28 May 2015 – website, 4.6.2015

Article 43 – Taxpayer obligations

1. Taxpayers shall:

a) fulfil tax liabilities in accordance with the tax legislation of Georgia;

b) be enrolled with a respective tax authority or register with the Register of Entrepreneurs and Non-entrepreneurial (Non-commercial) Legal Entities and the Register of Citizens’ Political Alliances (Parties);

c) file tax returns, computations, and accounting documents with a tax authority as provided by the legislation of Georgia;

d) submit to a tax authority and its authorised person the documents (certificates) needed for computation and payment of taxes in the case of a tax audit or in any other cases provided for by this Code;

e) comply with the lawful requests of a tax authority and authorised persons with respect to the elimination of detected violations of tax legislation; not prevent authorised persons from fulfilling their official duties;

f) ensure the safekeeping of documents necessary for identifying a taxable object for three years. Such period shall be calculated from the end of the calendar year of relevant tax period, for the identification of tax liabilities of which such documentation is necessary.

g) place a copy of a taxpayer certificate and in the case of retail trade – price labels (in Georgian national currency) at a place conspicuous for customers;

g¹) not impede a person chosen by the Revenue Service under the legislation of Georgia in delivering services related to affixing mandatory excise stamps/mandatory markings.

h) fulfil any other obligations provided for by the tax legislation of Georgia.      

2. A Georgian enterprise, a Georgian organisation and an entrepreneur natural person shall submit to a tax authority, according to the place of tax registration, information on opening bank accounts (other than deposit (time deposit) accounts) outside Georgia within five business days after opening such accounts.

2¹. A financial institution of Georgia defined in the Agreement between the Government of the United States of America and the Government of Georgia to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act (FATCA) shall, within the framework of this Agreement, transfer to a tax authority the information provided for under the same Agreement.

3. A taxpayer shall submit to a tax authority the information set forth in the second paragraph of this article in the form approved by the Minister of Finance of Georgia.

4. For non-fulfilment or improper fulfilment of the obligations provided for by the tax legislation of Georgia, a taxpayer shall be liable as prescribed by this Code and/or other legislative acts of Georgia. 

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 5557 of 20 December 2011 – website, 28.12.2011

Law of Georgia No 5942 of 27 March 2012 – website, 12.4.2012

Law of Georgia No 4458 of 28 October 2015 – website, 11.11.2015

Law of Georgia No 4680 of 18 December 2015 – website, 29.12.2015

Law of Georgia No 5144 of 27 May 2016 – website, 4.6.2016

Article 44 – Correspondence with taxpayers

1. A tax authority shall send and/or present a document to a person in writing or electronically.

2. A document sent in writing by a tax authority shall be signed by an authorised person. The addressee shall be given the original or a certified copy of the document.

2¹. If upon the presentation of a written document to the address of persons defined under the sixth and seventh paragraphs of this article or to the legal address defined in registration documents, the clerical office or the structural unit of the same function refuses to accept a written document, the tax authority shall be entitled to use technical means for recording the refusal.

3. A tax authority shall decide on the form of sending and/or presenting a document.

4. If the same document is presented to a person several times or in several forms, the date of presenting such document shall be the day on which the document was first delivered.

5. If upon the presentation of a written document a person refuses to accept it, the presenting person shall make an appropriate note.

5¹. In the case provided for under the fifth paragraph of this article, if the fact of presenting a written document has been recorded using technical means, such document shall be deemed accepted.

6. A written document shall be deemed to have been served on a natural person if the document is delivered to:

a) the addressee in person;

b) an authorised or legal representative of the person;

c) any adult family member residing with that person at his/her place of residence;

d) a clerical office or any structural unit of the same function at the place of business of an entrepreneur natural person;

e) a person directly performing the economic activity of a natural person, when there is an order of an authorised person on execution of a tax offence report, current control procedures and/or tax enforcement measures.

7. A written document shall be deemed to have been served on a taxpayer (other than a natural person) if the document is delivered to:

a) the authorised person;

b) an authorised or legal representative of the person;

c) a clerical office or any structural unit of the same function at the legal address indicated in registration documents;

d) a person directly performing the economic activity of a taxpayer, provided there is an order of an authorised person on the execution of a tax offence report, current control procedures and/or tax enforcement measures;

e) any adult person residing at the residential apartment indicated as a legal address in registration documents.

8. The delivery of a document shall be confirmed by the recipient’s signature on a copy of the document or on the relevant mail document. The recipient’s full name and his/her relationship with the addressee, as well as the date of delivery of the document shall be indicated next to it.

9. A document sent electronically by a tax authority to a person shall be deemed delivered as soon as the addressee reviews it, and in the case provided for in Article 264(2) of this Code – as soon as the person reviews it or on the 30th day after it has been posted on an authorised user’s page, unless the addressee reviewed the notice within that period.

10. The Revenue Service or the National Bureau of Enforcement may publish a document if the following conditions have been met:

a) the document has been sent/presented to a person at least twice in written form, but could not be served on the addressee;

b) the person is not an authorised user of the Revenue Service official website or the addressee has not reviewed the document within 30 days after the document was posted on an authorised user’s page;

11. A document shall be published by posting it on the official website of the Ministry of Finance of Georgia or the National Bureau of Enforcement and shall be deemed to have been delivered on the 20th day after such posting. 

12. In exercising the rights defined in this Code, a tax authority may create, receive, send, keep and issue any electronic or written document (including in archived form) that may have legal implications, and use an electronic document circulation system. 

13. A taxpayer may present documents to a tax authority in writing or electronically.

14. A written document presented by a taxpayer to a tax authority shall be signed by an authorised person.  The original document or its certified copy shall be submitted to the addressee.

15. If a taxpayer sends a document to a tax authority by post, the date of its submission shall be the day when the document is sent. At the same time, the term for responding to the document shall commence from the day following the day on which the mail is actually delivered to a tax authority.

16. The procedure for electronic correspondence/public dissemination of documents between a taxpayer and a tax/dispute resolution authority shall be determined by an order of the Minister of Finance of Georgia.

Law of Georgia No 4206 of 22 February 2011 – website, 10.3.2011

Law of Georgia No 4754 of 14 June 2011 – website, 28.6.2011

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 4680 of 18 December 2015 – website, 29.12.2015

Law of Georgia No 649 of 21 April 2017 – website, 10.5.2017

Law of Georgia No 1182 of 30 June 2017 – website, 13.7.2017

SECTION III

PROVIDING INFORMATION TO TAXPAYERS AND THE SYSTEM OF GEORGIAN TAX AUTHORITIES

Chapter V – Providing Information to Taxpayers

Article 45 – (Deleted)

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Article 46 – Clarifications on the application of the tax legislation of Georgia

A tax authority may send a written clarification to a person on the application of the tax legislation of Georgia. This clarification shall be regarded as a recommendation.

Law of Georgia No 2946 of 12 December 2014 – website, 24.12.2014

Article 46¹ – Public rulings

1. Based on a decision made by a dispute resolution authority or on the analysis of the current practice of taxation of taxpayers by a tax authority, the Minister of Finance of Georgia may issue a public ruling on the application of certain provisions of the tax legislation of Georgia.

2. A document shall be regarded as a public ruling if it states that it is a public ruling.

3. A public ruling (including a decision on modifying or cancelling a public ruling) shall be published on the official website of the Legislative Herald of Georgia.

4. A public ruling shall enter into force from the date indicated in it and shall be valid for an indefinite term or for the period stated in it. This ruling shall be binding for a tax authority from the day of its entry into force.

5. A public ruling shall not be applied if the provisions with respect to which the ruling was issued have been modified or repealed.

6. The Minister of Finance may declare a public ruling, or its part, as invalid or modify it.

7. If a person acts according to a public ruling, a monitoring/law-enforcement authority may not adopt a decision contradicting the ruling and may not impose additional taxes/sanctions.

8. If there is contradiction between two public rulings or between a public ruling and an advance tax ruling, the person concerned may act according to one of the rulings at its discretion.

9. The procedure for issuing a public ruling shall be determined by the Minister of Finance of Georgia.

Law of Georgia No 2946 of 12 December 2014 – website, 24.12.2014

Article 47 – Advance tax ruling

1. The Revenue Service may, on the basis of a person’s application, issue an advance tax ruling according to a future or completed transaction on:

a) the tax reporting rules provided for by this Code and Customs Code of Georgia and/or outstanding tax/customs liabilities;

b) the reporting rules and/or outstanding liabilities related to a fee administration of which is carried out by a tax authority.

2. An advance tax ruling shall be issued within not later than 90 days after submission of a request.

3. An advance tax ruling shall apply only to the persons to whom it has been issued.  At the same time, an advance tax ruling shall indicate the norm of the legislation of Georgia on which the ruling was based. 

4. Different advance tax rulings may not be issued with respect to identical transactions performed by different persons.

5. If a person acts under an advance tax ruling, controlling/law-enforcement authorities may not make decisions contradicting the advance tax ruling or impose any charges and/or sanctions.

6. An advance tax ruling shall not be applied if:

a) the facts and circumstances indicated in the advance tax ruling and which would have affected the advance tax ruling are different from those actually existing;

b) the norm of the legislation of Georgia which formed the basis for the advance tax ruling has been repealed or amended.

7. A norm of the legislation of Georgia that is unfavourable to a taxpayer and has been given retroactive force may not affect a transaction performed under an advance tax ruling issued prior to enactment of such norm.

8. (Deleted – 28.6.2019, No 4906).

9. The information provided by a person in a request for an advance tax ruling shall be treated as a tax secret.

10. If a person disagrees with an advance tax ruling of a tax authority, he/she may appeal it as provided in this Code.

11. An advance tax ruling shall need to be agreed upon with the Minister of Finance of Georgia.

12. At the request of a person and in the case of submission of additional or amended information, the Revenue Service may amend its advance tax ruling, unless the person has already applied the advance tax ruling issued before such amendment, in relation to the transaction on which the ruling was based.

13. The procedure for issuing an advance tax ruling shall be determined by order of the Minister of Finance of Georgia.

Law of Georgia No 4963 of 24 June 2011 – website, 30.6.2011

Law of Georgia No 5942 of 27 March 2012 – website, 12.4.2012

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Chapter VI – Georgian Tax Authorities and their Main Functions

Article 48 – Georgian tax authorities

1. Georgian tax authorities shall be the Revenues Service and its structural units as determined by the Minister of Finance of Georgia.

2. The Revenue Service is a legal entity under public law within the Ministry of Finance of Georgia exercising public control. The Revenue Service exercises its powers across the whole territory of Georgia and may have offices in one or several locations.

3. Georgian tax authorities shall exercise tax control in Georgia, except where such power is granted under this Code to another authority.  

Law of Georgia No 4705 of 20 May 2011 – website, 1.6.2011

Law of Georgia No 4754 of 14 June 2011 – website, 28.6.2011

Law of Georgia No 3581 of 1 May 2015 – website, 15.5.2015

Chapter VII – Rights and Obligations of Tax Authorities

Article 49 – Rights of tax authorities

1. Under this Code, within the scope of their authority and in the manner provided for by the legislation of Georgia, tax authorities may:

a) audit financial documents, books, accounts, cost estimates, funds, securities and other valuables, computations, declarations, and other tax computation and payment documents;

b) obtain from taxpayers and/or their representatives tax computation and payment documents, as well as written and oral explanations regarding issues arising in the course of tax audit;

c) examine production, storage, sales and other facilities of enterprises, organisations and entrepreneur natural persons, perform tax monitoring, take inventory of stock of goods, conduct observations by time-study or any other method and determine the number of taxable objects, conduct tax audits, monitor taxpayer observance of the rules for use of cash registers and, in the case of non-compliance with this rule, determine and impose appropriate liabilities under the legislation of Georgia with respect to those persons;

d) summon taxpayers to a tax authority (a taxpayer’s legal or authorised representative who has accounting documents and/or information related to the taxation of the taxpayer may appear before a tax authority instead of the taxpayer);

e) independently determine the amount of tax liabilities of a taxpayer based on information held by the tax authority (including information on the expenditures of a taxpayer) or by a comparison method – by analysing information of other similar taxpayers, unless a taxpayer submits the accounting documents required for tax control or performs bookkeeping in violation of established procedure, or in other cases provided for by this Code;

f) apply sanctions against taxpayers who have violated the tax legislation of Georgia;

g) for the enforcement of payment of tax arrears, apply the measures provided for by this Code against a taxpayer;

h)  prepare administrative offence reports against offenders for tax legislation violations and adopt rulings on the imposition of administrative sanctions;

i) perform a test purchase of goods/services from a taxpayer to fully determine an object of taxation;

j) hire specialists or experts for tax administration purposes;

k) obtain data, certificates, documents and other necessary information free of charge from the state and municipality bodies for work-related purposes. Where necessary, the procedure for exchange of information between state bodies shall be determined by a resolution of the Government of Georgia;

l) request and obtain copies of accounting documents (a copy certified by the taxpayer, if necessary);

m) install readers and/or obtain their readings and seal documents and other materials in the manner provided for by this Code.

n) receive from a financial institution of Georgia defined in the Agreement between the Government of the United States of America and the Government of Georgia to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act (FATCA), within the framework of this Agreement, the information provided for under the same Agreement, and transfer this information to a competent body of the United States of America defined under the Agreement.

2. Tax authorities shall also have the rights provided under this Code and other legislative acts.

3. Under an agreement between a tax authority and the National Bureau of Enforcement, in order to secure the payment of tax arrears falling within the authority of a tax authority under the tax legislation of Georgia, the National Bureau of Enforcement shall demand and obtain a list of assets from a taxpayer for the purpose of seizing a taxpayer’s property, take inventory of a person’s property, evaluate the property, prepare an act for seizure of the property, seal the property, ensure registration of a seizure of the taxpayer’s property with a registration authority,  prepare a report on tax offences where so provided by this Code, apply to a court on behalf of a tax authority with a request to sell property or directly transfer it to the State in cases where the National Bureau of Enforcement seizes a person’s property, and perform other necessary actions for the purposes specified in this paragraph.

4. Under an agreement between a tax authority and a legal person with approval of the Government of Georgia, certain types of taxpayer services falling within the authority of a tax authority under the tax legislation of Georgia may be performed by such legal person.

5. The approval of the Government of Georgia referred to in the fourth paragraph of this article shall not be required if the agreement is made between a tax authority and the National Agency of Public Registry.

6. (Deleted – 1.5.2015, No 3581). 

Law of Georgia No 4206 of 22 February 2011 – website, 10.3.2011

Law of Georgia No 4705 of 20 May 2011 – website, 1.6.2011

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 3581 of 1 May 2015 – website, 15.5.2015

Law of Georgia No 4458 of 28 October 2015 – website, 11.11.2015

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Law of Georgia No 6942 of 15 July 2020 – website, 28.7.2020

Article 49¹ – General analytical procedures

1. A tax authority may perform general analytical procedures.

2. General analytical procedures shall mean collection and analysis of information about a person and, based on the analysis, planning and optimisation of tax administration measures, including collection and analysis of information about a taxable entity, and study of the reasons for the origination of tax liabilities and overpayments.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 50 – Personal tax advisor

1. To facilitate interaction with a tax authority in exercising rights and discharging obligations under this Code, a taxpayer may use the services of a personal tax advisor.

2. A personal tax advisor shall be a tax authority employee who renders a service defined by an order of the Minister of Finance of Georgia to a taxpayer. Service of a personal tax advisor shall not include determination of the amount of taxpayer’s tax liabilities.

3. Types of services to be rendered by a personal tax advisor to a taxpayer, the procedure and conditions for employing services shall be defined by the Minister of Finance of Georgia.

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 51 – Obligations of tax authorities

1. Within the scope of their authority, tax authorities shall:

a) comply with the tax legislation of Georgia, act in accordance with the requirements of this Code and other acts of the tax legislation of Georgia and participate in the implementation of national tax policy;

b) protect the rights of taxpayers and the interests of the state;

c) exercise control over the accuracy and completeness of tax computations and their timely payment, conduct tax audits as provided for by this Code and, in the course of the audit, inform taxpayers of their rights and obligations;

d) ensure taxpayers’ timely registration;

e) account for taxes charged and paid to the budget and prepare reports on taxes paid;

f) refund overpaid amounts to a taxpayer as prescribed by this Code;

g) protect confidentiality of taxpayer information and observe rules for storing information in accordance with this Code;

h) design declaration forms and other tax computation and payment forms and ensure the provision of information to a taxpayer;

i) study, analyse and assess the violations of the tax legislation of Georgia and take appropriate measures to eliminate the causes of or conditions for tax offences;

j) identify natural and legal persons who evade taxes; prevent tax offences, conduct tax offence cases and apply liability measures as provided by this Code;

k) maintain a national register of cash register models permitted for cash settlements with customers, register cash registers, and monitor the compliance with rules for operating cash registers;

l) receive applications, notifications and other information on  violations of the tax legislation of Georgia and examine them as provided by law;

m) consider letters, complaints and queries of taxpayers in the prescribed manner and, if necessary, inform them free of charge of the applicable taxes, tax computation and payment rules, and of the rights and obligations of a taxpayer;

n) raise awareness about the application of the tax legislation of Georgia, issue methodological guidelines, manuals and brochures, and publish advice on tax matters and explanations in the media;

o) conduct administrative proceedings on administrative offences as provided for by the Administrative Offences Code of Georgia;

p) deliver (send) tax audit reports, other decisions and notifications of tax authorities to a taxpayer in the manner and within the timeframes provided for by this Code and other tax legislation of Georgia;

q) present a tax notice to a taxpayer, and in the case of its noncompliance or improper  compliance, take actions under this Code to ensure  compliance;

r) promptly confirm receipt of letters delivered personally by taxpayers and of other documents provided for by this Code.

s) ensure the tax registration of taxpayers (maintenance of a Register) according to this Code, and the assignment of identification numbers  (except for persons subject to registration with the Register of Entrepreneurs and Non-entrepreneurial (Non-commercial) Legal Entities and the Register of Citizens’ Political Alliances (Parties)).

2. A tax authority shall, not later than 10 calendar days after receiving a taxpayer’s request, provide the taxpayer with a statement showing changes to its tax liabilities and the status of the completion of those liabilities for the period specified in the request.

3. Tax authorities shall also fulfil the obligations provided for by this Code and other legislative acts.

Law of Georgia No 6547 of 22 June 2012 – website, 4.7.2012

Law of Georgia No 5144 of 27 May 2016 – website, 4.6.2016

Article 52 – Delegation of authority

The head of a tax authority may grant specific authority to any employee. The employee may not transfer the authority delegated to him/her to another person.

SECTION IV

TAX LIABILITY

Chapter VIII – Tax Liability and its Fulfilment

Article 53 – Tax liability and its fulfilment

1. Tax liability is the obligation of a taxpayer to pay taxes established by this Code, as well as taxes established by this Code and introduced by a municipality representative body.

2. A person shall be obligated to pay taxes upon the occurrence of a taxable event as determined by the tax legislation of Georgia.

3. Tax liability shall be deemed fulfilled if the tax amount is paid within the set timeframe.

4. Tax liability shall be paid directly by a taxpayer, unless otherwise provided by the legislation of Georgia. A taxpayer’s tax liability may be paid by another person in the manner prescribed by the National Bank of Georgia.

5. The procedure and/or timeframe for payment of tax liability may be changed in the cases as provided for by this Code.

6. The day of the payment of taxes shall be the day when the tax amount is transferred into the relevant account of the Budget, unless otherwise provided by the tax legislation of Georgia.

7. (Deleted – 1.5.2015, No 3581).

8. Under the Law of Georgia on Oil and Gas, based on the application of the parties to the Production Sharing Agreement and at the decision of the Minister of Finance of Georgia, payment of tax liabilities may be imposed on the party receiving a profit from the state-owned share of oil and gas.

9. With regard to import payments, tax liabilities shall be considered discharged in cases provided for by Article 62(2)(a-d) of the Customs Code of Georgia.

Law of Georgia No 3581 of 1 May 2015 – website, 15.5.2015

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Law of Georgia No 6942 of 15 July 2020 – website, 28.7.2020

Article 54 – Obligations of banking institutions with regard to the payment of taxpayer tax liabilities

1. A banking institution shall, first of all, fulfil a taxpayer’s payment order for the payment of taxes and a tax authority’s collection order for debiting funds from the bank account in the following order of precedence:

a) a tax authority’s collection order:

b) a taxpayer’s payment order.

1¹. The obligation of a banking institution specified in the first paragraph of this article shall not restrict a person’s right to use funds exceeding the uncollected amount of the collection order until the full payment or after partial payment of the collection order.

2. If there are funds in a person’s bank account, the bank fulfils a payment order or a collection order not later than the banking day following the day of receipt of the order, unless otherwise provided for by this Code. A taxpayer shall bear the cost of services related to a collection order.

3. If the amount on a person’s bank account is not sufficient to pay a payment order or a collection order, they shall be paid not later than the banking day following the day when funds are transferred into the account.

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Article 55 – Payment of tax liabilities in the case of liquidation of an enterprise/organisation

1. If an enterprise/organisation is liquidated, the liquidation commission of the enterprise/organisation shall pay tax liabilities and tax arrears, unless otherwise provided for by this article.

2. If an enterprise provided for in Article 21(1)(c) of this Code is liquidated/terminates its activities, the partners/participants of the enterprise shall pay tax liabilities and tax arrears jointly and severally.

3. If an enterprise/organisation is liquidated, a tax authority shall refund any overpaid amount to the liquidation commission of that enterprise/organisation (participants of the enterprise) as provided for by this Code.

Article 56 – Payment of tax liability in the case of reorganisation of an enterprise/organisation

1. Tax liability and tax arrears of a reorganised enterprise/organisation shall be paid by its legal successor as provided by this Code.

2. In the case of a merger of several enterprises/organisations, the enterprise/organisation formed as a result of the merger shall be the legal successor with respect to payment of tax liabilities of these enterprises/organisations.

3. If one enterprise/organisation is acquired by another, the legal successor with regard to payment of tax liabilities/arrears of the acquired enterprise/organisation shall be the acquiring enterprise/organisation.

4. If an enterprise/organisation is split into several enterprises/organisations, the enterprises/organisations created as result of the split shall be legal successors with respect to payment of tax liabilities/arrears of the original enterprise/organisation.

5. If there are several legal successors, the share of each of them with respect to payment of tax liabilities/arrears of the reorganised enterprise/organisation shall be determined under the division balance sheet or other deed of transfer. Newly formed enterprises/organisations shall be jointly and severally responsible for payment of tax liability/arrears of the reorganised enterprise/organisation or its respective part.

6. If an enterprise/organisation changes its organisational and legal form, the enterprise/organisation arising from such reorganisation shall be the legal successor with regard to payment of tax liability/arrears of the original enterprise/organisation.

7. If one or several enterprises/organisations separate from an enterprise/organisation, the separated enterprise(s)/organisation(s) shall be subject to paragraphs 4 and 5 of this article.

8. Any overpaid amount paid before the reorganisation of an enterprise/organisation shall be credited by a tax authority against future tax liabilities of the legal successor of the reorganised enterprise/organisation pro rata to the total amount or refunded to the legal successor(s) (pro rata to their shares) as provided by this Code.

Article 57 – Payment of tax liabilities of a deceased person

1. Tax arrears of a deceased person shall be paid by his/her heirs pro rata to their shares in the inheritance, from the day of receipt of an inheritance certificate.

2. Tax arrears of a deceased person shall be the tax arrears as of the day of his/her death.

3. The heir to the deceased person shall notify a tax authority of having obtained an inheritance certificate if he/she is aware of the tax arrears of the deceased person.

4. A tax authority shall send a notice of the tax arrears not later than 30 days after it becomes aware that the person obtained an inheritance certificate.

5. Tax arrears of a deceased person shall be written off, if:

a) the deceased person has no heir;

b) the heir waives the inheritance;

c) the amount of the tax arrears of the deceased person exceeds the value of the inherited property – in the amount of the outstanding amount of tax arrears.

6. An heir who continues the economic activity of the deceased person shall:

a) notify a tax authority accordingly;

b) before starting the economic activity, become registered as a taxpayer, and if the deceased person was a VAT payer, become registered as a VAT payer;

c) pay tax arrears of the deceased person;

d) fulfil a taxpayer’s other obligations under this Code.

7. An heir who continues the economic activity of the deceased person may:

a) apply for a refund for the sum of any tax and/or sanction (including a customs sanction) overpaid by the deceased person or keeping it as a credit against future taxes;

b) use the deceased person’s tax source documents for tax reporting;

c) present tax returns (including, adjusted ones) for the period of the deceased person’s activity;

d) where so provided by this Code, use appropriate documents of the deceased person to confirm the costs deductible from total revenue and to obtain a deduction of excise tax/VAT;

e) continue a tax dispute started by the deceased person;

f) exercise a taxpayer’s other rights under this Code.

8. A tax authority shall unite the deceased person’s and his/her heir’s personal account cards if the heir carries on with the economic activity of the deceased person.

9. If an heir applies for a refund for the sum of any tax and/or sanction (including a customs sanction) overpaid by the deceased person or keeping it as a credit against future taxes, a tax authority shall, not later than three months after the taxpayer’s application is lodged:

a) transfer the sum of any tax and/or sanction (including a customs sanction) overpaid by the deceased person to the heir’s personal account card;

b) be authorised to establish compliance of the overpaid sum of a tax and/or sanction on a person’s personal account card with the legislation of Georgia, including through a tax inspection;

c) in the case any outstanding tax liability of the deceased person is identified, be authorised to impose a respective tax:

c.a) to the heir’s personal account card if the heir carries on with the economic activity of the deceased person;

c.b) to the heir’s personal account card, within the scope of the overpaid sum of a tax and/or sanction if the heir does not carry on with the economic activity of the deceased person;

d) after the procedures provided for in subparagraphs (a)-(c) of this paragraph are performed, refund to the heir of the deceased person, under the procedure established by the legislation of Georgia, the sum of any tax and/or sanction overpaid by the deceased person, or keep it as a credit against future tax liabilities.

10. In the case provided for in paragraph 9(c) of this article, sanctions defined by this Code shall not apply to the heir.

Law of Georgia No 6446 of 12 June 2012 – website, 25.6.2012

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Article 58 – Payment of tax liabilities of missing persons and beneficiaries of support

1. Tax arrears of a natural person who has been declared missing by a court shall be paid within three months after the person is declared missing, at the expense of the property of the missing person, by the person who is authorised by guardianship authorities to manage the property of the missing person.

2. A tax authority shall send to the person who is authorised by guardianship authorities to manage the property of the missing person a notice requesting payment of the missing person’s tax arrears.

3. Tax liabilities of a beneficiary of support shall be paid by his/her supporter at the expense of the property of the beneficiary of support, unless otherwise determined under the court decision. Tax arrears of a beneficiary of support shall be paid by his/her supporter at the expense of the property of the beneficiary of support, unless otherwise determined under the court decision.

4. Tax arrears of a person recognised as missing or declared as a beneficiary of support by court shall be regarded as bad debt and shall be written off if his/her property is insufficient to cover the tax arrears and unless otherwise determined under court decision with respect to the beneficiary of support.

5. The written-off tax arrears shall be restored the day the decision is made to reverse the court’s recognition of a person as missing or declaration as a beneficiary of support.

6. Tax arrears of a missing person or a beneficiary of support shall be the tax arrears as of the date when he/she was recognised as missing or declared as a beneficiary of support by court.

Law of Georgia No 3349 of 20 March 2015 – website, 31.3.2015

Article 59 – Tax period

1. Tax period shall be the period according to which a taxpayer’s tax liability is determined in relation to a specific tax.

2. If an enterprise/organisation is founded (becomes publicly registered) after the beginning of a calendar year before 1 December of that year, its first tax period shall be the period from its foundation(registration) up to the end of that year. At the same time, the day of foundation of the enterprise/organisation indicated in Article 21(1)(c) of this Code shall be the day on which a joint activities agreement is signed.

3. If an enterprise/organisation is founded from 1 December through 31 December, its first tax period shall be the period from the day of foundation up to the end of the next year, unless otherwise provided by this article.

4. If an enterprise/organisation is liquidated/reorganised before the end of a calendar year, its last tax period shall be the period from the beginning of the year up to the day when its liquidation/reorganisation ends.

5. If an enterprise/organisation is founded after 30 November of the year preceding the year of its liquidation/reorganisation, its first and last tax periods shall be the period from the date of foundation up to the day on which its liquidation/reorganisation is finished.

6. The rules provided for in the fourth and fifth paragraphs of this article shall not apply to enterprises/organisations from which one or several enterprises/organisations separated or which acquired one or several enterprises/organisations.

7. If during a tax period, a Georgian enterprise/organisation acquires the status of a foreign enterprise or a foreign enterprise acquires the status of a Georgian enterprise, the tax period shall be divided into two parts: in the first part the enterprise/organisation shall pay taxes according to its original status, and in the second part it shall pay taxes according to the acquired status.

7¹. (Deleted – 26.12.2013, No 1886).

8. The rules provided by paragraphs 2 through 4 of this article shall not apply to taxes, the tax period of which is not a calendar year.

Law of Georgia No 6212 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Article 60 – Tax privileges

1. Exemption from the national or local taxes provided for by this Code may be granted only by making amendments to this Code.

2. Tax privilege shall be any advantage given to a certain category of taxpayers over other taxpayers, namely, the possibility to pay less tax or be tax exempt.

3. A tax privilege in relation to a local tax shall be granted by making amendments to the relevant normative act.

4. No individual tax privileges may be granted or individual tax exemptions made.

5. A taxpayer may enjoy tax privileges from the moment when the relevant legal basis for the privileges arise, throughout the entire period of their validity.

Article 61 – Tax assessment

1. Tax assessment shall mean computing by a tax authority of the tax amount payable by a taxpayer for a specific tax period and recording it in a taxpayer’s personal account card. The procedure for maintaining the card shall be determined by the Minister of Finance of Georgia.

2. Tax may be assessed based on:

a) a tax return/customs declaration;

a¹) (Deleted – 1.5.2015, No 3581); 

b) information on the amounts paid under Article 154 of this Code;

c) a tax audit report;

d) information on a person’s tax liability provided to a tax authority by other controlling or law-enforcement authorities;

e) information provided to a tax authority by the National Agency of Public Registry to assess property tax on land;

f) information on assessing VAT on the sale of goods in the case provided for by Article 161¹ of this Code;

g) information identified during tax/customs proceedings.

3. If a person does not present the information needed for assessment of taxes, a tax authority may charge taxes based on information available to it.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 6446 of 12 June 2012 – website, 25.6.2012

Law of Georgia No 3581 of 1 May 2015 – website, 15.5.2015

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 62 – Tax payment timeframes

1. The timeframe for payment of taxes, including current tax payments, shall be set according to each tax.

2. If a tax payment timeframe is not specified by this Code, it shall be paid within the timeframe set for filing tax returns, and in other cases, within 30 days after receiving a tax notice.

3. The import payments payable under a customs declaration shall be paid within the time limit set for the payment of import payments under the Customs Code of Georgia.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 6446 of 12 June 2012 – website, 25.6.2012

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Article 63 – Refunding overpaid amounts

1. If the amount of taxes and/or sanctions (including a customs sanction) paid by a taxpayer exceeds the amount of the assessed taxes and/or sanctions (including a customs sanction), the tax authority shall, on the basis of the taxpayer’s request, refund the overpaid sum to the taxpayer not later than one month after the request is submitted.

2. If the amount of taxes and/or sanctions (including a customs sanction) paid by a taxpayer exceeds the amount of the acknowledged tax arrears, the tax authority shall use the overpaid sum to cover the tax arrears that will be charged and acknowledged in future.

3. (Deleted – 1.5.2015, No 3581).

4. (Deleted – 1.5.2015, No 3581).

5. (Deleted – 14.7.2020, No 6817).

5¹. (Deleted – 12.6.2012, No 6446).

6. (Deleted – 14.7.2020, No 6817).

7. The overpaid amount resulting from an incorrect debiting of the sum of a tax and/or tax sanction (including a customs sanction) from a taxpayer’s bank account under a tax authority collection order, or from concurrent payment of a tax authority collection order by two or more banking institutions, shall be refunded to the taxpayer not later than 15 days after filing an application with the tax authority.

8. The procedure for refunding the overpaid sum to a taxpayer shall be established by the Minister of Finance of Georgia.

9. In an individual case, an overpaid amount may be refunded automatically to taxpayers who file electronic tax returns. The terms and conditions for automatically refunding overpaid amounts shall be determined by the Minister of Finance of Georgia.

10. In individual cases, by decision of the head of the Revenue Service, the overpaid sum of a tax and/or sanction (including a customs sanction) may be refunded to the taxpayer without submission of the taxpayer’s application for a refund. Cases of, procedure and conditions for refunding the overpaid sum of a tax and/or sanction (including a customs sanction) without submitting a taxpayer’s application for a refund shall be defined by the Minister of Finance of Georgia.

Law of Georgia No 4754 of 14 June 2011 – website, 28.6.2011

Law of Georgia No 4963 of 24 June 2011 – website, 30.6.2011

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 5791 of 13 March 2012 – website, 23.3.2012

Law of Georgia No 6446 of 12 June 2012 – website, 25.6.2012

Law of Georgia No 3581 of 1 May 2015 – website, 15.5.2015

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 64 – Tax notice

1. A tax notice is an individual administrative-legal act of a tax authority that must be complied with as provided for in this Code.

2. A tax authority shall present a tax notice to a taxpayer if there is one of the following grounds:

a) assessment of tax, the computation of which is the obligation of a tax authority;

b) the decision of a tax authority on assessing tax and/or imposing a sanction or a tax offence report;

c) the decision on serving a notice of levy on a third person under Article 240(1) of this Code;

d) the decision of a customs authority on assessing the import payment and/or imposing a customs sanction on a person, or a customs offence report.

3. Only one tax notice shall be presented to a person based on specific grounds for presentation.

4. A tax notice shall be deemed fulfilled from the moment the person pays the amount indicated in the tax notice.

5. The procedure for issuing tax notices shall be determined by order of the Minister of Finance of Georgia.

Law of Georgia No 4705 of 20 May 2011 – website, 1.6.2011

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 65 – Taxpayer's claim

1. A taxpayer's claim is a claim filed by a person with a tax authority for refunding the sum of overpaid taxes and/or sanctions (including a customs sanction), which a tax authority has to fulfil in the cases provided for and under the procedure established by this Code.

2. The basis for filing a taxpayer's claim shall be the overpaid sum of taxes and/or sanctions (including a customs sanction).

3. A taxpayer's claim shall be deemed fulfilled upon payment of the amount claimed.

4. If a tax authority deems that a taxpayer's claim is groundless, it shall submit a substantiated counterclaim to the taxpayer within 20 days after receiving the taxpayer's claim.

5. The person may appeal the tax authority’s counterclaim as provided in this Code.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Article 66 – Registration as a taxpayer

1. A Georgian citizen natural person, a person having a neutral ID or a neutral travel document, and persons legally residing in the Autonomous Republic of Abkhazia and in Tskhinvali region (former Autonomous Region of South Ossetia) that are registered under the procedure established by the legislation of Georgia and that are granted the personal number, except for a person whose income is withheld at source or who is tax exempt, shall apply to a tax authority for granting the identification number to them before starting economic activities.

2. Tax registration of taxpayers shall be carried out by the tax authorities under the procedure established by the Minister of Finance of Georgia. This procedure shall not apply to persons whose registration under the legislation of Georgia is performed by the Legal Entity under Public Law operating under the Ministry of Justice of Georgia – the National Agency of Public Registry. The procedure and conditions for assigning the identification number to these persons shall be defined by an order of the Minister of Justice of Georgia.

3. A branch of a foreign enterprise that is subject to registration with the Register of Entrepreneurs and Non-entrepreneurial (Non-commercial) Legal Entities shall be registered for tax purposes and issued an identification number by the National Agency of Public Registry at the moment of the registration of the branch. At the same time, if the said foreign enterprise was registered for tax purposes before the registration of the branch and was issued an identification number by a tax authority or if two or more branches have been registered, the identification number first issued shall remain intact.

4. If the obligation to pay taxes and/or file tax returns arises in Georgia, a Georgian citizen natural persons, a person having a neutral ID or a neutral travel document, and persons legally residing in the Autonomous Republic of Abkhazia and in Tskhinvali region (former Autonomous Region of South Ossetia) that are registered under the procedure established by the legislation of Georgia and that are granted the personal number (except for an entrepreneur natural person) may indicate, even without  completing tax registration procedures with a tax authority, their personal number indicated in their identity card, neutral ID card or in a neutral travel document of a citizen, and the number granted to them at registration (identification number), when filing a return in respect of the incurred tax, including customs liabilities and when paying taxes at a banking institution. Tax registration of a Georgian citizen natural person, a person having a neutral ID card or a neutral travel document, and of persons legally residing in the Autonomous Republic of Abkhazia and in Tskhinvali region (former Autonomous Region of South Ossetia) that are registered under the procedure established by the legislation of Georgia and that are granted the personal number, shall be conducted based on the details of their tax returns, customs declarations/re-export declarations and/or payment orders presented to the bank that evidence the payment of taxes.

5. A Georgian citizen natural person (including an entrepreneur natural person) shall be granted the personal number indicated in his/her ID card as the identification number; a person having a neutral ID card or a neutral travel document shall be granted the personal number indicated in the ID card/travel document, and a person legally residing in the Autonomous Republic of Abkhazia and in Tskhinvali region (former Autonomous Region of South Ossetia) shall be granted the personal number granted to him/her at registration.

6. The identification number of a natural person who is not a Georgian citizen shall be the 9-digit identification number issued by the authority as determined under the legislation of Georgia.

7. An identification number shall be permanent and may not be changed or repeated, unless otherwise provided by the legislation of Georgia.

8. Tax registration of an enterprise/organisation, an entrepreneurial entity and a non-entrepreneurial (non-commercial) legal entity shall be performed according to the legal address; tax registration of a natural person shall be performed according to his/her declared  place of residence/business.

9. A taxpayer shall indicate its taxpayer identification number in a tax return, in correspondence with a tax authority and in any other documents as determined by the tax legislation of Georgia.

10. In detecting a tax offence specified in Article 273 of this Code, a tax authority shall ensure the person’s tax registration as prescribed by the Minister of Finance of Georgia.

Law of Georgia No 4998 of 1 July 2011 – website, 15.7.2011

Law of Georgia No 5144 of 27 May 2016 – website, 4.6.2016

Law of Georgia No 2476 of 6 June 2018 – website, 21.6.2018

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 66¹ – Estimated assessment

1. A tax authority may, without a tax audit, conduct an estimated assessment on the basis of information it holds if:

a) there is a reasonable belief that the amount of tax has been unreasonably reduced on a taxpayer’s personal account card. In this case, an estimated assessment may be conducted only in the sum of the tax amount reduced;

b) a taxpayer has failed to fulfil the obligation to submit a tax return/calculation within the period set by the tax legislation of Georgia.

2. An estimated assessment may be annulled by an adjusted assessment.

3. The estimated and adjusted assessment procedure shall be defined by an order of the Minister of Finance of Georgia.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Chapter IX – Tax Reporting

Article 67 – Tax return

1. A tax return is a person’s statement used to assess his/her tax liabilities under this Code.

2. The amount of total tax liabilities in a tax return is computed in full laris. For this purpose, any tax liability under GEL 1 shall be zeroed.

3. A person may file his/her tax return with a tax authority in person, or may send it by registered mail or electronically.

4. Except as defined by the Minister of Finance of Georgia, if a person fails to file a tax return he/she is deemed to have filed a tax return, based upon which the amount of the assessed taxes equals zero. A tax return filed later for the given reporting period shall be deemed as late filing.

5. Tax return forms and the procedure for their completion and electronic filing shall be determined by the Minister of Finance of Georgia.

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Article 68 – Extending deadlines for filing tax returns

The deadline for filing annual income, profit or property tax returns shall be extended for three months if a person has paid the current taxes for the period subject to declaration (or has no obligation to pay current taxes) and applies in writing to a tax authority for an extension of the deadline before the filing deadline expires. An extension of the deadline for filing tax returns shall not affect the deadline for tax payment.

Article 69 – Making amendments to tax returns

1. If in a filed tax return a person discovers a mistake that causes a change in the tax liability, he/she shall make relevant amendments to the tax return.

2. If an amended tax return is filed with a tax authority before its filing deadline expires, the amended tax return shall be deemed as originally filed.

3. If a person files a tax return (including an amended tax return) for the period or issue, in respect of which a tax authority has already conducted a tax audit or assessment, the tax authority may perform a calculation according to such tax return (including an amended tax return). In this respect, the authorised person of the tax authority shall issue a reasoned order.

4. A person may not file a tax return (including an amended tax return) for the period or issue in respect of which a tax audit is being conducted or is to be conducted, from the moment of service of the relevant order/notice of a judicial/tax authority on conducting a tax audit, or from posting of this order/notice electronically on a tax payer’s authorised user web page, or from preparation of a tax offence report up to the service of the relevant tax notice to the person in question.

5. The restriction under the fourth paragraph of this article shall not apply if a tax notice is deemed invalid under Article 264(3) of this Code.

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 1182 of 30 June 2017 – website, 13.7.2017

Article 70 – Right to request information

1. A tax authority may request persons:

a) to provide accounting documents and/or taxation-related information (including information requested by another state’s competent (authorised) body on the basis of an international agreement to which Georgia is a part);

b) to submit a list of their property.

2. In the cases provided by this Code, an authorised person of the National Bureau of Enforcement may exercise the right under paragraph 1(b) of this article.

3. A tax authority may request a commercial bank to provide confidential information specified in Article 17 of the Law of Georgia on the Activities of Commercial Banks during a tax audit (within the scope of the audit) of a taxpayer or upon request of another state’s competent (authorised) body according to an international agreement to which Georgia is a part. A tax authority shall request this information on the basis of a court decision as prescribed by the Administrative Procedure Code of Georgia, except as provided for by paragraph 3¹ of this article.

3¹) A tax authority may request from a financial institution of Georgia defined in the Agreement between the Government of the United States of America and the Government of Georgia to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act (FATCA), within the framework of this Agreement, the information provided for under the same Agreement, and transfer this information to a competent body of the United States of America defined under the Agreement.

4. A tax authority may not transfer the information specified in paragraph 3 of this article to persons set out in Article 39(2) of this Code, except when the information is transferred to another state’s competent (authorised) body under an international agreement to which Georgia is a part.

5. A person shall be obligated to accurately and fully provide the requested information to a tax authority/the National Bureau of Enforcement within the indicated time limits. A person whose property has been seized by a tax authority shall be obligated to adjust the submitted property list not later than seven working days from the purchase of the property.

Law of Georgia No 4206 of 22 February 2011 – website, 10.3.2011

Law of Georgia No 2946 of 12 December 2014 – website, 24.12.2014

Law of Georgia No 4458 of 28 October 2015 – website, 11.11.2015

Article 70¹ – Statement of a multinational enterprise group

1. A final parent company of a multinational enterprise group, which is a Georgian resident, shall submit a report by countries to a tax authority before 31 December of a year following the accounting year.

2. A Georgian resident enterprise – a part of a multinational enterprises group – which is a final parent or surrogate parent establishment, shall inform a tax authority thereof before end of the accounting year.

3. For the purposes of this article:

a) a multinational enterprise group shall be any group which:

a.a) includes two or more than two enterprises that are tax residents of different countries/jurisdictions, or includes an enterprise which is a resident of one country for taxation purposes and is subject to taxation in another country/jurisdiction, in relation to an economic activity performed through its permanent establishment;

a.b) is not an exceptional multinational enterprise group;

b) an exceptional multinational enterprise group – in relation to any fiscal year of the group, a group whose overall consolidated group revenues are less than EURO 750 000 000 during the fiscal year immediately preceding the accounting fiscal year, as it has been included in its consolidated financial statement for this previous financial year;

c) a final parent enterprise – a part of a multinational enterprise group, which meets the following requirements:

c.a) directly or indirectly holds sufficient number of shares in one or more than one enterprise – part of such multinational enterprise group that it is assigned to prepare consolidated financial statements in compliance with the accounting principles generally effective in a country/jurisdiction of which it is a tax resident, or would be obligated to prepare them in the case of trading at a public stock exchange with its shares;

c.b) there is no other enterprise – part of such multinational enterprise group, which directly or indirectly holds shares provided for in subparagraph c.a) of this paragraph in the aforementioned enterprise – part of the multinational enterprise group;

d) a surrogate parent establishment – an establishment – part of a multinational enterprise group, which has been appointed by this multinational enterprise group in a country/jurisdiction, of which it is a resident, as a sole substitute for a final parent establishment for the purpose of submitting a statement by countries, when conditions under the order of the Minister of Finance of Georgia have been met;

e) the following shall be deemed an enterprise – part of a multinational enterprise group:

e.a) any separate economic unit of a multinational enterprise group, which is included in the consolidated financial statements of the multinational enterprise group for financial reporting purposes, or would be included therein in the case of trading at a public stock exchange with shares of such economic unit of the multinational enterprise group;

e.b) any separate economic unit that is not included in the consolidated financial statements of the multinational enterprise group only on the basis of size or materiality;

e.c) any permanent establishment of any separate economic unit of a multinational enterprise group under subparagraphs e.a) and e.b), provided that the economic unit prepares a separate financial statement for the permanent establishment for financial/tax reporting, and internal management control purposes.

4. The procedure for submitting a statement of a multinational enterprise group shall be defined by an order of the Minister of Finance of Georgia.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 71 – Obligations of banking institutions

1. A banking institution shall:

a) open a bank account for an entrepreneur natural person and/or enterprise/organisation based on documents evidencing the granting of a taxpayer identification number, except as provided by subparagraph (b) of this paragraph;

b) notify the Revenue Service of the opening of a bank account for a foreign enterprise for the first time or closing the last account of such enterprise, within three business days (except as provided by subparagraph (e) of this paragraph) and not perform any debit transactions from the account until the Revenue Service receives the notification. Furthermore, based on the information provided by a foreign enterprise, it shall provide the Revenue Service with the identification number of the foreign enterprise and/or the actual address of a permanent establishment (if such information is available or if the person opening the account has provided such information to the bank).

c) notify the relevant tax authority within three business days after the opening of an account for the first time or closing the last account of the persons indicated in subparagraph (a) of this paragraph and not perform any debit transactions from the account of the person indicated in subparagraph (a) of this paragraph within two business days after receipt of such information by the tax authority, except where a debit transaction is related to payment of taxes to the budget. If the Revenue Service and the banking institution have signed an agreement on electronic exchange of information (including collection orders), the timeframes indicated in this subparagraph shall be determined under the agreement, but they shall not exceed the timeframes provided for in this subparagraph;

c¹) within three days after establishing the fact that a natural person is an entrepreneur natural person, notify a tax authority the date of the opening of the first active account and the date of closing the last account of that person. If the Revenue Service and the banking institution have concluded an agreement on electronic exchange of information (including collection orders), the timeframe indicated in this subparagraph shall be determined under the agreement, but it shall not exceed the timeframe set in this subparagraph.

d) not perform any debit transactions (other than the bank service charges, unless such transactions are related to payment transactions outside the bank system) from the account of the persons indicated in subparagraph (a) of this paragraph without indicating a taxpayer identification number;

e) notify the Revenues Service, in the cases and according to the timeframes and conditions specified in the agreement concluded with it, about the opening and/or closing of the accounts only of the persons referred to in subparagraphs (a) and (b) of this paragraph and apply collection orders or seizure orders issued by a tax authority with the indication of the identification numbers of such persons, to the account(s) of such persons within the scope of the collection or seizure order, which shall not restrict the right to administer those funds that are in excess of the collection or seizure order, and if the funds on the bank account(s) are not enough to fully fulfil the collection or seizure order, automatically apply the collection or seizure order to all of their bank accounts;

f) at the request of the Revenue Service, provide it with information regarding the opening or closing of a taxpayer’s account not later than three business days after such request. The Revenue Service may request such information within the timeframe provided in this Code. The timeframe shall commence from the opening/closing of an account. In other cases, information may be requested under a court decision. If the Revenue Service and a banking institution have signed an agreement on electronic exchange of information, the information specified in this subparagraph may be requested electronically. In that case, the timeframe indicated in this subparagraph shall be determined under the agreement;

g) inform the person about the registration for payment of a collection order issued by a tax authority with respect to the person’s bank accounts, except where it is impossible to inform the person.

h) transfer, within the framework of the Agreement between the Government of the United States of America and the Government of Georgia to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act (FATCA), to a tax authority the information provided for under this Agreement.

2. If the information specified in the first paragraph of this article is provided by submitting a written notice to a tax authority, then it shall be certified with the signature of the authorised person of the tax authority on the second copy of the notice of opening a bank account, and where the notice submitted to the tax authority is not certified within two business days, the notice shall be deemed to have been certified automatically. Accordingly, the bank may perform debit transactions from that account. At the same time, a notice shall be deemed submitted upon receipt of correspondence by a tax authority.

Law of Georgia No 4114 of 17 December 2010 – LHG III, No 76, 29.12.2010, Art. 506

Law of Georgia No 4963 of 24 June 2011 – website, 30.6.2011

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 4458 of 28 October 2015 – website, 11.11.2015

Article 72 – Tax source document

1. A tax source document shall be a written document based on which the parties to a business transaction can be identified. It has a date and includes the list and value of the supplied goods/rendered services. The value of goods (including a unit price of goods) need not be indicated in a tax source document issued for a transaction on the exchange of goods/services (barter transaction).

2. A tax source document shall be made in at least two identical copies that are kept by the parties to the business transaction.

3. A person shall keep a tax source document for at least three years after the end of the calendar year for the determination of the tax liabilities of which such document is necessary.

Law of Georgia No 4754 of 14 June 2011 – website, 28.6.2011

Law of Georgia No 4680 of 18 December 2015 – website, 29.12.2015

Article 72¹ – Tax document

1. A tax document (the ‘TD’) shall be the document of the form determined by the Minister of Finance of Georgia, which is issued:

a) when transporting goods within the country;

b) when supplying goods;

c) when providing services.

2. When the SD is issued, no obligation of issuing a consignment note or a tax invoice (including a special tax invoice) shall arise.

3. The SD shall be the VAT deduction document for a VAT payer.

4. If the SD is/is not issued, all the legal consequences that would follow in a respective case when a consignment note and/or a tax invoice (including a special tax invoice) was/was not issued shall follow.

5. When the procedure for issuing and submitting the SD is not complied with, the measures of liability established by the legislation of Georgia for an offence related to the procedure for issuing and submitting a consignment note or a tax invoice (including a special tax invoice), respectively.

6. The SD may be issued and submitted in an electronic form.

7. The procedure for issuing and submitting the SD shall be defined by the order of the Minister of Finance of Georgia.

Law of Georgia No 3591 of 30 May 2018 – website, 12.6.2018

Article 73 – Determining an object of taxation and tax liability in certain cases

1. Income shall be taxed even if its legitimacy is in question.

2. Income earned or a transaction performed in violation of tax legislation shall be taxed as provided for by the tax legislation of Georgia.

3. If under a court decision, in the cases provided by the legislation of Georgia, income is subject to full collection in favour of the budget, it shall not be taxed.

4. If any amount is used for the interests of a particular person, the amount shall be deemed to have been received by that person.

5. A tax authority may determine a person’s tax liabilities by using indirect methods (based on the volume of assets, operating income and costs, by comparing information on the person with any other tax period of his/her business or with the data on other taxpayers who are subject to the same taxes, as well as based on analyses of similar information):

a) if a person does not have accounting documents or an object of taxation cannot be determined based on accounting documents;

b) if there are more than one of the following conditions:

b.a) the increase in a person’s assets is not supported by appropriate documents;

b.b) the costs incurred by a person for economic activity and/or personal use exceed the declared income;

b.c) in the audited period specified under the relevant act of a tax authority on the commencement of a tax audit, two or more cases of tax offences have been detected as a result of current tax control measures;

b.d) there is a substantial difference between the taxation-related data submitted/declared by a person to a tax authority and the actual data recorded as a result of current tax control measures.

6. In transactions between related parties, income and costs shall be distributed the same way as in the case of a transaction between unrelated persons.

7. When paying taxes, a person who sells goods/services primarily for cash applies the simplified rules established by the Minister of Finance of Georgia for recording revenues and costs. These rules shall not extend to the taxpayers who, for the purposes of profit and income taxes, are obliged to keep or voluntarily keep records on an accrual basis or to the person who is registered as a VAT-payer.

8. When the value of a barter transaction is understated, the tax authority shall adjust the value of an object of taxation according to market prices and take into account the sanctions for tax offence when reassessing the tax.

9. To determine tax liabilities, a tax authority has the right:

a) not to take into account business transactions of no substantial economic impact;

b) to change the classification of a business transaction based on its form and substance if the form of the transaction does not correspond with its substance.

10. A taxable transaction performed in a foreign currency shall be translated into the national currency of Georgia in the following order:

a) if there is an official exchange rate of lari defined by the National Bank of Georgia for a respective foreign currency as of the transaction day, at this rate;

b) if there is no official exchange rate of lari defined by the National Bank of Georgia for a respective foreign currency as of the transaction day, at the rate defined under the procedure determined by the Board of the National Bank of Georgia.

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 5942 of 27 March 2012 – website, 12.4.2012

Law of Georgia No 189 of 28 December 2012 – website, 29.12.2012

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Chapter X – (Deleted)

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 74 – (Deleted)

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 75 – (Deleted)

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 76 – (Deleted)

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 77 – (Deleted)

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 78 – (Deleted)

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

SECTION V

INCOME AND PROFIT TAXES

Chapter XI – Income Tax

Article 79 – Taxpayers

An Income tax payer shall be:

a) a resident natural person;

b) a non-resident natural person earning income from a Georgian source.

Article 80 – Object of taxation

1. A resident natural person shall be taxed by income tax with respect to his/her taxable income, which is the difference between the total income earned during a calendar year and deductions under this Code for that period.

2. A non-resident natural person conducting business through a permanent establishment in Georgia shall be taxed by income tax with respect to his/her taxable income, which is the difference between the total income earned during a calendar year from a Georgian source related to the permanent establishment and deductions under this Code for that period.

3. The gross income of a non-resident natural person that is not related to his/her permanent establishment in Georgia shall be taxed under Article 134 of this Code at source without deductions, except as provided for by paragraphs 4 and 6 of this article.

4. A non-resident natural person who receives income from the sale of property shall pay income tax with respect to the gross income earned during a calendar year from a Georgian source that is reduced by the deductions related to the receipt of such income for that period.

5. The income from the sale of property provided for by paragraph 4 of this article shall be:

a) the surplus gained from the sale of ordinary shares of a resident legal entity or from the sale of a partner's share;

b) the surplus income earned from the assets referred to in Article 8(21) of this Code;

c) the surplus gained from the sale of the property used for the economic activity provided for in Article 104(1)(k) or (l) of this Code;

d) the surplus gained from the sale of other property.

6. The object of income taxation of a non-resident natural person, who receives a payment for leasing/renting of property from a person who is not a tax agent under Article 154(1) of this Code, shall be the difference between the gross income earned from a Georgian source during a calendar year and the sums of deductions related to the receipt of this income.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 81 – Tax rate

1. A natural person's taxable income shall be taxed at the rate of 20%, unless otherwise provided for by this Code.

2. As a result of renting out the residential space to an organisation, legal or a natural person for residential purposes, the income received by a natural person who makes no deductions from this income shall be taxed at the rate of 5%.

3. Surplus income gained by a natural person from the provision of a residential apartment (house) and of the land attached to it, or from the provision of a vehicle, shall be taxed at the rate of 5%.

4. For the purposes of paragraph 3 of this article, surplus income received from the provision of assets shall be determined according to Article 82(4)(b) of this Code.

5. For the purposes of paragraph 2 of this article, the procedure for the maintenance of the register of persons renting out the residential space and for the enjoyment of tax privileges by persons renting out the residential space to legal persons shall be established by the Minister of Finance of Georgia.

Law of Georgia No 118 of 20 December 2012 – website, 29.12.2012

Law of Georgia No 3581 of 1 May 2015 – website, 15.5.2015

Law of Georgia No 4680 of 18 December 2015 – website, 29.12.2015

Article 81¹ – (Deleted)

Law of Georgia No 118 of 20 December 2012 – website, 29.12.2012

Law of Georgia No 3015 of 26 December 2014 – website, 30.12.2014

Article 82 – Tax exemption

1. The following types of income of natural persons shall be exempt from income tax:

a) income of a non-resident earned while being employed at foreign diplomatic and other equivalent establishments in the territory of Georgia;

b) grant, state pension, state compensation, state academic scholarship, pension from cumulative and refundable private pension scheme in the amount of the contributions made, state scholarship, allowances or lump sum payments allocated from the budget and/or the amounts received by a natural person from budget reserve funds;

b¹) benefit received from a non-entrepreneurial (non-commercial) legal person founded by the State within the scope of the charitable activities;

b²) benefit received from a charitable organisation for financing treatment and/or medical service expenses;

b³) cumulative pension in the amount of pension contributions made and respective benefits, except as provided for by Article 23(3) of the Law of Georgia on Cumulative Pension;

c) monetary and other awards to sportsmen and their coaches for winning and/or taking podium places in Olympic Games, Chess Olympiads, World and/or European Championships, European Games, World Youth Olympic Games and/or European Youth Olympic Festivals, as well as monetary and other awards to medical personnel of Georgian teams; also other cash prizes determined under an Ordinance of the Government of Georgia for sportsmen and their coaches and for medical personnel in individual Olympic and Non-Olympic games and in particular types of sports games;

d) alimony;

e) the value of property (income) received by a natural person as a result of dissolution of marriage;

f) natural person’s:

f.a) surplus gained from the sale of a residential apartment (house) along with the land attached to it owned for more than two years;

f.b) surplus gained from the sale of a vehicle owned for more than six months after registration of title;

f.c) surplus gained from the supply of assets owned for more than two years, except for usage of assets by the transferor for economic activity before their supply and/or for cases under subparagraphs (f.a) and (f.b) of this paragraph.

Note: mere holding of securities/share for receiving a dividend/interest shall not be considered the usage of assets for economic activity for the purpose of this subparagraph. In addition, the usage of assets for economic activity shall not be taken into account if two years have passed from the moment when their usage for economic activity ended till their supply;

g) the value of property received as a gift or inherited by first and second line heirs during a fiscal year;

h) the value of property of up to GEL 1 000 received as a gift from a natural person during a tax year, except for the value of property received as a gift by an employee from the employer;

i) the value of the property of up to GEL 150 000 received as a gift or by inheritance during a tax year by third and fourth line heirs;

j) amount paid to a natural person (donor) for nutrition in compensation for blood donation;

k) taxable income earned from the primary supply of agricultural products produced in Georgia by a natural person engaged in agricultural production until 1 January 2023 if the gross income earned by the natural person from such supply during the calendar year does not exceed GEL 200 000;

l) gain arising from the receipt of property through privatisation (or free of charge) as well as from gratuitous receipt of apartments by the victims of earthquake or other natural disasters in exchange for damaged apartments in the same populated area or by eco-migrants in other populated areas;

l¹) gain arising from the acknowledgment of the property right according to the Law of Georgia on Recognition of Property Rights of the Parcels of Land Possessed (Used) by Natural Persons and Legal Entities under Private Law;

m) compensations received within the framework of a privatisation program by a person having the status of a refugee or a humanitarian status or by an internally displaced person in exchange for a temporary residence; also, for internally displaced persons, the value of property granted to them by the State and income from the initial sale of that property;

n) (Deleted – 14.7.2020, No 6817); 

o) (Deleted – 28.6.2019, No 4906);

p) (Deleted – 23.12.2107, No 1935);

q) income earned by a non-resident from a Georgian source as a result of risk insurance or reinsurance by a company, organisation and/or entrepreneur natural person;

r) income earned by non-residents from leasing out the property that do not belong to the non-resident’s permanent establishment in Georgia;

s) interest income from government debt securities or debt securities of the National Bank of Georgia, the Legal Entity under Pubic Law – the Deposit Insurance Agency, and of an international financial institution. The list of international financial institutions shall be determined by an ordinance of the Government of Georgia;

t) surplus income from the sale of government debt securities or debt securities of the National Bank of Georgia, the Legal Entity under Pubic Law – the Deposit Insurance Agency, and of an international financial institution and the income received from the interests accrued by funds placed in the accounts at the National Bank of Georgia. The list of international financial institutions shall be determined by an ordinance of the Government of Georgia;

t¹) income gained by a resident legal person from the supply of the equity securities issued through a public offering in Georgia and allowed for trading on an organised market recognised by the National Bank of Georgia;

t²) income gained by a resident legal person as an interest from the loan securities issued before 1 January 2023 through a public offering in Georgia and allowed for trading on an organised market recognised by the National Bank of Georgia;

t³) income gained by a resident legal person from the supply of the equity securities issued through a public offering in Georgia and allowed for trading on an organised market recognised by the National Bank of Georgia;

u) income (including gain) received by a resident natural person, which does not belong to Georgian source income;

v) allowance paid by the employer to employees of the Ministry of Internal Affairs of Georgia, employees of the State Security Service of Georgia, or to military personnel maimed and/or incapacitated in the course of their duty; and in the event of their death – an allowance paid by the employer to their families (heirs);

w) income received from lottery, the value of which does not exceed GEL 1 000;

x) income earned by a partnership from the transfer of property to its member (co-owner), provided the members of the partnership are only natural persons, the composition of the members of the partnership did not change from the foundation of the partnership up to the transfer (distribution) of property and the partnership is not a VAT payer at the moment of the distribution. For the purposes of this subparagraph, the transfer of a partner’s interest to his/her heir in the case of the partner’s death or the sale of a partner’s interest under the Law of Georgia on Enforcement Proceedings shall not be regarded as a change in the composition of the partnership;

y) salary income earned by a non-resident natural person, if the employment is performed within the territory of Georgia for not more than 30 calendar days during a tax year and the payer of such income (salary) is a non-resident employer, except where such expenses are attributed to the expenses of the non-resident’s permanent establishment, irrespective of whether such expenses are paid by such permanent establishment;

z) surplus received from the transfer of real estate to a partner natural person in exchange for his/her share in the enterprise by way of liquidation or capital reduction of such company, if more than two years have elapsed from the creation of the natural person’s title to that share of the enterprise;

z¹) salary paid by a person engaged in agricultural production before 1 January 2023 within the scope of that activity, if the employer’s gross income received from that activity does not exceed GEL 200 000;

z²) income earned by persons organising gambling clubs, slot machine saloons, or betting houses (other than the income earned from organising gambling in a systemic-electronic form) from such business;

z³) the value of property received free of charge from a charitable organisation by a person duly registered in the unified database of socially vulnerable persons (who receives subsistence allowance that can be evidenced by the relevant documents), by a person maimed in the fight for the territorial integrity of Georgia, as well as by a family member of a person killed in the fight for the territorial integrity of Georgia;

z⁴) gain derived from the transfer of immovable property by an administrative authority (employer) to a staff member (employee) for consideration or free of charge;

z₄¹) gain derived from a gratuitous transfer by an administrative authority to an employee of fuel intended for a vehicle which is in the employee’s personal possession in the course of his/her official duty;

z⁵) compensation payable to a person for the provision of services of the surety specified in Article 249 of this Code, of the surety specified in the Civil Code of Georgia, or easement services free of charge, and the gain received by recipients of those gratuitous services;

z⁶) gain derived by a hotel room owner from gratuitous hotel services (hotel accommodation) provided to him/her for maximum 60 days during a calendar year by a tourist enterprise and/or by the person(s) hired under an agreement by the tourist enterprise for the functioning/operation of the hotel;

z⁷) income received by a notary in the form of a financial aid from the LEPL Notary Chamber of Georgia under the Law of Georgia on Notaries in a high-mountain settlement or in a settlement where notary services were not duly available at the moment of the appointment of a notary.

z⁸) income earned by a person under the bankruptcy regime after the commencement of bankruptcy proceedings under the Law of Georgia on Insolvency Proceedings;

z⁸a) income earned by a natural person as a result of being employed by a person in relation to whom bankruptcy proceedings are pending;

[z⁸) income earned by a person under the bankruptcy regime after commencement of the bankruptcy regime under the procedure established by the Law of Georgia on Rehabilitation and Collective Satisfaction of Creditors;

z⁸a) income earned by a natural person as a result of being employed by a person under the bankruptcy regime; (Shall become effective from 1 April 2021)]

z⁸b) compensation for the property confiscated under Article 19 of the Constitution of Georgia;

z⁸c) income earned from the activity carried out within the status of a high-mountain settlement enterprise by an individual entrepreneur who enjoys the status of a high-mountain settlement enterprise – for 10 calendar years after the granting of the relevant status (including the calendar year in which the status was granted);

z⁸d) income earned from supplying the surplus energy produced by a retail consumer, an owner of a micro power plant to a distribution licensee;

z⁸e) income earned by a person having the status of a special enterprise from an activity under Article 24²(2)(a) and (b) of this Code.

Note: a tax privilege under t¹–t³ of this paragraph shall also apply when the loan/equity securities are allowed for trading on an organised market before its recognition by the National Bank of Georgia. In addition, the privilege shall be effective from the date of recognition of the organised market by the National Bank of Georgia.

2. Income tax shall not be levied on:

a) taxable income up to GEL 3 000 earned by the following natural persons during a calendar year:

a.a) citizens of Georgia who are veterans of World War II, veterans of military operations for the territorial integrity, freedom and independence of Georgia, and veterans of military operations in the territory of other states;

a.b) a person awarded with an honorary title of ‘Kartvlis Deda’ (Mother of Georgia);

a.c) a single mother;

a.d) a person who has adopted a child (for one year from adoption);

a.e) a person has taken a child under foster care;

a.f) the taxable salary income received from a budgetary organisation in a high-mountain settlement during a calendar year by a person with three or more children (having three or more than three dependent children under age 18) who resides permanently in a settlement. Income tax on the taxable salary income of up to GEL 3 000 received from a budgetary organisation in a high-mountain settlement during a calendar year by a person with one or two children (having one or two dependent children under age 18) who resides permanently in a settlement shall be reduced by 50%.

b) the taxable income of up to GEL 6 000 earned during a calendar year by a person with a disability from childhood, as well as by a person with severe and persistent disabilities;

b¹) a taxable income of up to GEL 6 000 earned during a calendar year by a person who received serious damage to health during the participation in international peacekeeping operations for the maintenance and restoration of peace and security or in other peacekeeping activities in accordance with the Law of Georgia on the Participation of the Defence Forces of Georgia in Peacekeeping Operations;

c) taxable income of up to GEL 6 000 earned by a person with the status of a person permanently residing in a high-mountain settlement from an activity in a high-mountain settlement during a calendar year, except for the salary income received from a budgetary organisation, and a medical institution established by the state or a municipality.

3. If in the cases provided for in the second paragraph of this article an income tax payer becomes eligible to more than one tax privileges, he/she shall use the highest of the tax privileges.

4. For the purposes of this article:

a) The two-year term of owning an asset shall commence:

a.a) from the date of the preparation of a certificate of title for the purpose of registration with the registration authority; if an asset that is registered with the registration authority as a single property in terms of its title deed is divided, the two-year period of ownership of the received asset shall be calculated from the date of ownership of the asset before its division.

a.b) if a title is not registered with the registration authority – from the moment of creation of the title;

a¹) For the purposes of having assets in ownership for a 2-year term, a total term of ownership of a natural person and of a testator/donator, whose first line heir is this natural person, shall be taken into account;

a²) the moment of supplying, including of selling assets, shall be deemed the date of preparation of the document on the basis of which the registration of transfer of the right of ownership to another person has been carried out with a registration authority; and if the registration of the right of ownership is not carried out with a registration authority, then the moment of transferring the right of ownership;

b) ‘surplus gained from the sale’ of an asset shall be calculated as:

b.a) the difference between the supply price of the asset and its purchase price at the moment of the creation of title to it;

b.b) the difference between the supply price of an asset and its market price at the moment of gratuitous receipt, provided the title to the asset has been received free of charge.

c) when receiving property as a gift and/or by will the following persons shall be deemed as first, second, third and fourth line heirs:

c.a) first line heirs – spouse, child, adopted child, grandchild, great grandchild and his/her child, parent, adoptive parent;

c.b) second line heirs – sister, brother, niece/nephew and their children;

c.c) third line heirs – grandmother and grandfather, parents of grandmother and parents of grandfather both maternal and paternal;

c.d) fourth line heirs – uncle (mother’s brother and father’s brother), aunt.

5. In the cases provided in the second paragraph of this article, in order to apply tax privileges to the income received from a payment source according to the tax year, the employee shall submit, in the manner prescribed by the Minister of Finance of Georgia, to the employer a certificate issued by a tax authority evidencing his/her right to tax privileges. If the person has more than one working place, the payment source, in respect of which tax privilege is to apply, shall be determined by the employee.

Law of Georgia No 3882 of 7 December 2010 – LHG III, No 72, 22.12.2010, Art. 428

Law of Georgia No 4114 of 17 December 2010 – LHG III, No 76, 29.12.2010, Art. 506

Law of Georgia No 4935 of 24 June 2011 – website, 30.6.2011

Law of Georgia No 4963 of 24 June 2011 – website, 30.6.2011

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 5371 of 6 December 2011 – website, 20.12.2011

Law of Georgia No 5452 of 9 December 2011 – website, 22.12.2011

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 5791 of 13 March 2012 – website, 23.3.2012

Law of Georgia No 6053 of 24 April 2012 – website, 27.4.2012

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 6395 of 5 June 2012 – website, 19.6.2012

Law of Georgia No 6446 of 12 June 2012 – website, 25.6.2012

Law of Georgia No 6502 of 19 June 2012 – website, 2.7.2012

Law of Georgia No 906 of 30 July 2013 – website, 20.8.2013

Law of Georgia No 1046 of 6 September 2013 – website, 23.9.2013

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 2950 of 12 December 2014 – website, 23.12.2014

Law of Georgia No 2946 of 12 December 2014 – website, 24.12.2014

Law of Georgia No 3942 of 8 July 2015 – website, 15.7.2015

Law of Georgia No 4037 of 16 July 2015 – website, 28.7.2015

Law of Georgia No 4611 of 10 December 2015 – website, 22.12.2015

Law of Georgia No 4647 of 16 December 2015 – website, 25.12.2015

Law of Georgia No 4611 of 10 December 2015 – website, 22.12.2015

Law of Georgia No 4647 of 16 December 2015 – website, 25.12.2015

Law of Georgia No 4680 of 18 December 2015 – website, 29.12.2015

Law of Georgia No 4842 of 4 March 2016 – website, 9.3.2016

Law of Georgia No 5491 of 22 June 2016 – website, 29.6.2016

Law of Georgia No 97 of 16 December 2016 – website, 23.12.2016

Law of Georgia No 854 of 17 May 2017 – website, 2.6.2017

Law of Georgia No 1182 of 30 June 2017 – website, 13.7.2017

Law of Georgia No 1935 of 23 December 2017 – website, 29.12.2017

Law of Georgia No 2476 of 6 June 2018 – website, 21.6.2018

Law of Georgia No 1607 of 27 June 2018 – website, 6.7.2018

Law of Georgia No 3308 of 21 July 2018 – website, 6.8.2018

Law of Georgia No 3383 of 5 September 2018 – website, 24.9.2018

Law of Georgia No 3440 of 20 September 2018 – website, 5.10.2018

Law of Georgia No 3600 of 31 October 2018 – website, 21.11.2018

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Law of Georgia No 6942 of 15 July 2020 – website, 28.7.2020

Law of Georgia No 7169 of 18 September 2020 – website, 25.9.2020

Chapter XII – Special Tax Treatments

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Article 83 – Special tax treatments

Special tax treatments shall apply to:

a) natural persons having the status of a micro business;

b) entrepreneur natural persons having the status of a small business;

c) persons having the status of a fixed tax payer.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Article 84 – Micro business

1. The status of a micro business may be granted to a natural person who does not use the hired labour and conducts economic activity independently, the gross receivable income from which during a calendar year does not exceed GEL 30 000.

2. The GEL 30 000 limit set by the first paragraph of this article does not apply to the types of activities identified by the Government of Georgia in agreement with the Financial-Budget Committee of the Parliament of Georgia.

3. In agreement with the Financial-Budget Committee of the Parliament of Georgia, the Government of Georgia may prohibit the conduct of certain activities, for which the status of micro business cannot be granted to a natural person.

4. In agreement with the Financial-Budget Committee of the Parliament of Georgia, the Government of Georgia may determine the types of income not taxable under special tax treatment and for the purposes of the first paragraph of this article shall not be included in gross income.

5. The status of a micro business is granted, revoked and the certificate of a micro business is issued as prescribed by the Minister of Finance of Georgia.

Article 85 – Granting the status of a micro business

1. A natural person who meets the conditions set out in Article 84 of this Code may apply to a tax authority for the status of a micro business. The tax authority shall issue a certificate of a micro business.

2. The status of a micro business in the current fiscal year shall be revoked if:

a) a natural person has applied to a tax authority for revocation of the status of a micro business or for receiving the status of a small business;

b) after the inventory conducted by a tax authority it has been established that the inventory balance of a natural person having the status of a micro business exceeds GEL 45 000.

c) a natural person has been registered as a VAT payer.

3. If a person having the status of a micro business does not apply to a tax authority for the status of a small business within 15 days after violating the requirement (limit on the amount of gross income) of Article 84(1) of this Code, his/her status of a micro business shall be revoked and shall be removed from special tax treatment.

4. If a natural person does not comply with the requirement of Article 84(3) of this Code, a tax authority shall revoke his/her status of a micro business and remove him/her from special tax treatment.

5. If the status of micro business of a natural person is revoked, the income of the natural person at that moment shall be taxed:

a) at the moment of receiving the status of small business – in accordance with the procedure established for micro business;

b) in other cases – in accordance with Articles 79-82 of this Code.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 86 – Exemption of a micro business from tax

A natural person having the status of a micro business shall not pay income tax.

Article 87 – Obligations of a micro business

1. When drawing up a tax source document, a person having the status of a micro business shall indicate his/her status and status certificate number in the document.

2. A person having the status of a micro business shall keep the tax source document issued by or to him/her.

Article 88 – Small business

1. The status of a small business may be granted to an entrepreneur natural person.

2. In agreement with the Financial-Budget Committee of the Parliament of Georgia, the Government of Georgia may prohibit the conduct of a certain activity for which the status of a small business cannot be granted to a natural person.

3. In agreement with the Financial-Budget Committee of the Parliament of Georgia, the Government of Georgia may determine the types of income that will not be taxed under the special tax treatment and will not be included in the gross income when calculating the GEL 50 000-limit of the gross income received during a calendar year determined for a natural person having the status of a small business.

Law of Georgia No 3591 of 30 May 2018 – website, 12.6.2018

Article 89 – Granting the status of small business

1. An entrepreneur natural person who meets the conditions set out in Article 88 of this Code may apply to a tax authority for a status of a small business. The tax authority shall grant a certificate of small business.

2. The status of small business shall be revoked if:

a) the gross income received from the economic activities of a person according to two calendar years has exceeded GEL 500 000 in each calendar year;

b) a person has applied to a tax authority with this request before the end of the calendar year;

c) a person conducts an activity under Article 88(2) of this Code;

d) a person has been fined at least three times within a calendar year for failing to comply with the cash register usage procedures;

e) a person has failed to meet the requirement provided for by Article 88(1) of this Code.

3. In the case under paragraph 2(a) or (b) of this article, the status of a small business shall be considered revoked from the beginning of the year following the calendar year.

4. If the status of a small business is revoked on the ground under paragraph 2(c or d) of this article, the status of a small business shall be considered revoked from the beginning of the calendar year.

5. Where so provided for by paragraph 2(e) of this article, the status of small business shall be considered revoked from the date when an appropriate ground for this originated.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 3591 of 30 May 2018 – website, 12.6.2018

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 90 – Taxable income of small business and tax rates

1. Taxable income of a person having the status of a small business shall be taxed at 1%, except as provided for paragraph 2 of this article.

2. Taxable income of a person having the status of a small business shall be taxed at 3% if his/her gross income received from the economic activities has exceeded GEL 500 000. A person having the status of a small business shall be taxed at the rate determined under this paragraph from the beginning of a respective month (a month when the excess of the GEL 500 000-limit of the gross income has been recorded) until the end of the calendar year.

3. Taxable income of a small business consists of the incomes earned from a Georgian-based source, except for the salary income and the income earned from a type of income defined in Article 88(3) of this Code.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 3591 of 30 May 2018 – website, 12.6.2018

Article 91 – Principles of accounting for small business income and costs

1. A person having the status of a small business shall maintain a special book of records. The procedure for maintaining the book (including in an electronic form) shall be defined by the order of the Minister of Finance of Georgia.

2. (Deleted – 30.5.2018, No 2391).

3. An entrepreneur natural person having the status of a small business shall keep a tax source document issued to or by him/her.

4. (Deleted – 30.5.2018, No 2391).

5. The loss incurred by a small business during a tax year shall not be carried forward to the next year, unless the taxpayer is removed from special tax treatment.

6. The procedure for recording the inventory balance available when the status of a small business is revoked for an entrepreneur natural person having the status of a small business shall be defined by the order of the Minister of Finance of Georgia.

7. (Deleted – 30.5.2018, No 2391).

Law of Georgia No 3591 of 30 May 2018 – website, 12.6.2018

Article 92 – Registration of a small business as a VAT payer

1. An entrepreneur natural person having the status of small business, who has become obligated to obtain mandatory registration as a VAT payer, shall pass the registration under Article 165 of this Code.

2. When an entrepreneur natural person having the status of a small business becomes liable for mandatory registration as a VAT payer, he/she shall record the inventory balance available at that moment.

3. Upon registration as a VAT payer, an entrepreneur natural person having the status of a small business may obtain a VAT deduction for the inventory balance referred to in the second paragraph of this article as provided for by this Code, provided relevant documents are available.

Law of Georgia No 3591 of 30 May 2018 – website, 12.6.2018

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 93 – Filing micro and small business tax returns

1. Except as provided for by Article 26 of this article, before 1 April of the year following a tax year, tax returns shall be filed with a tax authority according to the place of tax registration by:

a) a natural person having the status of micro business;

b) (Deleted – 30.5.2018, No 2391).

1¹. A tax return of a person having the status of small business shall be filed with, and a tax shall be paid to a tax authority not later than the 15^th day of a month following the accounting month.

2. A person having the status of micro business shall file a tax return with a tax authority within 30 business days after he/she terminates his/her economic activities in Georgia.

3. (Deleted – 20.12.2011, No 5556).

4. Tax return filing procedures for persons having the status of micro or small business shall be prescribed by order of the Minister of Finance of Georgia.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 3591 of 30 May 2018 – website, 12.6.2018

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 94 – Current taxes of small and micro businesses and procedure for withholding at source

1. A natural person having the status of a micro business and a natural person having the status of a small business shall not pay current taxes.

2. An entrepreneur natural person having the status of a small business shall pay current taxes to the budget according to the annual tax paid during the previous tax year in the following amounts:

a) by not later than 15 May – 25%;

b) by not later than 15 July – 25%;

c) by not later than 15 September – 25%;

d) by not later than 15 December – 25%.

3. A natural person having the status of micro business shall not withhold tax at source if paying for the services received.

4. A salary of up to GEL 6 000 paid in total during a calendar year by a person having the status of a small business to hired persons shall not be taxed at source if there is one of the following conditions:

a) he/she is registered as an individual entrepreneur and is granted the status of a small business within the same calendar year;

b) the gross income he/she received during the previous calendar year does not exceed GEL 50 000.

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 3591 of 30 May 2018 – website, 12.6.2018

Article 95 – Tax control over small and micro businesses

1. Tax authorities may conduct the following current tax control measures with respect to persons having the status of small and micro businesses:

a) test purchase of goods/services;

b) visual inspection;

c) checking the observance of rules for the use of cash registers;

d) time study;

e) stocktaking.

2. A tax authority may determine the income of a person having the status of micro business by indirect methods in accordance with the procedures established by the Minister of Finance of Georgia.

Article 95¹ – Flat tax payers

A fixed tax payer may be a person who is not a VAT payer and who conducts one or more activities subject to a fixed tax.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Article 95² – Activities taxable with flat tax

The types of activities subject to a flat tax and in the case of the activities taxable at the rate specified in Article 95³(1)(a) of this Code, the activity taxable with a flat tax according to the types of activity shall be determined by the Government of Georgia.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Article 95³ – Flat tax rate

1. A flat tax rate according to the types of activity determined by the Government of Georgia may be:

a) from GEL 1 to GEL 2 000 for an object of taxation;

b) 3% of the revenues from taxable activity.

2. In the cases provided in paragraph 1(a) of this Article, a flat tax rate according to types of activity shall be determined by the Government of Georgia to the extent of the amount determined by that subparagraph. At the same time, the Government of Georgia may determine different flat tax rates according to the municipalities for the same types of activities taxable at a flat tax rate.

3. In the case provided for in paragraph 1(b) of this article conditions and types of taxable activities according to the place of business shall be determined by the Government of Georgia.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 4680 of 18 December 2015 – website, 29.12.2015

Law of Georgia No 6942 of 15 July 2020 – website, 28.7.2020

Article 95⁴ – Granting the status of a flat tax payer

1. A person who meets the requirements of Article 95¹ of this Code may apply to a tax authority for the status of a flat tax payer and move to a flat tax regime, for which a certificate of a flat tax payer is issued.

2. A person may move to a flat tax regime in any month of the reporting year. At the same time, a person shall be deemed to have the status of a flat tax payer and, accordingly, to be a flat tax payer from the first day of the month following the month in which the person is granted the status of a flat tax payer.

3. The procedures for granting and revoking a flat tax payer status and issuing a flat tax payer certificate shall be determined by order of the Minister of Finance of Georgia.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Article 95⁵ – Conditions of flat rate taxation

1. In addition to the activity taxable by a flat tax, a flat tax payer may conduct only activities permitted by the Government of Georgia.

2. Income earned from an additional activity referred to in the first paragraph of this article shall be taxed according to regular procedures.

3. Income earned from the activity taxable by a flat tax shall not be included in the gross income of a flat tax payer and shall not be subject to subsequent taxation.

4. A flat tax payer shall not pay current taxes according to a flat tax.

5. When preparing tax source documents, a flat tax payer shall indicate a flat tax payer status and a flat tax payer certificate number.

6. A flat tax payer shall retain the tax source document issued to or by him/her.

7. The procedure for payment and reporting of flat tax shall be determined by order of the Minister of Finance of Georgia.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Article 95⁶ – Revoking a flat tax payer status

1. A flat tax payer status shall be revoked if:

a) a person ceases the activity taxable by a flat tax;

b) a person applies to a tax authority for revocation of a flat tax payer status;

c) a person conducts activities different from the additional activities permitted by the Government of Georgia for a flat tax payer;

d) a person becomes liable to become registered as a VAT payer in respect of the additional activity permitted by the Government of Georgia for flat tax payers, or voluntarily becomes registered as a VAT payer.

2. If one of the conditions for revocation of the status of a flat tax payer occurs (except for paragraph 1(b) of this article), a person shall apply to a tax authority for revocation of a flat tax payer status not later than 10 business days after the condition occurs.

3. The status of a flat tax payer shall be deemed revoked from the day when the condition for revocation of the status of a flat tax payer specified in the first paragraph of this article occurs.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Chapter XIII – Profit Tax

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Article 96 – Profit tax payers

Profit tax payers shall be:

a) resident enterprises;

b) non-resident enterprises that conduct business in Georgia through a permanent establishment and/or earns income from a Georgian source.

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Article 97 – Object of profit taxation

1. The object of profit taxation of a resident enterprise (except for cases under paragraphs 2, 8 and 9 of this article) shall be:

a) distributed profit;

b) costs incurred or other payments not related to economic activity;

c) free delivery of goods/services and/or transfer of funds;

d) representation expenses paid in excess of a limited amount determined under this Code.

2. The object of profit taxation of an organisation conducting economic activities shall be:

a) the costs incurred, or other payments not connected with economic activities and/or which are not related to the objective of the organisation’s activities (including those not connected with charity activities or not related to the objective of a grant agreement);

b) the free supply of goods/provision of services, and/or transfer of financial resources if it is not related to the objective of the organisation’s activities;

c) the entertainment costs paid in excess of the limited amount determined under this Code.

3. The object of profit taxation of a non-resident enterprise conducting business in Georgia through a permanent establishment shall be, on the basis of the activity of its permanent establishment, disbursements made/expenses paid by the non-resident enterprise, or the permanent establishment as provided for under paragraph 1 of this article.

4. Income earned by a non-resident enterprise from a Georgian source, which does not belong to its permanent establishment, shall be taxed at the source without deductions in accordance with Article 134 of this Code, except as provided for in paragraphs 5, 6 and 11 of this article.

5. The object of profit taxation of a non-resident enterprise earning income from the sale of property under paragraph 6 of this article, which is not related to the activity of its permanent establishment in Georgia, shall be the difference between the gross income earned from a Georgian source during a calendar year and the deduction amounts with respect to earning of the income.

6. Income earned from the sale of property under paragraph 5 of this article shall be:

a) income gained from the sale of ordinary shares or partner's equity of a resident legal entity;

b) income gained from the sale of assets under Article 8(21) of this Code;

c) income gained from the sale of property under Article 104(1)(j) or (k) of this Code;

d) income gained from the sale of other property.

7. If payments/disbursements under Articles 98¹ – 98⁴ of this Code are made in a non-monetary form, the object of profit taxation shall be determined by the market price of the goods supplied/services delivered, and if the market price of the goods supplied/services delivered includes the value-added tax, the object of profit taxation shall be determined by the market price, without the value-added tax.

8. The difference between the gross income gained during a calendar year and the amounts of the deductions provided for by this Code shall be the object of profit taxation for:

a) a person that gains profit as a result of oil and gas operations based on the “existing agreements” defined by the Law of Georgia on Oil and Gas, in a part of this profit;

b) a party to the Main Export Pipeline project as defined by the Agreement Among Georgia, the Azerbaijan Republic and the Republic of Turkey Relating to the Transportation of Petroleum Via the Territories of the Azerbaijan Republic, Georgia and the Republic of Turkey Through the Baku-Tbilisi-Ceyhan Main Export Pipeline, in a part of the profit gained within this project;

c) a party to the South Caucasus Pipeline project defined by the Agreement between Georgia and the Azerbaijan Republic Relating to the Transit, Transportation and Sale of Natural Gas in and beyond the Territories of Georgia and the Azerbaijan Republic Through the South Caucasus Pipeline System, in a part of the profit gained within this project.

9. The object of profit taxation of a person, in case of organising a betting house in a systemic-electronic form, with regard to this activity shall be determined under Article 309(16) of this Code.

10. For the purposes of paragraphs 1–3 of this article, the amount subject to profit taxation shall be calculated by dividing the sum of a disbursement made/expense paid according to the object of taxation determined under the same paragraphs by 0.85.

11. The object of profit taxation of a non-resident enterprise, which receives a payment for leasing/renting of property from a person who is not a tax agent under Article 154(1) of this Code, shall be the difference between the gross income earned from a Georgian source during a calendar year and the sums of deductions related to the receipt of this income.

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 1935 of 23 December 2017 – website, 29.12.2017

Law of Georgia No 3591 of 30 May 2018 – website, 12.6.2018

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 98 – Tax rate

1. The profit tax rate shall be 15%, except as provided for in paragraph 2 of this article.

2. Profit gained from oil and gas operations as a result of implementation of the “existing agreements” defined under the Law of Georgia on Oil and Gas shall be taxed at the rate of 10%, provided these agreements were signed before 1 January 1998.

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Article 98¹ – Distributed profit

1. Distributed profit shall be a profit distributed by an enterprise to its partner as a dividend in a monetary or non-monetary form.

2. The following shall not be deemed as distributed profit:

a) a payment/disbursement made in cash or in kind at the time of liquidation of an enterprise or at the time of buying out a share/interest, which does not exceed the amount of contribution made by a partner to the capital (authorised and additional paid-in capital). Increase of the capital of an enterprise as a result of an operation conducted under sub-paragraph b) of this paragraph for the purpose of this sub-paragraph shall not be considered a contribution made by a partner to the capital (authorised and additional paid-in capital);

b) a payment made to a partner of an enterprise by transferring a share/interest of the enterprise into ownership, except for transferring by a resident legal person the equity securities issued through a public offering in Georgia and allowed for trading on an organised market recognised by the National Bank of Georgia;

c) distribution of a dividend to a person defined under Article 2(1) of the Law of Georgia on Entrepreneurs (except for an individual enterprise and a person exempt from profit tax under this Code);

d) transfer of assets to the state and/or a municipality by an enterprise through capital reduction if more than 50% of shares/interest of the enterprise is in the ownership of the state and/or the municipality;

e) distribution by an enterprise of a dividend received from a foreign enterprise (except for a person registered in a country with preferential tax treatment);

f) further distribution of the received dividend by a person provided for by Article 21(1)(b) of the Tax Code of Georgia (except for a permanent establishment of a foreign enterprise), who has moved the place of management to Georgia.

3. For the purposes of this article, distributed profit of a permanent establishment of a non-resident enterprise shall be deemed a disbursement made to the non-resident enterprise in cash or in kind out of the profit gained as a result of the activity of the permanent establishment (taking away by the non-resident enterprise of the profit allotted to its permanent establishment). A permanent establishment shall be allotted a profit it might have gained as an independent enterprise conducting the same or similar activity and being in the same or similar conditions.

4. The following shall be deemed as distribution of profit:

a) any operation performed by an enterprise with a related party (who is not subject to profit tax according to objects of taxation under Article 97(1, 3)) if the price of a transaction concluded between them is different from its market price and their relation affects the outcome of the transaction. In such a case the amount of distributed profit shall be:

a.a) the difference between the market price of a transaction and the income gained/to be gained if the market price of the transaction exceeds the income gained/to be gained;

a.b) the difference between the costs incurred as a result of a transaction and the market price of the transaction if the costs incurred as a result of the transaction exceeds the market price of the transaction;

b) conduct of a controlled transaction if the established conditions for the transaction fail to satisfy the market principle. In such a case, the amount of distributed profit shall be determined by the adjustment amount calculated under the procedure established by Chapter XVII of this Code;

c) any operation performed by an enterprise with a person exempt from income tax/profit tax (except for a budget organisation, the Legal Entity under Public Law – the Deposit Insurance Agency and the National Bank of Georgia) if the price of a transaction concluded between them is different from its market price. In such a case the amount of distributed profit shall be:

c.a) the difference between the market price of a transaction and the income gained/to be gained if the market price of the transaction exceeds the income gained/to be gained;

c.b) the difference between the costs incurred as a result of a transaction and the market price of the transaction if the costs incurred as a result of the transaction exceeds the market price of the transaction.

5. For the identification of the amount under paragraph 2(e) of this article it shall be deemed that this amount is to be paid first when a dividend is distributed by an enterprise.

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 854 of 17 May 2017 – website, 2.6.2017

Law of Georgia No 1182 of 30 June 2017 – website, 13.7.2017

Law of Georgia No 1935 of 23 December 2017 – website, 29.12.2017

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 98² – Costs incurred or other payments not related to economic activity

1. For the purposes of this article, costs not related to economic activity shall be:

a) costs that are not documented if this obligation is established under this Code;

b) costs the purpose of payment of which is not to gain profit, income or compensation;

c) costs paid for goods/services purchased from a natural person having the status of a micro business, except when the income gained from the delivery of goods/services by a person having this status is taxed under the general rule, or when a consignment note/a document of a form determined by the Minister of Finance of Georgia is issued upon the supply/purchase of goods;

d) costs paid for goods/services purchased from a person having the status of a fixed taxpayer within the scope of an activity taxed at a fixed rate (except for an activity to be taxed at a fixed rate under Article 95³(1)(b) of this Code);

e) the interest paid for a credit (loan) above the annual interest rate established by the Minister of Finance of Georgia;

f) costs paid by a person (except for a special trade company) for purchasing foreign goods from a special trade company in the amount exceeding the customs value of the goods, except for the costs not related to payments to the special trade company.

2. Costs paid in order to make disbursements provided for in Articles 98¹ and 98³ of this Code (including a disbursement not subject to profit tax), as well as a disbursement taxed at source shall not be included in the costs under paragraph 1 of this article.

3. The following shall be subject to profit taxation:

a) payments made to purchase debt securities issued by a person registered in a country with preferential tax treatment, as well as by a person exempt from profit tax under this Code (except for a budget organisation, the Legal Entity under Public Law – the Deposit Insurance Agency and the National Bank of Georgia);

b) contractual penalties and/or other fines paid to a person registered in a country with preferential tax treatment, as well as to a person exempt from profit tax under this Code (except for a budget organisation, the Legal Entity under Public Law – the Deposit Insurance Agency and the National Bank of Georgia), which were incurred on the basis of contractual relations;

c) advance payments to a person registered in a country with preferential tax treatment, as well as to a person exempt from profit tax under this Code (except for a budget organisation, the Legal Entity under Public Law – the Deposit Insurance Agency and the National Bank of Georgia);

d) granting of a loan to a person registered in a country with preferential tax treatment, as well as to a person exempt from profit tax under this Code (except for the Legal Entity under Public Law – the Deposit Insurance Agency and the National Bank of Georgia) and/or payments made to purchase a claim against that person. This subparagraph shall not apply to transactions conducted by a commercial bank, credit union, microfinance organisation and loan provider with a person exempt from profit tax under this Code;

e) loss incurred due to the transfer of the right to claim to and/or the denial of the right to claim for a person registered in a country with preferential tax treatment, as well as a person exempt from profit tax under this Code (except for the Legal Entity under Public Law – the Deposit Insurance Agency and the National Bank of Georgia);

f) a contribution made to the capital of a non-resident, as well as of a person exempt from profit tax under this Code, and/or a payment made to purchase a share/equity (except for a share/equity placed on a foreign recognised stock exchange);

g) granting of a loan to a natural person or a non-resident (except for the purchase of loan securities placed on a foreign recognised stock exchange). This subparagraph shall not apply to transactions conducted by a commercial bank, credit union, microfinance organisation and a loan provider;

g¹) securing of a loan obtained by a partner natural person or a partner non-resident from a third person with the funds deposited to a bank account. In such a case, the sum of an object of profit taxation shall be the amount of funds deposited to the bank account for securing the loan. This sub-paragraph shall not apply to operations conducted by a commercial bank, credit union, microfinance organisation and a loan provider;

h) granting of a loan by a commercial bank, credit union, microfinance organisation or a loan provider to a non-resident partner, a partner exempt from profit tax under this Code or a partner natural person with at least 1 % of the capital participation, and/or securing of a loan taken out by a partner from a third party with the funds deposited to a bank account. In such a case, the sum of an object of profit taxation shall be the amount of funds deposited to the bank account for securing the loan.

4. Expenses related to the placement of shares and/or Global Depositary Receipts at stock exchange (including at the stock exchange recognised by a foreign country), and to the issuing of such shares and/or Global Depositary Receipts, as well as expenses related to changes made in the listing category/regime shall be considered as the expenses related to economic activity.

5. A country shall be considered as having preferential tax treatment if under the tax legislation of the country and/or separate territories of the country:

a) a legal person is exempt from profit tax;

b) no profit tax is imposed on profit gained and/or distributed by a legal person, or the profit tax rate does not exceed 1/3 of the profit tax rate existing in Georgia.

6. if, under the tax legislation of a foreign country or separate territories of a foreign country, either of  the cases under paragraph 5 of this article takes place in relation to a legal person, this country and/or separate territories of the country shall, in this regard, be considered as a country with preferential tax treatment.

7. If payment was effected (a sum was actually received) as a result of providing debt securities purchased or the right to participate in the capital (shares/interest), or satisfying a demand, a person may set off and recover under the procedure established by this Code a sum of the previously paid profit tax in the amount of a profit tax calculated according to the sum paid within the accounting period of the actual receipt of the sum.

8. If a loan granted/advance payment was repaid, or goods/services were received in return for the advance payment, a person may set off and recover under the procedure established by this Code a sum of the previously paid profit tax in the amount of a profit tax calculated according to the sum repaid within the accounting period for repayment of the loan/advance payment or actual receipt of the goods/services, or according to the amount of compensation for the goods/services received.

9. If securing of a loan by the funds deposited to a bank account is cancelled, a person may set off and recover under the procedure established by this Code a sum of the previously paid profit tax in the amount of a profit tax calculated according to the security with the funds deposited to the bank account cancelled during the accounting period of cancellation of the security.

10. The list of countries and/or separate territories of countries that are considered as countries with preferential tax treatment for the purposes of this Code shall be compiled based on the criteria under paragraphs 5 and 6 of this article by ordinance of the Government of Georgia.

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 854 of 17 May 2017 – website, 2.6.2017

Law of Georgia No 1182 of 30 June 2017 – website, 13.7.2017

Law of Georgia No 3591 of 30 May 2018 – website, 12.6.2018

Law of Georgia No 4225 of 27 December 2018 – website, 31.12.2018

Article 98³ – Free delivery of goods/services and/or transfer of funds

1. For the purposes of this article, delivery of goods or services not intended to gain profit, income or compensation shall be considered free delivery.

2. Shortage in the inventory and/or assets provided for under this Code at the moment of its identification shall be considered as free delivery of the good.

3. The following cases of free delivery of goods/services and/or transfer of funds shall not be subject to profit taxation:

a) a donation made to a charity organisation during a calendar year not exceeding 10 % of the net profit gained by the organisation during a previous calendar year;

b) free delivery of goods, provision of services, or transfer of funds that are taxed at source under Article 154 of this Code;

c) free provision of hotel services (hotel accommodation) for not more than 60 days during a calendar year to a hotel room owner by a tour company and/or a person/persons invited by a tour company under a contract for running/operating the hotel;

d) free delivery of goods, provision of services, and/or transfer of funds to the state, a municipality or a legal entity under public law;

e) free provision of immovable property to a charitable organisation if the property recipient organisation does charitable work in relation to persons with disabilities from childhood and/or persons with severe and persistent disabilities for at least three previous calendar years;

f) free provision of a surety under Article 249 of this Code, a surety under the Civil Code of Georgia, and an easement;

g) free delivery of goods, provision of services, and/or transfer of funds to a person who is subject to profit taxation according to the objects of taxation under Article 97(1) and (3) of this Code.

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 98⁴ – Taxation of entertainment expenses

1. For the purposes of this article, entertainment expenses shall be defined under Article 8(33) of this Code.

2. For the purposes of Article 97 of this Code, the amount of entertainment expenses to be incurred during a calendar year shall be limited to 1 % of the income gained during a previous calendar year, and to 1 % of the expenses incurred if the expenses exceed the income gained.

3. The amount of entertainment expenses incurred during the calendar year of an enterprise establishment shall be limited to 1 % of the expenses incurred before the end of the current calendar year.

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Article 99 – Tax exemption

1. The following shall be exempt from profit tax:

a) (Deleted – 30.5.2018, No 2391);

b) (Deleted – 30.5.2018, No 2391);

c) (Deleted – 30.5.2018, No 2391);

c¹) (Deleted – 30.5.2018, No 2391);

d) profit from the sale of crosses, candles, icons, books and calendars used by the Patriarchate of Georgia for religious purposes;

e) profit earned by a person engaged in agricultural production from the primary supply of agricultural products made in Georgia before their industrial processing (changing of commodity code) before 1 January 2018 or distribution of profit, and expenses incurred/disbursements made within the scope of the same activity that are provided for in Article 97(1)(b-d) of this Code if the income gained from such supply during a calendar year does not exceed GEL 200 000;

f) profit earned by an agricultural cooperative from a primary supply of agricultural products made in Georgia before their industrial processing (changing their commodity code) before 1 January 2023 or distribution of profit, and expenses incurred/disbursements made within the scope of the same activity that are provided for in Article 97(1)(b-d) of this Code;

g) (Deleted – 28.6.2019, No 4906);

h) (Deleted – 28.6.2019, No 4906);

i) (Deleted – 23.12.2017, No 1935);

j) income earned by a non-resident from a Georgian source based on the risk insurance and reinsurance by a company, organisation and/or entrepreneur natural person;

k) income earned by non-residents from leasing out property that does not belong to the non-resident’s permanent establishment in Georgia;

l) profit or distribution of profit earned from the sale of debt securities of the state, of the National Bank of Georgia, the Legal Entity under Public Law – the Deposit Insurance Agency or of an international financial institution and profit in the form of interests received from those securities, as well as profit or distribution of profit earned from the interest accrued to the funds placed on the accounts with the National Bank of Georgia. The list of international financial institutions shall be determined by an ordinance of the Government of Georgia;

l¹) income earned by a non-resident as a result of supplying the loan securities issued by a resident legal person through a public offering in Georgia and allowed for trading on an organised market recognised by the National Bank of Georgia, which does not belong to the permanent establishment of the non-resident in Georgia;

l²) income earned by a non-resident as an interest from the loan securities issued before 1 January 2023 by a resident legal person through a public offering in Georgia and allowed for trading on an organised market recognised by the National Bank of Georgia, which does not belong to the permanent establishment of the non-resident in Georgia;

l³) income earned by a non-resident as a result of supplying the equity securities issued by a resident legal person through a public offering in Georgia and allowed for trading on an organised market recognised by the National Bank of Georgia, which does not belong to the permanent establishment of the non-resident in Georgia;

m) profit or distribution of profit earned by a FIZ Enterprise from business permitted within the Free Industrial Zone, and expenses incurred/disbursements made within the scope of the same activity that are provided for in Article 97(1)(b-d) of this Code;

n) (Deleted – 28.6.2019, No 4906);

o) (Deleted – 30.5.2018, No 2391);

p) profit (distribution of profit) earned from the supply of information technologies outside Georgia developed by a legal entity of a virtual zone;

q) distribution of profit earned by a tourist zone entrepreneur from the delivery of hotel services up to 1 January 2026, and expenses incurred/disbursements made within the scope of the same activity that are provided for in Article 97(1)(b-d) of this Code;

r) distribution of profit earned by persons from organising a gambling club, a slot machine saloon, a betting house (except for the profit earned by them from organising games in a systemic-electronic form).

s) distribution of profit earned by a special trading company from the conduct of permitted activities (except for the profit earned by the company from the supply of a fixed asset used by the company for its economic activity for over two years);

t) (Deleted – 30.5.2018, No 2391);

u) distribution of profit earned by a person under a bankruptcy regime after commencement of bankruptcy proceedings under the procedure established by the Law of Georgia on Insolvency Proceedings;

[u) distribution of profit earned by a person under the bankruptcy regime after commencement of the  bankruptcy regime under the procedure established by the Law of Georgia on Rehabilitation and Collective Satisfaction of Creditors; (Shall become effective from 1 April 2021)]

v) distribution of profit from compensation received in return for the property confiscated under Article 19 of the Constitution of Georgia;

w) distribution of profit earned by a high-mountain settlement enterprise from an activity carried out in the same high-mountain settlement, and expenses incurred/disbursements made within the scope of the same activity that are provided for in Article 97(1)(b-d) of this Code – for 10 years after being granted the relevant status (including the calendar year when the status was granted);

x) distribution of profit gained from the interest earned from a financial institute certified under the legislation of Georgia;

y) distribution of profit earned by a person having the status of a special enterprise from an activity under Article 24²(2)(a) and (b) of this Code.

Note: a tax privilege under l¹–l³ of this paragraph shall also apply when the loan/equity securities are allowed for trading on an organised market before its recognition by the National Bank of Georgia. In addition, the privilege shall be effective from the date of recognition of the organised market by the National Bank of Georgia.

2. For the purposes of this article, the types of hotel services (except for the hotel services under Article 8(33)(d.d) of this Code) shall be determined by the Government of Georgia.

3. For the identification of the amount of profit exempt from profit tax under paragraph 1 of this article it shall be deemed that this amount is to be paid first when a dividend is distributed by an enterprise.

Law of Georgia No 4061 of 15 December 2010 – LHG III, No 75, 27.12.2010, Art. 469

Law of Georgia No 4935 of 24 June 2011 – website, 30.6.2011

Law of Georgia No 4963 of 24 June 2011 – website, 30.6.2011

Law of Georgia No 4961 of 24 June 2011 – website, 06.7.2011

Law of Georgia No 5120 of 13 October 2011 – website, 19.10.2011

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 5452 of 9 December 2011 – website, 22.12.2011

Law of Georgia No 5791 of 13 March 2012 – website, 23.3.2012

Law of Georgia No 6053 of 24 April 2012 – website, 27.4.2012

Law of Georgia No 6015 of 10 April 2012 – website, 30. 4.2012

Law of Georgia No 6395 of 5 June 2012 – website, 19.6.2012

Law of Georgia No 6446 of 12 June 2012 – website, 25.6.2012

Law of Georgia No 189 of 28 December 2012 – website, 29.12.2012

Law of Georgia No 817 of 12 July 2013 – website, 05.8.2013

Law of Georgia No 906 of 30 July 2013 – website, 20.8.2013

Law of Georgia No 1046 of 6 September 2013 – website, 23.9.2013

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 4037 of 16 July 2015 – website, 28.7.2015

Law of Georgia No 5503 of 22 June 2016 – website, 12.7.2016

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 854 of 17 May 2017 – website, 2.6.2017

Law of Georgia No 1935 of 23 December 2017 – website, 29.12.2017

Law of Georgia No 3591 of 30 May 2018 – website, 12.6.2018

Law of Georgia No 2476 of 6 June 2018 – website, 21.6.2018

Law of Georgia No 3109 of 5 July 2018 – website, 11.7.2018

Law of Georgia No 3383 of 5 September 2018 – website, 24.9.2018

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Law of Georgia No 7169 of 18 September 2020 – website, 25.9.2020

Chapter XIV – Gross income

Article 100 – Gross income

1. The gross income of a resident shall consist of the income earned from a source located in and outside Georgia.

2. A non-resident’s gross income shall consist of the income earned from a Georgian source.

3. Gross income shall be income earned in any form and/or through any activity, namely:

a) salary income;

b) income earned from economic activity, which is not related to employment;

c) other income not related to employment and economic activity.

4. The following shall not be included into the gross income:

a) (Deleted – 13.5.2016, No 5092).

b) gratuitous transfer of goods and/or gratuitous provision of services to the State and/or the municipalities;

c) transfer of goods to other persons, within the framework of the projects (including the preparatory stage) provided for in the international treaties ratified by the Parliament of Georgia, by legal persons under public law carrying out those projects  and with which the Ministry of Finance has signed an agreement on the implementation of the projects;

d) salary paid by a person having the status of a small business to a hired person, which, under Article 94(4)(a) of this Code, is not taxed at source;

e) return of a fixed asset to a lessor in the cases provided for in Article 115(4)(b) of this Code;

f) benefit received by reducing taxes and/or sanctions (including a customs sanction) under a tax agreement made with a taxpayer, writing off tax arrears, and by exempting from a tax sanction on the basis of Article 269(7) of this Code, or by exempting from a customs sanction on the basis of Article 163(11) of the Customs Code of Georgia;

f¹) benefit received by reducing the amount of fee and the related fine and surcharge on the basis of a tax agreement;

g) supply of agricultural produce made in Georgia as a result of agricultural activity between an agricultural cooperative and its members (shareholders) and/or provision of services related to such activity before 1 January 2023;

h) market value of the immovable property (including land) supplied free of charge to a charitable organisation, if the organisation receiving such property has been providing charitable activities for at least the last three calendar years to persons with a disability from childhood and/or severe and persistent disabilities;

j) income earned by a tour company as a result of providing hotel services with the use of hotel assets/part of assets in possession of a natural person (using them as hotel rooms/apartments) – for a natural person;

l) supply of the surplus energy produced by a retail consumer organisation, an owner of a micro power plant to a distribution licensee.

Law of Georgia No 4705 of 20 May 2011 – website, 1.6.2011

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 817 of 12 July 2013 – website, 5.8.2013

Law of Georgia No 906 of 30 July 2013 – website, 20.8.2013

Law of Georgia No 3581 of 1 May 2015 – website, 15.5.2015

Law of Georgia No 4088 of 22 July 2015 – website, 4.8.2015

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 5491 of 22 June 2016 – website, 29.6.2016

Law of Georgia No 1182 of 30 June 2017 – website, 13.7.2017

Law of Georgia No 1935 of 23 December 2017 – website, 29.12.2017

Law of Georgia No 3591 of 30 May 2018 – website, 12.6.2018

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Law of Georgia No 6942 of 15 July 2020 – website, 28.7.2020

Article 101 – Salary income

1. Salary income shall be any compensation or benefit received by a natural person as a result of employment, including income earned as a pension or in any other form from the previous employment, or income from future employment.

2. For the purposes of the first paragraph of this article, the value of the benefit shall be the amount specified below which is reduced by the amount paid by an employee to an employer at the time of receiving the benefit:

a) (Deleted – 28.6.2019, No 4906);

b) where an employer issues a loan to an employee at an interest rate lower than the rate fixed by the Minister of Finance of Georgia – the amount corresponding to the interest payable at the interest rate fixed by the Minister of Finance of Georgia;

c) where an employer supplies, or gratuitously transfers, goods/services to an employee – the market price of such goods/services;

d) where an employer provides accommodation to an employee for use – the annual market value of the rental fee (in proportion to the period concerned);

e) where an employer assists an employee or his/her dependants to receive education (not including a training program directly related to the fulfilment of the employee’s obligations) – the value of the assistance rendered by the employer for the education;

f) where an employer reimburses an employee’s expenses – the amount of the reimbursement;

g) where an employer waives an employee’s debt or obligation – the amount of the debt or obligation, except when the expenses for taking measures under the legislation of Georgia for enforcing payment of a monetary claim exceeds the amount of the monetary claim.

h) where an employer pays an insurance premium or other amount for an employee’s life and health insurance or under any pension insurance contract – the amount of the insurance premium or other amount paid by the employer;

i) in other cases – the market value of the benefit under Article 18 of this Code.

2¹. The benefit gained by an employee as a result of using the employer’s motor car for his/her personal need shall be considered as a salary and shall be subject to income tax, in the following amounts:

2². The reporting period for the income tax under paragraph 2¹ of this article shall be the calendar year, and it shall be paid by a tax agent (employer) (except as provided for by Article 154(1)(a) of this Code) not later than the 15^th day of a month following the reporting month.

2³. Use of an employer’s electric engine motor car by an employee for his/her personal need shall not be subject to income tax.

2⁴. The procedure for keeping record of an employer’s motor car used by an employee for his/her personal need and for communicating information on such car to a tax authority shall be defined by an order of the Minister of Finance of Georgia.

3. Salary income shall not include:

a) reimbursement of business travel expenses paid to an employee within limits prescribed by the Ministry of Finance of Georgia;

b) reimbursement of entertainment expenses;

c) organised transportation of an employee from the place of residence to the place of work, or from the place of work to the place of residence by an employer if this cannot be done with the use of public transport, or if an employee needs to incur unreasonable expenses and/or spend unreasonable time to travel;

d) the amount of pension contributions made under the Law of Georgia on Cumulative Pension by an employer to the pension account on behalf and in favour of an employee, except as provided for by Article 32(4) and Article 34(2) of the Law of Georgia on Cumulative Pension;

e) the benefit received as a result of payment of an insurance premium by an employer in favour of an employee within the compulsory insurance in accordance with the legislation of Georgia;

f) transfer of accommodation for use and/or provision of food service and/or reimbursement of the expenses related to these services by an employer to an employee if all the following conditions are met:

f.a) the accommodation/food is provided based on the specifics of an employer’s activity and it is a necessary condition for the proper performance of obligations undertaken by an employee under an employment agreement, and/or provision of an employee with a place of residence/food, without provision by an employer, requires payment of unreasonable expenses and/or spending of unreasonable time by the employee;

f.b) the transfer of accommodation for use and/or provision of food service and/or reimbursement of the expenses related to these services is not part of the labour remuneration provided for by an employment agreement between an employer and employees.

4. The amount specified in the second paragraph of this article shall include excise taxes, VAT and other taxes payable by an employee.

5. For the purposes of paragraph 2(b) of this article, the interest rate shall be determined by the Minister of Finance of Georgia.

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 3308 of 21 July 2018 – website, 6.8.2018

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 102 – Income from economic activity

1. Income from economic activity shall be:

a) income from supplying goods/services;

b) surplus income from the sale of assets;

c) income received as a result of the restriction of economic activities or shutdown of an enterprise;

d) amounts received from the sale of fixed assets; in the case of gratuitous supplying of fixed assets the market value shall be included in the income under Article 111(7) of this Code;

e) reimbursed deductions under Article 146 of this Code;

f) interest income, other than interest income from funds deposited by a natural person with banks and other credit institutions on deposits and time deposits;

g) dividends;

h) royalty;

i) benefit from writing off a person’s debt;

j) income from the transfer of property by leasing, easement, renting, letting or in any other similar form;

k) income from other economic activity.

2. Where goods/services are delivered free of charge, the market price of such goods/services shall be included in gross income. This shall not apply to free dissemination of advertising goods, including through retail sellers, which have no independent consumer specifications and are an integral part of the supply of the primary goods/services.

3. (Deleted – 13.5.2016, No 5092).

Law of Georgia No 2946 of 12 December 2014 – website, 24.12.2014

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Article 103 – Income not related to employment and economic activity

1. Income not related to employment and economic activity shall include any income or benefit, except for:

a) the contributions of partners increasing net assets of the enterprise in which they are partners;

b) according to an insurance contract:

b.a) the insurance compensation paid by an insurer to an insured natural person under a health insurance contract upon the occurrence of an insured event; 

b.b) the insurance compensation not exceeding the amount of the damage occurred, paid by an insurer to an insured natural person under an insurance contract upon the occurrence of an insured event;

b¹) the compensation, within powers delegated by the insurer, made by the Non-entrepreneurial (Non-commercial) Legal Person – Compulsory Insurance Centre specified in the Law of Georgia on Compulsory Insurance of Civil Liability of Owner of Transport Vehicle Registered in Foreign State and Moving within the Territory of Georgia for damage inflicted on the affected person (third person) by the owner of an uninsured transport vehicle involving the transport vehicle, which does not exceed the amount of damage occurred;

c) the value of goods and services purchased as test purchases under this Code and the legislation of Georgia, as well as income or benefit secretly earned by a person who secretly assists criminal investigation authorities;

d) the amount of pension contributions made under the Law of Georgia on Cumulative Pension by an employer to the pension account on behalf and in favour of an employee, except as provided for by Article 32(4) and Article 34(2) of the Law of Georgia on Cumulative Pension;

e) the benefit received as a result of payment of an insurance premium by an employer in favour of an employee within the compulsory insurance in accordance with the legislation of Georgia. 

2. If a person receives property or benefit from another person, the value of the property or benefit to be included in gross income shall be determined under Article 101(2) of this Code.

Law of Georgia No 1935 of 23 December 2017 – website, 29.12.2017

Law of Georgia No 3308 of 21 July 2018 – website, 6.8.2018

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 104 – Georgian source income

1. For the purposes of this Section, Georgian source income shall be:

a) income earned from employment in Georgia;

b) income or benefit earned from the supply of goods in the territory of Georgia;

c) income earned from the delivery of services in Georgia.  For this purpose, unless otherwise provided by this article, services shall be deemed to be delivered in Georgia, if:

c.a) services are actually rendered in Georgia;

c.b) services are related directly to the immovable property located in Georgia;

c.c) services are related directly to the movable property located in Georgia;

c.d) services are related to the securities issued by a Georgian resident;

c.e) the place of actual delivery of services is Georgia and services are delivered in the sphere of culture, art, education, tourism, recreation, physical culture and sports;

c.f) the delivery of services is related to transportation of cargo or passengers, and the place of commencement and ending of transportation is Georgia;

c.g) a service provider and a service recipient are in different states and the service provider is a Georgian resident, except where the service provider delivers services through its permanent establishment in another country that confirms the fact that the service provider has delivered services in another country (other than in Georgia).

c.h) a service provider and a service recipient are in different states and the service provider delivers services in Georgia through its permanent establishment to an employee or otherwise (at the same time, the expenses related to the delivery of services by the service provider are incurred in Georgia irrespective of the place of actual payment of such expenses) that confirms the fact that the service provider has delivered services in Georgia.

d) income earned from economic activity conducted in Georgia by a non-resident’s permanent establishment, including income earned by a non-resident from the sale of identical (similar) goods in Georgia; as well as income from the services delivered in Georgia, which are identical or similar to the services delivered by a permanent establishment;

e) income from the cancellation of obligations as a result of writing off bad debts related to economic activity conducted in Georgia and income from the sale of fixed assets under Article 111(7) of this Code or income received as a result of compensation under Article 146 of this Code;

f) dividends received from a resident legal person, or income earned from the sale of shares of a resident legal person and/or a partner’s share in a legal person;

g) interest, provided the interest payer is a Georgian resident. At the same time, irrespective of whether the interest payer is a Georgian resident:

g.a) interest shall be deemed as a Georgian source income if a non-resident person has a permanent establishment in Georgia to which the non-resident’s debt obligation is related and the interest expenses related to such debt obligation is attributed to the expenses of the permanent establishment, irrespective of whether such expenses have been incurred by the permanent establishment or not;

g.b) interest shall not be deemed as a Georgian source income if a resident person confirms that it has a permanent establishment in a foreign country to which the resident’s debt obligation is related and the interest expenses related to such debt obligation is attributed to the expenses of the permanent establishment, irrespective of whether such expense has been incurred by the permanent establishment or not; 

h) pension or scholarship paid by a resident;

i) royalty, if the payer of such royalty is a Georgia resident.  At the same time, irrespective of whether the payer of the royalty is a Georgia resident or not:

i.a) a royalty shall be deemed as Georgian source income if a non-resident person has a permanent establishment in Georgia with  respect to which the obligation to pay royalty arose, irrespective of whether such expense has been incurred by the permanent establishment or not;

i.b) a royalty shall not be deemed as a Georgian source income if a resident confirms that it has a permanent establishment in a foreign country with respect to which the obligation to pay royalty arose, irrespective of whether such expense has been incurred by the permanent establishment or not;

j) income earned from the sale or assignment of  rights existing or exercised in Georgia provided in Article 8(21) of this Code;

k) income earned from leasing movable property used in Georgia and/or from transferring any other contractual right of use;

l) income earned from immovable property located in Georgia and used for economic activity, including income from the sale of a partner’s interest in such property;

m) income earned from the supply of shares of or partner’s interest in an enterprise, more than 50% of the value of which assets is directly or indirectly created from the value of the immovable property located in Georgia;

n) income received from a resident enterprise or a non-resident’s permanent establishment in Georgia for management, as well as financial and/or insurance services (including reinsurance services);

o) income earned in the form of insurance premiums under risk insurance or reinsurance contracts made in Georgia;

p) income earned from the provision of transport services in international carriage between Georgia and foreign countries or from the provision of telecommunication services in international communication;

q) other income earned from carrying on activities in Georgia.

2. In determining the source of income specified in the first paragraph of this article, the place of receipt of the amount of income shall not be taken into account.

3. (Deleted – 28.6.2019, No 4906).

Law of Georgia No 4114 of 17 December 2010 – LHG III, No 76, 29.12.2010, Art. 506

Law of Georgia No 189 of 28 December 2012 – website, 29.12.2012

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Chapter XV – Deductions and Loss

Article 105 – Expenses related to earning income

1. All expenses related to earning income, other than the expenses that are not deductible under this Section, shall be deducted from gross income.

2. Unless otherwise provided for by this Code, all expenses shall be documented.

3. The expense of purchase, installation and other capitalisable expenses of fixed assets shall be deducted on a phased basis as depreciation charges, except where a taxpayer exercises the right to full deduction of depreciation charges.

4. A taxpayer may deduct from gross income:

a) benefit arising from supplying (including, free of charge) of goods/services to him/her, taking into account the restrictions provided for by this Code, in the reporting year, in which such goods and services are used in economic activity;

b) the VAT amount assessed on goods with independent consumer specifications, disseminated gratuitously for advertising purposes, unless a tax invoice has been issued with respect to the transaction.

c) costs related to the placement of shares and/or Global Depositary Receipts at stock exchange (including at the stock exchange recognised by a foreign country) and to issuing such shares and/or Global Depositary Receipts, as well as expenses related to changes made in the listing category/regime.

d) costs related to the income (profit) exempted from profit tax under Article 99(1)(l) of this Code.

5. The Minister of Finance of Georgia may determine:

a) certain cases where expenses need not be documented;

b) the list of documents that will be deemed as documents evidencing expenses notwithstanding the requirements of this Code.

6. (Deleted – 13.5.2016, No 5092).

7. (Deleted – 26.12.2013, No 1886).

8. (Deleted – 13.5.2016, No 5092).

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 6212 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 6330 of 25 May 2012 – website, 08.6.2012

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 2946 of 12 December 2014 – website, 24.12.2014

Law of Georgia No 4720 of 24 December 2015 – website, 29.12.2015

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 1182 of 30 June 2017 – website, 13.7.2017

Article 106 – Non-deductible expenses

The following expenses shall not be deducted from gross income:

a) expenses that are not related to economic activity, except for:

a.a) the case provided in Article 117 of this Code;

a.b) the case where a legal person under public law supplies goods and/or provides services to the State and/or the municipalities free of charge;

b) entertainment expenses, except where a taxpayer is engaged in the entertainment business and the expenses are incurred within the framework of such business;

c) personal expenses of a natural person, expenses related to winnings from lotteries, casinos, gambling and other games of chance or related to earning salary income;

d) expenses related to earning income that is exempt from profit or income tax, except as provided in the note to this article;

e) expenses incurred for goods/services that are not regarded as being supplied for the purposes of a profit tax, or during the supply of which the corresponding income/market price is not included in the gross income under Article 100(4) of this Code, except as provided in Article 100(4)(b) of this Code;

f) expenses incurred for goods/services purchased from a natural person having the status of a micro business, except when the income received by a person having this status from the supply of goods/provision of services is taxed under regular procedures, or when a consignment note/a document of a form determined by the Minister of Finance of Georgia is issued upon the supply/purchase of goods;

g) (Deleted – 26.12.2013, No 1886)

h) expenses incurred with respect to the goods/services purchased from a flat tax payer within the scope of the activity subject to a flat tax;

h) expenses incurred with respect to the goods/services purchased from a person having a status of a flat tax payer within the scope of the activity (except for the activity taxable at a tax rate determined under Article 95³ (1)(b) of this Code) subject to a flat tax

i) expenses of a person having the status of a flat tax payer not separated between the activity subject to a flat tax and additionally performed activities.

Note: where so provided for in Article 82(1)(f) and (k) of this Code, a person may deduct expenses relating to the exempted income. When using this right, a person shall apply income tax to the income exempt from income tax under Article 82(1)(f) and (k) of this Code.

Law of Georgia No 4206 of 22 February 2011 – website, 10.3.2011

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 6330 of 25 May 2012 – website, 8.6.2012

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 2950 of 12 December 2014 – website, 23.12.2014

Law of Georgia No 2946 of 12 December 2014 – website, 24.12.2014

Law of Georgia No 4680 of 18 December 2015 – website, 29.12.2015

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 2391 of 30 May 2018 – website, 12.6.2018

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Law of Georgia No 6942 of 15 July 2020 – website, 28.7.2020

Article 107 – Limiting interest deductions

1. Taking into consideration the second paragraph of this article, interest paid and/or payable (under an accrual method) for a credit (loan) shall be deducted within limits not higher than the annual interest rate set by the Minister of Finance of Georgia, in proportion to the period concerned.

2. In an enterprise, more than 20% of the interest (shares) of which is directly or indirectly held by a legal person exempt from the tax on profits, the maximum amount of interest deductible under the first paragraph of this article shall not exceed the total of any interest income earned by a taxpayer and 50% of the total amount of taxable profit calculated without regard to interest income earned and interest expenses incurred.

Law of Georgia No 4114 of 17 December 2010 – LHG III, No 76, 29.12.2010, Art. 506

Law of Georgia No 6446 of 12 June 2012 – website, 25.6.2012

Law of Georgia No 6547 of 22 June 2012 – website, 4.7.2012

Article 108 – Deduction of bad debts

1. A taxpayer may deduct bad debts related to goods and service sold, where receivable income in previous reporting periods was included in the gross income received from the economic activity.

2. Bad debts may be deducted only if tax arrears have been written off and recorded in the taxpayer's financial statements.

Article 109 – Deduction of allocations to reserve funds

1. A legal person engaged in a licensed insurance business may deduct from the gross income of a reporting year ‘insurance losses/losses incurred, net’ of the same reporting period, calculated in the manner prescribed by the National Bank of Georgia, except for the income from recourse and from salvaged property.

2. Banks and credit unions shall, under the procedure established by the National Bank of Georgia for the classification of assets and creation and use of possible loan loss reserves by commercial banks, deduct possible loan loss reserves defined by the same procedure.

2¹. A microfinance organisation shall deduct potential loan loss reserves under the procedure established by the National Bank of Georgia for classifying assets of microfinance organisations and forming potential loan loss reserves.

3. A leasing company may deduct, as prescribed by the Minister of Finance of Georgia, from the gross income of a reporting period the expenses of lease loss reserves.

Law of Georgia No 4114 of 17 December 2010 – LHG III, No 76, 29.12.2010, Art. 506

Law of Georgia No 5118 of 13 October 2011 – website, 31.10.2011

Law of Georgia No 4225 of 27 December 2018 – website, 31.12.2018

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

[Article 109 – (Deleted) (Shall become effective from 1 January 2023)]

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 2392 of 30 May 2018 – website, 12.6.2018

Article 110 – Deduction of scientific-research, design and development service expenses

Scientific-research, design and development service expenses related to the receipt of gross income shall be deductible, except for the expenses related to fixed-asset purchases, installation and other capitalisable expenses.

Article 111 – Depreciation charges and deductions according to fixed assets

1. The depreciation charges of fixed assets used for economic activity shall be deducted under this article.

2. Depreciation shall not be charged against land, works of art, museum exhibits, objects (other than buildings) of historical significance, and other non-depreciable assets. At the same time, depreciation shall not be charged against a fixed asset and biological asset with a value of up to GEL 1 000. A fixed asset with a value of up to GEL 1 000 shall be fully deducted from gross income in the tax year in which it is put into service, and the expenses incurred for a biological asset shall be deducted from gross income in the tax year in which they were actually incurred.

3. Fixed assets subject to depreciation shall be grouped according to the following depreciation rates:

4. The amount of depreciation charges for each group is calculated from the book value of a group at the end of a tax year in accordance with the depreciation rates indicated in the third paragraph of this article.

5. Buildings and structures (‘buildings’) depreciation shall be charged against each building separately. Accordingly, each building shall be regarded as a separate group.

6. The book value of a group at the end of a tax year shall be the amount calculated as follows: the book value of a group at the end of a tax year preceding the reporting year:

a) shall be reduced:

a.a) by the depreciation amount charged in the tax year preceding the reporting year;

a.b) by the amount of deductions made under the eighth and ninth paragraphs of this article;

a.c) by the amount derived from the sale of fixed assets of a group during a reporting tax year, and in the event of gratuitous supply of fixed assets, by market value;

b) shall be increased:

b.a) by the value of fixed assets specified in Article 148 of this Code (other than non-depreciable fixed assets) added to the group in the reporting tax year;

b.b) by the amount that exceeds the maximum limit for repair expenses incurred on fixed assets during a reporting tax year, in accordance with Article 115(2) of this Code.

7. If the amount from the sale of fixed assets of a group during a tax year, and in the case of a gratuitous supply of fixed assets – their market price, exceeds the book value of the group at the end of the year, the surplus amount shall be included into gross income and the book value of the group shall be equal zero.

8. If the amount of the book value of a group at the end of the year is less than GEL 1 000, the amount of the book value of the group shall be subject to deduction.

9. If all fixed assets of a group are sold or liquidated, the amount of the book value of the group shall be subject to deduction from gross income.

10. Taxpayers may apply an accelerated depreciation rate to the second and third groups but the rate shall not exceed double the amount of the respective rate provided for in the third paragraph of this article.

11. A non-entrepreneur natural person may not deduct depreciation charges against fixed assets used for economic activity.

12. Each fixed asset leased by a lessor shall be classified as a separate group. Depreciation charges for such assets shall be deducted in the amount of discounted value of leasing fees that are calculated according to the leasing conditions and the book value of the group of such fixed assets.

13. Where a leased fixed asset is returned to the lessor after expiry or termination of a lease contract, such fixed asset shall remain in the same group and the deduction of depreciation charges against it shall be suspended pending its subsequent transfer by lease.

14. (Deleted – 26.12.2013, No 1886).

Law of Georgia No 5118 of 13 October 2011 – website, 31.10.2011

Law of Georgia No 6212 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Article 112 – Full deduction of depreciation charges of fixed assets

1. A taxpayer may fully deduct the value of fixed assets, except for those contributed to the enterprise’s capital, in the tax year in which the fixed assets are put into service.

2. If a taxpayer exercises the right of full deduction of the value of fixed assets, the taxpayer shall apply the same method in respect of all subsequently purchased (manufactured) fixed assets.

3. When fully deducting the value of fixed assets:

a) the fixed assets shall not be included in the book value of the group provided for in Article 111;

b) the amounts received and/or receivable from subsequent supply of such assets, and in the absence of such amounts – market value without VAT, shall be included in gross income.

4. If a taxpayer fully deducts the value of fixed assets, the taxpayer may not alter the chosen deduction rate for the next five years. At the same time, the rate of deduction shall be chosen in the tax year in which the fixed assets are put into service.

5. The right of full deduction of the value of fixed assets shall not apply to non-depreciable fixed assets.

Law of Georgia No 5118 of 13 October 2011 – website, 31.10.2011

Article 113 – Deduction of depreciation charges on intangible assets

1. The value of intangible assets shall be deducted in the form of depreciation charges, throughout their useful life, in proportion to the reporting period. At the same time, a taxpayer may fully deduct an intangible asset with the value of up to GEL 1 000 from gross income in the reporting year in which the relevant expenses were incurred.

2. If the useful life of intangible assets cannot be determined, the depreciation rate shall be 15%.

3. Each intangible asset shall be recorded in a separate group.

4. The value of amortisable intangible assets shall not include the expenses of purchase or manufacture of such assets if these expenses were already deducted when calculating a taxpayer’s taxable profit (income).

5. If the amount of the book value of a group of intangible assets by the end of the year is less than GEL 1 000, the amount of the book value of the group shall be deducted.

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 2946 of 12 December 2014 – website, 24.12.2014

Article 114 – (Deleted)

Law of Georgia No 5118 of 13 October 2011 – website, 31.10.2011

Article 115 – Deducting fixed asset repair expenses

1. Repair expenses of fixed assets in each group under Article 111(3) of this Code may be deducted annually up to 5% of the book value of the group at the end of the tax year preceding the reporting year.

2. The amount exceeding the limit set by the first paragraph of this article shall increase the book value of the group concerned.

3. In exercising the right of full deduction of the value of fixed assets under Article 112 of this Code, repair expenses shall be deducted in full, notwithstanding the limitation provided for in this article.

4. Repair expenses of fixed assets taken under lease, unless a contract provides for the reduction of rental charges in exchange for the repairs, expenses shall be capitalised with the recipient of fixed assets and shall form by the end of the reporting period a separate group. In that case:

a) expenses incurred shall be deducted from gross income according to the depreciation rates set by this Code for fixed assets at 15%;

b) if a fixed asset is returned to the lessor in the event of expiry or early termination of the contract, the book value of the group shall be equal to zero and the remaining sum shall not be deducted from gross income. At the same time, the return of fixed assets to the lessor shall not be regarded as supply.

5. (Deleted – 26.12.2013, No 1886).

Law of Georgia No 6212 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Article 116 – Limiting the deduction of entertainment expenses

Persons carrying on economic activity may deduct entertainment expenses up to a maximum of 1% of gross income received during a tax year.

Article 117 – Deducting donations to charitable organisations

The amount donated by an enterprise/entrepreneur natural person to a charitable organisation shall be deducted from gross income, also the market price of goods (other than immovable property)/services supplied free of charge and included into gross income, but not more than 10% of the amount remaining after deductions under this Code from gross income (without the deductions specified in this article).

Law of Georgia No 906 of 30 July 2013 – website, 20.8.2013

Article 118 – Deducting insurance premium expenses

Insurance premiums paid and/or payable (using an accrual basis method) under an insurance contract by the policyholders and/or the ensured in connection with economic activity, except for the insurance premiums paid by the insured under a pension insurance contract, shall subject to deduction.

Article 119 – Expenses of the geological survey and preparatory services in connection with extraction of natural resources

1. Expenses of the geological survey and preparatory services in connection with extraction of natural resources shall be deducted as depreciation charges from gross income according to the book value of the group at the depreciation rate of 20% under Article 111 of this Code, according to the book value of a group and shall be recorded as a separate group.

2. This article shall:

a) apply to the expenses on intangible assets incurred by a taxpayer for purchasing the right to geological survey, processing or extraction of natural resources;

b) not extend to the intangible assets the useful life of which can be established and which can be deducted retain proportion to the reporting period.

3. Expenses of the geological survey, preparatory services and drillings in connection with extraction of natural resources performed under the production sharing agreement in accordance with the Law of Georgia on Oil and Gas shall be deducted according to the rates provided by an agreement.

Article 120 – Non-deductible expenses and fines

1. The following shall not be deducted:

a) profit tax and income tax paid or payable in Georgia or in a foreign country, except for the income tax paid in connection with a natural person’s earning of benefit (except for the benefit received from employment and economic activity). In that case, the amount of the income tax payable for the income earned from the sale of property shall be reduced by the amount of the income tax paid for this property (including in the preceding tax periods);

b) amounts of penalties/fines prescribed by the legislation of Georgia and paid or payable by a taxpayer to the budget.

2. (Deleted – 26.12.2013, No 1886).

Law of Georgia No 6212 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Article 121 – Carry-forward of losses

1. Losses incurred by an entrepreneur natural person upon sale of an asset (other than an asset used in economic activity) shall be compensated by the surplus value resulting from the sale of an asset of the same type. If the losses cannot be compensated in the same year, it shall not be carried forward to the next year.

2. Losses incurred by a natural person (other than an entrepreneur natural person) upon sale of an asset during a tax year shall be compensated by the surplus value resulting from the sale of the asset of the same type. At the same time, if the loss cannot be compensated in the same year, it shall not be carried forward to the next year.

3. The excess of deductions over the gross income from economic activity not related to employment, received by an entrepreneur natural person shall not be deducted from the salary received by such person. It shall be carried forward for up to five years and shall be covered by the excess of gross income of future periods over deductions not related to employment.

4. The excess of deductions over the gross income of a legal person shall be carried forward for up to five years and covered from the excess of the gross income of future periods over deductions.

5. (Deleted – 28.6.2019, No 4906).

Law of Georgia No 5120 of 13 October 2011 – website, 19.10.2011

Law of Georgia No 6015 of 10 April 2012 – website, 30.4.2012

Law of Georgia No 189 of 28 December 2012 – website, 29.12.2012

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Article 122 – Extension of the loss carry-forward period

1. A person may replace the 5-year loss carry-forward period specified in Article 121 of this Code with a 10-year loss carry-forward period. For this purpose, the person shall apply to a tax authority before the expiry of the 5-year loss carry-forward period specified in Article 121 of this Code.

2. In applying the provisions of the first paragraph of this article, a person, in the case of loss coverage, may change again the chosen 10-year loss carry-forward period back to a 5-year loss carry-forward period. For this purpose, the person shall, in any tax year following the loss coverage, notify a tax authority of reverting to a 5-year loss carry-forward period.

3. (Deleted – 18.12.2015, No 4680).

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 4680 of 18 December 2015 – website, 29.12.2015

Article 123 – (Deleted)

Law of Georgia No 5118 of 13 October 2011 – website, 31.10.2011

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 6547 of 22 June 2012 – website, 4.7.2012            

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Chapter XVI – International Taxation and Prevention of Tax Evasion

Article 124 – Setting off taxes paid outside Georgia

1. An enterprise (except for an enterprise under paragraph 2 of this article) may set off profit tax paid outside Georgia for a respective tax year when paying tax on that profit in Georgia with respect to the income not earned from a Georgian source.

2. An enterprise subject to profit tax in the course of profit distribution may, when paying tax according to a dividend paid, set off profit tax for a respective tax year, which is paid outside Georgia with respect to the income not earned from a Georgian source.

3. Amounts that are set off under paragraphs 1 and 2 of this article must not exceed the amounts of taxes that would be charged in Georgia on that profit under the procedure and at the rates existing in Georgia.

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Article 125 – Use of tax privileges by a non-resident under international agreements on prevention of double taxation

The procedure for granting tax privileges under international agreements on prevention of double taxation and for refunding to a non-resident the taxes paid by the non-resident in Georgia shall be determined by an order of the Minister of Finance of Georgia.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Chapter XVII – Transfer Pricing

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Article 126 – Meaning of the concepts for the purposes of this Chapter

1. Two persons shall be related if:

a) one person directly or indirectly participates in the management, control or capital of the other person;

b) the same persons directly or indirectly participate in the management, control or capital of two persons.

2. A person directly or indirectly participates in the management, control or capital of an enterprise if:

a) he/she directly or indirectly owns over 50% of an enterprise;

b) he/she actually controls the business decisions of an enterprise.

3. Persons that are not related shall be independent.

4. Any transaction between related persons shall be a controlled transaction.

5. Any transaction between independent persons shall be an uncontrolled transaction.

6. Margin is a rate of profitability calculated as the ratio of such indicators as purchases, sales, expenses and assets.

7. Transaction conditions shall mean the financial or other relevant indicators used in applying a transfer pricing method.

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Article 127 – General principles of transfer pricing

1. For the purposes of this Code, where a Georgian enterprise performs one or several financial or commercial transactions with a related enterprise, which is not a Georgian enterprise, each of such enterprises shall determine the amount of its profit in accordance with the concept of an arm’s length transaction.

2. The amount of taxable profit of an enterprise performing one or several financial or commercial controlled transactions with a related enterprise shall be in accordance with the concept of an arm’s length transaction, if the terms of the transaction do not differ from the terms which would have been agreed upon if a comparable transaction had been performed between related enterprises under comparable circumstances.

3. If the established terms of the transaction specified in the first paragraph of this article are not conducted as if it were at arm’s length, any profits that would have accrued to one of the enterprises if the established terms of the transaction had been conducted at arm’s length, but have not so accrued by reason of nonconformity with an arm’s length transaction, may be included in the profits of that enterprise and taxed accordingly.

4. An uncontrolled transaction shall be comparable with a controlled transaction if:

a) there is no such significant difference between them that would have had any essential effect on the financial indicator that is measured by a transfer pricing method;

b) in the case of the difference indicated in subparagraph (a) of this paragraph, for the purpose of eliminating the results of such difference, a reasonably correct adjustment in the financial indicator of an uncontrolled transaction has been made.

5. Provisions of paragraph 3 of this article shall also apply to cases where a Georgian enterprise performs one or several financial or commercial transactions with a resident of a country with preferential tax treatment, irrespective of whether they are related persons or not. However, a transaction, one of the parties to which is a resident of a country with preferential tax treatment, shall be considered as a controlled transaction.

6. The criteria, according to which the price of a transaction to be examined is deemed to be an arms-length price for the purposes of this article, shall be determined by the Minister of Finance of Georgia.

7. The provisions of the third paragraph of this article shall also apply where a Georgian enterprise performs one or several financial or commercial transactions with its permanent establishment.

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 6547 of 22 June 2012 – website, 4.7.2012

Law of Georgia No 189 of 28 December 2012 – website, 29.12.2012

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Article 128 – Transfer pricing methods

1. The following transfer pricing methods shall apply to determine the conformity of the amount of taxable profit with the concept of an arm’s length transaction:

a) Comparable Uncontrolled Price (CUP) Method. This method compares the price charged for property or services transferred in a controlled transaction to the price charged for property or services transferred in a comparable uncontrolled transaction;

b) Resale Price Method. This method compares the margin arising from the sale in an uncontrolled transaction of goods purchased in a controlled transaction with the margin arising from the sale in a comparable uncontrolled transaction of goods purchased in comparable and uncontrolled transactions;

c) Cost Plus Method. Under this method, a cost plus mark-up that is added to the direct or indirect costs incurred for the supply of goods or services in a controlled transaction is compared with the cost plus mark-up that is added to the direct or indirect costs incurred for the supply of goods or services in a comparable uncontrolled transaction;

d) Transactional Net Margin Method. Under this method, the net profit margin obtained by an enterprise in a controlled international transaction in relation to the appropriate indicator (e.g. sales, costs, assets) is compared to the net profit margin obtained in a comparable uncontrolled transaction in relation to the appropriate indicators;

e) Transactional Profit Split Method. Under this method, a portion of the profit/loss received from the transaction, which an independent enterprise would presumably have earned in a comparable uncontrolled transaction, is attributed to each enterprise involved in the controlled transaction.

2. The arm’s length price of a controlled transaction shall be determined by the method that best suits each particular transfer pricing instance.

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 189 of 28 December 2012 – website, 29.12.2012

Article 129 – Special provisions of transfer pricing

1. If so requested by a tax authority, a taxpayer shall provide an explanation as to why he/she believes that the profit earned by him/her is in accordance with the concept of an arm’s length transaction defined by Article 127(1) of this Code. At the same time, a taxpayer may provide sufficient information and analysis to back up his/her arguments and to verify the conformity of the transactions performed by the taxpayer with related persons with Article 127(1) of this Code.

2. If the terms of an agreement concluded between an enterprise taxed in Georgia and its related enterprise is adjusted by a tax authority of another country, as a result of which that country is to charge taxes on that portion of the profit that has already been taxed in Georgia, and Georgia has signed a double taxation avoidance agreement with that country, then the Georgian tax authority shall, based on the request from the Georgian taxpayer enterprise, verify whether the adjustment made is in accordance with the concept of an arm’s length  transaction. If the tax authority concludes that the aforesaid adjustment complies with the concept of an arm’s length transaction, it shall make appropriate corrections and adjust the amount of tax of the Georgian taxpayer enterprise.

3. Transfer pricing methods and their application, determination of comparability of uncontrolled transactions, transaction adjustment procedure, information and documents to be submitted by the parties to a transaction to a tax authority, sources of information on arms-length prices, price range application procedure, timeframes to be applied for the purposes of this Chapter and other procedural matters shall be determined by an order of the Minister of Finance of Georgia.

4. Controlled transactions are examined in accordance with the provisions of this Chapter under the decision of the Head of the Revenue Service.

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Article 129¹ – Advance pricing arrangement

1. Based on a taxpayer’s application, the Head of the Revenue Service may sign an advance pricing arrangement with the taxpayer for purposes of this Chapter. An advance pricing arrangement is made before the commencement of a transaction, for a fixed period of time; it determines a set of criteria for determining the transfer pricing for those transactions. Such criteria include methods, comparable transactions and appropriate adjustments to them, as well as critical assumptions as to future transactions, etc. 

2. An advance pricing arrangement shall apply only to the person in relation to whom it has been concluded. At the same time, an advance pricing arrangement shall make a reference to the provision of the legislation of Georgia on which it is based.

3. If a person acts under an advance pricing arrangement, a controlling authority shall in no event make a decision or charge taxes and/or penalties that contradict the advance pricing arrangement.

4. An advance pricing arrangement shall not apply if:

a) the facts and circumstances indicated in the advance pricing arrangement which would have affected the advance pricing arrangement, do not correspond to the actual facts and circumstances;

b) the provision of the legislation of Georgia on which the advance pricing arrangement was based, has been abolished or amended.

5. The provision of the legislation of Georgia that is unfavourable to a taxpayer and that has been given a retroactive force shall not affect the transactions performed under an advance pricing arrangement signed before the provision took effect.

6. The information provided by a person for signing an advance pricing arrangement shall be treated as a tax secret.

7. If the price declared by a taxpayer is in accordance with the concept of an arm’s length transaction, the taxpayer shall not be held liable under this Code just because he/she has violated a condition of the advance pricing arrangement referred to in the first paragraph of this article.

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Chapter XVIII – Taxation of Income at the Source

Article 130 – Taxation of dividends at the source

1. Dividends paid by a resident enterprise to a natural person, a non-entrepreneurial (non-commercial) legal entity or a non-resident enterprise shall be taxed at source at the rate of 5% of the amount payable.

2. Dividends received by the persons provided for in Article 2(1) of the Law of Georgia on Entrepreneurs (other than an individual entrepreneur) shall not be taxed at the source and shall be not included in the gross income by the enterprise receiving the dividends.

3. Dividends received by a resident natural person that have been taxed at the source, shall not be included in the gross income of that person and shall not be subject to further taxation.

3¹. (Deleted – 14.7.2020, No 6817).

4. (Deleted – 28.6.2019, No 4906).

4¹. Dividends received by a member of an agricultural cooperative from the cooperative before 1 January 2023 (except for the dividends received from the profit earned from the activities provided for by Article 6(2) of the Law of Georgia on the Agricultural Cooperative) shall not be taxed at source and shall not be included in the gross income by a person receiving the dividends.

5. (Deleted – 23.12.2017, No 1935).

6. Dividends paid to the State by a resident enterprise shall not be taxed at the source.

7. Dividends earned from a FIZ Enterprise in a Free Industrial Zone shall not be taxed at the source and shall not be included in gross income by the person earning the dividends.

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 6015 of 10 April 2012 – website, 30.4.2012

Law of Georgia No 118 of 20 December 2012 – website, 29.12.2012

Law of Georgia No 817 of 12 July 2013 – website, 5.8.2013

Law of Georgia No 5491 of 22 June 2016 – website, 29.6.2016

Law of Georgia No 1935 of 23 December 2017 – website, 29.12.2017

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Law of Georgia No 5499 of 11 December 2019 – website, 23.12.2019

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 131 – Taxation of interest at the source

1. Interests paid by a non-resident's permanent establishment or by a resident, or on their behalf to a natural person or to a non-resident having no permanent establishment in Georgia shall be taxed at the source at the rate of 5% of the amount payable.

2. (Deleted – 30.6.2017, No 1182).

3. I Interest received by a natural person that have been taxed at the source shall not be included into the person’s gross income and shall not be subject to further taxation.

4. (Deleted – 14.7.2020, No 6817).

5. Interest earned from a licensed financial institution in accordance with the legislation of Georgia shall not be taxed at the source. At the same time, such interest shall not be included in gross income by the person earning the interest, unless the recipient of the interest is a licensed financial institution.

6. (Deleted – 23.12.2017, No 1935).

7. Interest paid to the State by a resident enterprise shall not be taxed at the source.

8. Interest earned from debt securities issued by a Georgian enterprise and listed on a recognised stock exchange of a foreign country shall not be taxed at the source and shall not be included in gross income by the person earning the interest.

9. Interest earned from a FIZ Enterprise in a Free Industrial Zone shall not be taxed at the source and shall not be included in gross income by the person earning the interest.

Law of Georgia No 6015 of 10 April 2012 – website, 30.4.2012

Law of Georgia No 118 of 20 December 2012 – website, 29.12.2012

Law of Georgia No 1182 of 30 June 2017 – website, 13.7.2017

Law of Georgia No 1935 of 23 December 2017 – website, 29.12.2017

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 132 – Taxation of royalty at the source

1. Royalty paid by a non-resident's permanent establishment or by a resident or on their behalf to a resident natural person (other than the natural person registered as a VAT payer) shall be taxed at the source at the rate of 20% of the amount payable.

2. Royalty received by a natural person (except as provided for in the third paragraph of this article) that has been taxed at the source shall not be included into the person’s gross income and shall not be subject to further taxation.

3. An entrepreneur natural person who has received royalty taxed at the source in Georgia may deduct the amount of the tax paid at the source.

4. Royalty paid to the State shall not be taxed at source.

Law of Georgia No 4754 of 14 June 2011 – website, 28.6.2011

Law of Georgia No 118 of 20 December 2012 – website, 29.12.2012

Article 133 – (Deleted)

Law of Georgia No 4754 of 14 June 2011 – website, 28.6.2011

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Article 133¹ – Taxation of the income of a renter of a trade outlet and/or a trading place in an STZ territory

1. Compensation received/receivable by a renter of a trade outlet and/or a trading place (for a VAT payer – net of VAT) in an STZ territory from the sale of goods (except as provided for in Article 26(6) of this Code) shall be taxed by the person having an STZ status at the rate of 3%.

2. (Deleted – 10.4.2012, No 6015).

3. Income earned by a person in an STZ territory that has been taxed under this article shall not be included in such person’s gross income and shall not be subject to further taxation.

4. The procedure for a person holding an STZ status to pay taxes under this article shall be determined by a resolution of the Government of Georgia.

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 6015 of 10 April 2012 – website, 30.4.2012

Article 133² – Taxation by a tourist enterprise of the income of a natural person who is the owner of the hotel assets/part of the assets

1. Remuneration paid by a tourist enterprise to a natural person under a relevant contract shall be taxed at the rate of 5% of the amount taxed at source.

2. In the case set out in paragraph 1 of this article, the income received by a natural person, which is taxed at source, shall not be included in the gross income of the receiving person and shall not be subject to subsequent taxation.

Law of Georgia No 2946 of 12 December 2014 – website, 24.12.2014

Article 133³ – Taxation of the income of a natural person supplying certain goods

1. The Minister of Finance of Georgia may define the list of goods by supplying of which the income earned by a natural person shall be taxed at source at the rate of 3%, by a person purchasing the goods.

2. The procedure of taxing at source under paragraph 1 of this article shall apply if a consignment note is not prepared when supplying goods.

3. The income earned by a natural person, which is taxed under this article, shall not be included in the gross income of the person and shall not be subject to subsequent taxation.

Law of Georgia No 1182 of 30 June 2017 – website, 13.7.2017

Law of Georgia No 2391 of 30 May 2018 – website, 12.6.2018

Article 134 – Taxation of a non-resident’s income at source

1. Income earned by a non-resident from a Georgian-based source that is not attributed  to the non-resident's permanent establishment registered for tax purposes in Georgia shall be taxed at the source without deductions at the following rates:

a) dividends – under Article 130 of this Code;

b) interests – under Article 131 of this Code;

b¹) royalty – 5%;

c) amounts paid by an enterprise, organisation and/or entrepreneur natural person for international telecommunication services and international transport services – at the rate of 10%.

d) income earned by non-resident subcontractors in conducting the oil and gas operations provided for by the Law of Georgia on Oil and Gas – at the rate of 4%.

d¹) lease service charges paid to a natural person – at the rate fixed by Article 81 of this Code.

e) other paid amounts, which under this Code are regarded as Georgian source income – at the rate of 10%;

f) salary income – at the rate fixed by Article 81 of this Code.

1¹. Income earned by a person registered in a country with a preferential tax treatment in cases provided for in paragraph 1(b), (b¹) and (e) of this article shall be taxed at source without deductions, at 15%.

2. For the purposes of this article, the taxes paid by or on behalf of a non-resident's permanent establishment in Georgia shall be deemed as paid by a resident enterprise.

3. A non-resident who earns income under paragraph 1(c)-(e) of this article and is taxed at the source, may file a return by the 1 April of the year following the reporting year requesting recalculation and refund of withheld taxes.

4. If a person exercises the right under the third paragraph of this article:

a) Taxable income/profit of a non-resident shall be defined as a difference between the gross income gained from a Georgian source and the amounts to be deducted under this Code;

b) (Deleted – 13.5.2016, No 5092);

c) taxes paid by a non-resident shall not exceed the amount withheld at the source under the first paragraph of this article.

5. (Deleted – 13.5.2016, No 5092).

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 6446 of 12 June 2012 – website, 25.6.2012

Law of Georgia No 3581 of 1 May 2015 – website, 15.5.2015

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Chapter XIX – Tax Accounting Rules

Article 135 – Accounting period

1. The accounting period for a person (except for persons under paragraph 2 and 3 of this article) shall be a calendar year.

2. The accounting period for a resident enterprise, organisation, and for a permanent establishment of a non-resident in Georgia (persons subject to profit taxation according to objects of taxation under Article 97 (1–3) of this Code) shall be a calendar month.

3. The accounting period for a person, which is subject to income/profit taxation according to the object of taxation under Article 309(16) of this Code, with regard to the organisation of a betting house in a systemic-electronic form, shall be a calendar month.

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 97 of 16 December 2016 – website, 23.12.2016

Law of Georgia No 2391 of 30 May 2018 – website, 12.6.2018

Article 136 – Principles of accounting for income and expenses

1. A taxpayer shall accurately and timely account for income and expenses based on documented data by applying the methods provided in this Chapter and attribute them to the reporting period in which they were earned or incurred.

2. Unless otherwise provided in this Chapter, a taxpayer shall use a cash method of accounting or an accrual method of accounting depending on which method he/she uses for accounting.

3. A taxpayer shall fully account for all transactions related to his/her activity in order to guarantee control over their commencement, progress and completion.

4. In the case of transporting goods domestically for entrepreneurial activity, and in the case of supplying goods – at the request of a buyer (except for supply carried out according to a Special VAT Invoice that contains the details found in a consignment note), a consignment note shall be issued in the form and manner prescribed by the Minister of Finance of Georgia. At the same time, if a consignment is issued at the request of a buyer for the supply of goods, the goods may not be stored without the consignment note.

4¹. The Minister of Finance of Georgia may determine cases where a consignment note is not issued.

5. Taxable income (profit) shall be determined by the same method that a taxpayer uses for accounting. At the same time, income (profit) is adjusted only in compliance with the requirements of this Code. If the accounting data produced by a taxpayer according to the deductions under this Code, and the limits provided for by this Code, differ, then the taxpayer shall apply the norms under this Code to determine an object of taxation.

6. According to the provisions of this article, a taxpayer shall keep accounts for tax purposes on a cash basis or an accrual basis provided that he/she uses one method throughout a tax year.

7. A natural person may account for income and expenses on a cash basis.

8. (Deleted – 14.7.2020, No 6817).

9. If a taxpayer changes any aspect of an accounting method, taxable income (profit) shall be adjusted in the year of such change, provided that no element related to determining taxable income (profit) is omitted or included twice.

10. If a taxpayer earns income or incurs expenses in a non-cash form, the moment of earning such income or incurring such expenses shall be determined in the same way as the moment of earning income or incurring expenses in cash form is determined.

11. The Minister of Finance of Georgia may require a taxpayer who conducts a certain type of activity, provided that different taxation terms are provided for by this Code for such activity, to separately account for income and expenses related to that activity. At the same time, income and expenses related to certain type of activity shall be evidenced by accounting documents.

12. A taxpayer may account for income and expenses in the manner prescribed by the Minister of Finance of Georgia.

13. Contractual penalties and other fines shall be accounted for on a cash basis.

14. The moment of incurring expenses and making other payments/disbursements under Articles 98¹ – 98⁴ of this Code shall be the very moment when they were actually incurred/made.

15. A person shall define and recognise the amounts of revenues and expenses within a derivative in compliance with International Accounting Standards. In addition, the Minister of Finance of Georgia shall have the right to define individual cases to which the aforementioned procedure for defining and recognising the amounts of revenues and expenses within a derivative, and to regulate such cases in a different way.

Law of Georgia No 5118 of 13 October 2011 – website, 31.10.2011

Law of Georgia No 6446 of 12 June 2012 – website, 25.6.2012

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 5677 of 20 December 2019 – website, 31.12.2019

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 137 – Accounting for income and expenses under a cash method

In using a cash method of accounting, a taxpayer shall:

a) account for income upon obtaining the right to receive it or use and administer it;

b) deduct expenses after payment (this does not apply to fixed assets subject to depreciation under Article 111 of this Code).

Article 138 – Moment of earning income under the cash method

1. When using a cash method of accounting, the moment of earning income shall be:

a) if payment is made in cash – the moment of receiving cash;

b) in the case of non-cash settlement – transfer of funds to a taxpayer's current account or to any other account with a bank, from which he/she may administer or draw those fund.

2. If a taxpayer's financial obligations are cancelled or covered, namely, in the case of a mutual set-off, the moment of earning income shall be the moment of cancellation or coverage of the obligations.

Law of Georgia No 6312 of 25 May 2012 – website, 12.6.2012

Article 139 – The moment of incurring expenses under the cash method

1. When using a cash method of accounting, the moment of incurring expenses shall be the moment when a taxpayer actually incurs expenses, except as provided for in the third and fourth paragraphs of this article.

2. When using a cash method of accounting, the moment of incurring expenses by a taxpayer shall be:

a) if payment is made in cash – the moment when cash is paid;

b) in the case of non-cash settlement – the moment when a bank debits sums from a taxpayer's banking or other account.

3. If financial obligations of a taxpayer are cancelled or covered, namely in the case of a mutual set-off, the moment of incurring expenses shall be the moment of cancellation or coverage of those obligations.

4. In connection with debt obligations or payments related to leasing property, if the term of debt obligations or lease agreement includes several reporting periods, the amount of actually paid interest (rent) that is deducted throughout a tax year shall be the amount of interest (rent) that is calculated according to the amount charged or to be charged in each reporting period.

Article 140 – Accounting for income and expenses under the accrual method

When using the accrual method of accounting, a taxpayer shall account for income and expenses according to the moment when the right to earn the income is obtained and expenses are recognised, respectively, regardless of when income is actually earned or expenses are actually incurred, except as provided for in Article 142(4) of this Code.

Article 141 – The moment of earning income under the accrual method

1. A taxpayer shall be deemed to have obtained the right to earn income if:

a) the appropriate amount is subject to payment to the taxpayer;

b) the taxpayer has fulfilled all the obligations under a contract (agreement).

2. If a taxpayer provides services, the right indicated in the first paragraph of this article shall be deemed obtained at the moment when the taxpayer completes the services under the contract (agreement).

3. If a taxpayer earns or has the right to earn income in the form of interest or from leasing property, the income shall be deemed to have been obtained at the moment when the debt obligation or lease agreement expires. At the same time, if the term of the debt obligation or lease agreement includes several reporting periods, income shall be apportioned to these reporting periods according to the amount charged or to be charged in each reporting period.

4. Banks shall recognise interest and penalties accrued on loans as income in the manner prescribed by the National Bank of Georgia.

[4. (Deleted – 13.5.2016, No 5092). (Shall become effective from 1 January 2023)]

Law of Georgia No 5118 of 13 October 2011 – website, 31.10.2011

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 2392 of 30 May 2018 – website, 12.6.2018

Article 142 – The moment of incurring expenses under the accrual method

1. Unless otherwise provided for in this article, when using an accrual method of accounting, the moment of incurring expenses related to a contract (agreement) shall be the moment when all the following conditions are fulfilled:

a) a taxpayer can be clearly deemed to have assumed a financial obligation;

b) the amount of the financial obligation may be assessed with sufficient accuracy;

c) all the parties to the contract (agreement) have actually fulfilled their obligations under the contract (agreement) and the appropriate compensation is subject to necessary payment.

2. Financial obligations shall mean the obligations assumed under a contract (agreement) as a result of the fulfilment of which the other party to the contract (agreement) shall indicate income corresponding to the obligation in cash or in any other form.

3. When interest on a debt obligation or rent for leased property is paid, the moment of incurring expenses shall be the moment when the term of the debt obligation or lease agreement expires. If the term of a debt obligation or lease agreement includes several reporting periods, the expenses shall be apportioned to the reporting periods according to their accrual.

4. Notwithstanding paragraphs (1-3) of this article, if a person, other than a licensed financial institution, uses an accrual method of accounting, the moment of incurring expenses shall be the moment when the amount is paid, if:

a) the payment is related to a natural person other than a natural person registered as a VAT payer;

b) the payment of the amount in compensation for services received is related to a non-resident enterprise that does not belong to a non-resident’s permanent establishment in Georgia.

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Article 143 – Joint ownership

1. The object of profit taxation of a partnership or other similar entity conducting economic activity and is deemed as an enterprise under Article 21(1)(c) of this Code shall be defined under Article 97(1) of this Code.

2. A holder of an interest in a partnership shall include his/her share in the profit (its income) allocated to him/her from the partnership in the gross income of a respective accounting period.

3. A partnership shall, under Article 154 of this Code, impose tax at source on the income distributed to a natural person (a person who is not registered as an individual entrepreneur and/or a VAT payer) holding an interest in the partnership.

4. A member of a partnership may set off the tax withheld at source under paragraph 3 of this article against the amount of taxes payable for the gross income earned during a year.

5. The losses of a partnership shall be attributed to its owners in proportion to their interests. At the same time, the losses of the partnership shall not be distributed to its owners and shall not be deducted from owners’ gross income.

6. The portion of losses of an owner of a partnership may be deducted only at the expense of the owner’s share of the taxable profit (of a future year/years) in the partnership. The losses shall be carried forward under the procedure established by Article 121(4) of this Code.

7. The losses of a partnership attributed to its owner shall not be deducted from the profit received as a result of the owners’ participation in another partnership.

8. The delivery of goods/services by a partnership to its member in return for his/her interest shall not be deemed as a free delivery of goods/services.

9. Provisions of paragraph 2 and paragraphs 5–7 of this article shall not apply to a member of a partnership, who is subject to profit taxation according to the objects of taxation provided for in Article 97(1 – 3) of this Code.

10. Receipt of hotel assets/part of the assets by a tour company from a natural person under a relevant contract, use of the assets as hotel rooms/apartments and organisation of the operation of the hotel shall not be regarded as a partnership under Article 21(1)(c) of this Code.

Law of Georgia No 2946 of 12 December 2014 – website, 24.12.2014

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 2391 of 30 May 2018 – website, 12.6.2018

Article 144 – Income and deductions under long-term contracts

1. If a taxpayer keeps accounting under an accrual method, income and expenses from long-term contracts must be reported throughout a tax year proportionately, according to their actual performance.

2. The volume of actual performance under long-term contracts shall be determined by comparing the expenses incurred by the end of the tax year with the total expenses provided for by the contract.

Article 145 – Accounting for inventories

1. A taxpayer shall include in its inventories finished or semi-finished goods in his/her ownership irrespective of their location, namely, raw materials and/or materials (other than capitalisable expenses), which are purchased for subsequent sale or for production of goods/delivery of services.

2. In determining taxable income (profit), the value of the inventory available at the beginning of a reporting period shall be subtracted from, and the value of the inventory available at the end of the reporting period shall be added to, gross income.

3. When accounting for inventories, a taxpayer shall record the value of produced or purchased goods at the price of the expenses (other than the depreciation charges) incurred during the production of these goods or at the purchase price of such goods. At the same time, the taxpayer shall include the storage and transportation expenses in the value of the goods.

4. When selling goods, a taxpayer may apply one of the following methods to account for inventories:

a) specific identification method;

b) weighted-average method;

c) FIFO method, under which the goods purchased at the beginning of a reporting period are assumed to be the first item sold in the reporting period, and the goods produced (purchased) during the reporting period are assumed to be the items sold later, according to the time of their production (purchase).

5. When accounting for inventories, a taxpayer may evaluate defective or obsolete and outdated goods that cannot be sold at a price higher than their production cost or purchase price, at an estimated selling price of such goods.

6. When writing off obsolete inventory items and/or items that are unfit for use or further supply, the taxpayer shall notify a tax authority about the inventory write-off (indicating the types, quantity and value of the inventory) and write them off only in the case of approval by the tax authority.

6¹. A tax payer may, without taking account of the conditions specified in paragraph 6 of this article, write off inventories destroyed/lost as a result of the effect of force majeure events (earthquake, flooding, landslide, avalanche, fire, accident or another emergency or extraordinary circumstance as a result of which inventories were destroyed/lost due to the reason independent of the tax payer).

7. In the case provided for in the sixth paragraph of this article, when a taxpayer writes off inventories, a tax authority shall, within 10 business days after receiving a taxpayer’s application, approve the write-off or perform a physical inspection of the inventories by visiting the premises and endorsing the taxpayer’s write-off document.

8. In cases provided for in paragraphs 6 and 6¹ of this article, the procedure for writing off inventories shall be determined by the Minister of Finance of Georgia.

9. A taxpayer may account for inventories electronically under the procedure determined by the Minister of Finance of Georgia.

Law of Georgia No 1182 of 30 June 2017 – website, 13.7.2017

Article 146 – Reimbursed deductions and reduction of reserves

1. The amount of compensation for previously deducted expenses, losses and bad debts shall be reported as income in the year in which it is received.

2. If the reserves deducted in advance are reduced, the reduced amount shall be included in gross income.

Article 147 – Profit and loss upon supply of assets

1. Profit earned from the supply of assets shall be a positive difference between the income earned from their supply and the value of those assets determined under Article 148 of this Code.

2.  Loss incurred from the supply of assets shall be a negative difference between the income earned from their supply and the value of those assets.

3. If assets are supplied free of charge or at a price lower than their cost, the supplier’s profit shall be a positive difference between the market price of the supplied assets and the value of the assets specified in Article 148 of this Code.

4. Provisions of paragraphs (1–3) of this article shall not apply to assets and inventories subject to a group depreciation method.

Law of Georgia No 4754 of 14 June 2011 – website, 28.6.2011

Article 148 – Value of assets

1. Value of assets shall include their purchase, production, construction, assembly and installation expenses (costs) as well as other expenses (costs) that increase their value, except for the expenses (costs) that may be directly deducted by a taxpayer, and in the event of receiving assets free of charge, the market price of such assets.

2. If only a portion of assets is supplied or transferred, the value of the assets at the moment of supply or transfer shall be apportioned between the remaining and the supplied or transferred portions.

3. If a fixed asset that was originally leased has been used for other purposes, its value shall be determined by the book value of the group in which the fixed asset was previously recorded.

4. If, within a repo agreement, securities lending or financial collateral, a buyer/lendee supplies primarily purchased/supplied loan securities to a third person, the value and the price of the supplied/redeemed loan securities shall be defined in each case by the market price of the securities primarily supplied by a seller/lender.

5. An interest received by a buyer after purchasing loan securities, which is part of the purchase amount, must be considered as the interest under Article 8(19)(b.d) of this Code, thus reducing the value of the securities. It shall not be included in the gross income of the buyer.

Law of Georgia No 5118 of 13 October 2011 – website, 31.10.2011

Law of Georgia No 5677 of 20 December 2019 – website, 31.12.2019

Article 149 – Non-recognition of profit or loss

1. In determining taxable income, no profit or loss shall be taken into account if:

a) assets are transferred between spouses;

b) assets are transferred between the former spouses at the time of dissolution of marriage;

c) assets are involuntarily destroyed/confiscated and if before the end of the next two years from the year in which the assets are destroyed/confiscated:

c.a) the amount received as a compensation for the destruction/confiscation is reinvested into an asset of similar type and character;

c.b) the destroyed/confiscated asset is replaced with an asset of similar type and character obtained as a result of compensation.

d) the registered shareholder of the resident company listed on/placed at a stock exchange of the foreign country in any form (including in the form of Global Depositary Receipts) is changed without changing of the beneficiary shareholder;

e) within a repo agreement, securities lending or financial collateral, the loan securities are supplied and they or their other equivalent loan securities are returned to the seller/lender at a pre-agreed price.

2. The value of the replacement asset referred to in paragraph 1(c) of this article shall be determined by taking into account the value of the replaced asset at the moment of the destruction/confiscation.

3. The value of the asset transferred under paragraph1 (a) and (b) of this article shall be the value of the given asset at the moment of the transaction for the transferring party.

4. The provisions of this article shall not apply to the assets that are subject to a group depreciation method under Chapter XV of this Code, except where all the assets of a group are transferred simultaneously under paragraph 1(a) and (b) of this Article.

Law of Georgia No 4720 of 24 December 2015 – website, 29.12.2015

Law of Georgia No 5677 of 20 December 2019 – website, 31.12.2019

Article 150 – Liquidation of legal persons

1. If a legal person is liquidated and a partner legal person receives assets in proportion (corresponding) to his/her interest and if before the liquidation the partner legal person owned 50% or more in the given legal person, then:

a) such transfer shall not be regarded as the sale (supply) of assets by the liquidated legal person;

b) the value of the assets transferred to the partner in proportion (corresponding) to his/her share is the same as the value of the asset before its transfer to the liquidated legal person;

c) distribution of assets shall not be regarded as a dividend;

d) profit and loss shall not be taken into consideration when cancelling the partner’s interest in the liquidated legal person.

2. The provisions of this article shall not apply to the assets that are subject to a group depreciation method under Chapter XV of this Code, except where all the assets of a group classified according to one rate of depreciation are transferred simultaneously.

3. If all the assets of the group referred to in the second paragraph of this article, classified according to one rate of depreciation, are transferred simultaneously, the value of the assets for the transferee shall be the book value of the group at the moment of the transfer.

4. The first paragraph of this article shall not apply if:

a) a tax authority proves that the purpose of liquidation is tax evasion;

b) the partner legal person in the liquidation is a non-resident, except as provided for in paragraph 5 of this article.

5. If liquidation involves a non-resident partner legal person, the first paragraph of this article may be applied if, based on the information produced by such person, a tax authority concludes that no tax evasion takes place and issues the appropriate consent.

6. Provisions of this article shall not apply if any party to a transaction is subject to profit taxation according to the objects of taxation provided for in Article 97(1 and 3) of this Code.

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Article 151 – Transfer of assets to a legal person in exchange for interest (shares) in that legal person

1. Transfer of assets (with or without liability) by a person(s) to a legal person in exchange for 50% or more interest (shares) in such legal person shall not be regarded as supply of assets.

2. Where so provided for in the first paragraph of this article, the value of assets for the receiving party shall be the same as their value for the supplier at the moment of transfer.

3. The value of the partner’s interest received as a result of the exchange referred to in the first paragraph of this article shall be equal to the value of the transferred assets minus the transferred (corresponding) liability.

4. The provisions of this article shall not apply to assets that are subject to a group depreciation method under Chapter XV of this Code, except where all the assets of a group classified according to one rate of depreciation are transferred simultaneously.

5. If all the assets of the group classified according to one rate of depreciation referred to in the fourth paragraph of this article are transferred simultaneously, the value of the assets for the transferee shall be the book value of the group at the moment of transfer.

6. The requirements of this article shall not apply to the transferor of assets with a legal defect if the liability exceeds the value of the assets transferred.

7. Provisions of this article shall not apply if any party to a transaction is subject to profit taxation according to the objects of taxation provided for in Article 97(1) and (3) of this Code, except for the case when a natural person transfers assets to a legal person in return of 50 % or more equity/shares of the legal person.

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 4906 of 28 June 2019 – website, 4.7.2019

Article 152 – Reorganisation of legal persons

1. The value of the property and interest (shares) owned by the legal person (persons) that is a party to a reorganisation shall be equal to the value of such property or interest (shares) before the reorganisation.

2. The transfer of property or interest (shares) between legal persons that are parties to a reorganisation shall not be regarded as sale of property.

3. Any exchange of an interest (shares) in a resident legal person that is a party to a reorganisation for an interest (shares) in any other similar legal person, which is also a party to the reorganisation, shall not be regarded as sale of the interest (shares).

4. The value of the interest (shares) exchanged under the third paragraph of this article shall be equal to the original value of the interest (shares).

5. Any distribution of an interest in a legal person that is a party to a reorganisation that gives rise to a similar right in any other legal person, which is also a party to the reorganisation, shall not be regarded as a dividend.

6. The value of the original interest (shares) referred to in the fifth paragraph of this article shall be attributable to the distributable interest (shares) at the ratio that is defined as the ratio between the market value of the distributed and original interest (stocks) at the moment of distribution and the value of the original share after distribution.

7. If a tax authority fails to prove that the purpose of the operation of merger, acquisition, takeover or division is tax evasion, a reorganisation shall involve:

a) the merger of two or more legal persons;

b) the acquisition or takeover of 50% or more of the interest and 50% or more of a partner’s interest in a resident legal person, only with rights similar to those of the partners in an acquisition or takeover transactions, in exchange for an interest (shares);

c) acquisition of 50% or more of the assets of a resident legal person by another resident legal person in exchange for a voting interest (shares), without preferential rights in relation to dividends;

d) division of a resident legal person into two or more resident legal persons.

8. A party to a reorganisation shall be any resident legal person:

a) that is directly involved in the reorganisation;

b) that directly owns a resident legal person directly involved in the reorganisation;

c) that is owned by a resident legal person directly involved in the reorganisation.

9.  For the purposes of the eighth paragraph of this article, the ownership of a legal person shall mean the ownership of 50% or more of the voting interest (shares) in that legal person or the ownership of 50% or more of the value of all other remaining interest (shares).

10. The provisions of this article shall not apply to assets that are subject to a group depreciation method under Chapter XV of this Code, except where all the assets of a group classified according to one rate of depreciation are transferred simultaneously.

11. With respect to all the assets of the group classified according to one rate of depreciation referred to in the tenth paragraph of this article, the value of the assets for the transferee shall be the book value of the group at the moment of transfer.

12. Provisions of this article shall not apply if any party to a transaction is subject to profit taxation according to the objects of taxation provided for in Article 97(1 and 3) of this Code.

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Chapter XX – Tax Administration Procedures

Article 153 – Filing tax returns

1. An income tax/profit tax return shall be filed with a tax authority by 1 April of a year following the reporting year by:

a) a resident natural person, whose income is not taxed at a Georgian source;

b) an enterprise (except for enterprises that are subject to profit taxation according to the objects of taxation under Article 97(1–3) of this Code);

c) a non-resident natural person and a non-resident enterprise without a permanent establishment in Georgia if the income they earn from a Georgian source is not taxed at source.

2. When terminating economic activity in Georgia, an entrepreneur natural person shall file with a tax authority a return of gross income and deductions within 30 business days. At the same time, the taxpayer shall not be required to file tax returns in any future period until the renewal of economic activity.

3. A liquidation commission or a taxpayer shall immediately notify a tax authority in writing of the liquidation of a legal person. The liquidation commission shall file a return with a tax authority within 15 days of making a decision on liquidation of the legal person.

3¹. (Deleted – 1.5.2015, No 3581);

4. A natural person that is not obligated to submit tax returns may submit them to claim tax recalculation and refund.

4¹. (Deleted – 26.12.2014, No 3015).

5. An entrepreneur natural person, an enterprise and an organisation shall, not later than the 15^th day of a month following the accounting month, file a tax return to a tax authority on the amounts paid as remuneration, and taxes withheld during the accounting month.

5¹. A taxpayer shall submit to a tax authority, within 15 days after the entry into force of a bankruptcy ruling delivered by a court under the Law of Georgia on Insolvency Proceedings:

a) before the commencement of bankruptcy proceedings, unfiled tax returns referred to in the first paragraph of this article for the complete/incomplete tax period(s). At the same time, the taxpayer shall not submit any income/profit tax return for the complete/incomplete tax period(s) after the commencement of bankruptcy proceedings;

b) before the commencement of bankruptcy proceedings, unfiled returns referred to in paragraph 5 of this article for the complete/incomplete tax period(s). At the same time, the taxpayer shall not submit any return on the remunerations paid and taxes withheld for the complete/incomplete tax period(s) after the commencement of the bankruptcy proceedings.

[5¹. A taxpayer shall, within 15 days after entry into force of the ruling on commencing the bankruptcy regime delivered by the court under the procedure established by the Law of Georgia on Rehabilitation and Collective Satisfaction of Creditors, submit to a tax authority:

a) tax returns provided for in paragraph 1 of this article not submitted according to the complete/incomplete tax period (periods) before commencement of the bankruptcy regime. In addition, a taxpayer shall not submit an income/profit tax return according to the complete/incomplete tax period (periods) after commencement of the bankruptcy regime;

b) tax returns provided for in paragraph 5 of this article not submitted according to the complete/incomplete tax period (periods) before commencement of the bankruptcy regime. In addition, a taxpayer shall not submit a declaration on the amounts of remuneration of labour paid out and taxes withheld according to the complete/incomplete tax period (periods) after commencement of the bankruptcy regime. (Shall become effective from 1 April 2021)]

6. Before registering the title of a future owner, a registration authority shall notify a natural person about the obligation to report and pay taxes, as well as about the liability for failure to fulfil such obligation:

a) where an asset owned by a natural person is sold;

b) where property is received as a gift (except where first and second line heirs receive property as a gift and where third and fourth line heirs receive property with a value of up to GEL 150 000 as a gift and/or inheritance during a tax year);

c) where third and fourth line heirs receive property with a value of GEL 150 000 or more as a gift and/or inheritance during a tax year.

7. If third and fourth line heirs receive property with a value of GEL 150 000 or more as a gift and/or inheritance during a tax year, income tax shall be paid within not later than two calendar years. The timeframes for filing returns and paying taxes within the two-year period shall be fixed by the Minister of Finance of Georgia.

8. The procedure for levying taxes on the remuneration paid to the citizens of Georgia by international organisations with diplomatic status operating in Georgia shall be determined by the Minister of Finance of Georgia.

9. The procedure for levying taxes on the salary paid to the employees by a Free Industrial Zone Enterprise shall be determined by the Government of Georgia.

10. An enterprise, an organisation and a permanent establishment of a non-resident enterprise (enterprises that are subject to profit taxation according to the objects of taxation under Article 97(1-3) of this Code) shall, on a monthly basis, not later than the 15^th day of a month following the accounting month, file a tax return to a tax authority on the profit tax. 

Law of Georgia No 4754 of 14 June 2011 – website, 28.6.2011

Law of Georgia No 6395 of 5 June 2012 – website, 19.6.2012

Law of Georgia No 118 of 20 December 2012 – website, 29.12.2012

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 3015 of 26 December 2014 – website, 30.12.2014

Law of Georgia No 3581 of 1 May 2015 – website, 15.5.2015

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 2391 of 30 May 2018 – website, 12.6.2018

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Law of Georgia No 7169 of 18 September 2020 – website, 25.9.2020

Article 154 – Procedure for withholding tax at source

1. Tax shall be withheld at source by a withholding agent who is a legal person, an enterprise/organisation or entrepreneur natural person, namely:

a) a person paying salary to an employee, except for:

a.a) salary paid by a Free Industrial Zone Enterprise to a Georgian resident employee;

a.b) salary paid by a non-resident to an employee where such expenses are not attributed to the expenses of the non-resident’s permanent establishment;

b) a person paying a pension to another person, other than the pension paid out within the state social security system;

c) a person paying taxes under Article 134(1) of this Code;

d) an enterprise/an organisation or an entrepreneur natural person, that pays the cost of rendered services to a natural person (except for a natural person registered as a VAT payer, a notary officer, a private enforcement officer, a natural person having the status of a micro business and a natural person having the status of a fixed tax payer, in the part of their activities) who is not registered as an individual entrepreneur;

e) a person organising a promotional game, casino (with respect to organising a gambling tournament), a gambling club (with respect to organising a gambling tournament), lotto, bingo, lottery who pays winnings to a natural person.

Note: If a natural person wins, at his/her request, the person organising a casino, gambling club, betting house, slot machines saloon, shall discharge the withholding agent’s obligations under this article with respect to such activity.

f) a person paying another person a scholarship, other than state scholarship;

g) a resident enterprise paying dividends to a person;

h) a person paying an interest to another person in the case provided for in Article 131 of this Code;

i) a person paying a royalty to a natural person;

j) (Deleted – 8.11.2011, No 5202).

k) a brokerage company provided for in Article 2(26) of the Law of Georgia on Securities Market, in the case of the sale of the securities of a person that is not registered as a taxpayer, when paying the surplus income from the sale;

l) a person transferring property free of charge to a natural person that is not registered as an individual entrepreneur, except when this person transfers free of charge to the same natural person property with a value of up to GEL 1 000 during a tax year. In such a case, the procedure for withholding a tax at source by a tax agent shall be determined by the Minister of Finance of Georgia;

m) a legal person having an STZ status – as provided for in Article 133¹ of this Code;

n) a tourist enterprise – in the case set out in Article 133² of this Code;

o) a person that pays a natural person the cost of goods purchased from him/her in the case provided for in Article 133³ of this Code.

2. When withholding taxes at the source:

a) the responsibility for withholding taxes and transferring them to the budget shall rest with the payer of income;

b) if the payer of income fails to withhold taxes, it shall transfer to the budget the amount of the tax not withheld according to actually paid compensation along with the penalties related to it;

c) the recipient of income may pay the taxes and penalties on behalf of the payer of income.

3. The person withholding tax at the source under the first paragraph of this article shall:

a) transfer the tax to the budget upon paying an amount to a person, and when making non-monetary disbursements – on the last day of the respective month;

b) when paying salary, at the request of the natural person receiving income, issue to that person a notice indicating the name and surname of this person, the amount and type of income, as well as the amount of the tax withheld (if tax has been withheld);

c) submit a notice indicating the person’s registration number, name and surname, residential address, the total amount of income and the total amount of tax withheld in the reporting period:

c.a) to a tax authority by not later than the 15^th day of the month following the month in which the tax is withheld;

c.b) to the person who receives income upon request.

3¹. The Minister of Finance of Georgia may set for certain categories of taxpayers’ information submission timeframes different from those prescribed by paragraph 3(c.a) of this article.

4. For each reporting period specified in Article 153(5) of this Code, by not later than the 15th day of the month following that period, the withholding agent referred to in the first paragraph of this article shall file with a tax authority a return on the performed disbursements, in the form and manner prescribed by the Minister of Finance of Georgia.

5. To fulfil tax obligations with respect to the salary specified in paragraph 1(a.b) of this article, the employee may fulfil the obligations regarding computing, reporting and paying taxes to the budget on his/her own in the manner prescribed by the Minister of Finance of Georgia. In that case, a non-resident employer shall be released from the obligation to withhold tax at the source.

Law of Georgia No 4754 of 14 June 2011 – website, 28.6.2011

Law of Georgia No 4935 of 24 June 2011 – website, 30.6.2011

Law of Georgia No 5202 of 8 November 2011 – website, 22.11.2011

Law of Georgia No 5452 of 9 December 2011 – website, 22.12.2011

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 6053 of 24 April 2012 – website, 27.4.2012

Law of Georgia No 6211 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 6547 of 22 June 2012 – website, 4.7.2012

Law of Georgia No 189 of 28 December 2012 – website, 29.12.2012

Law of Georgia No 2946 of 12 December 2014 – website, 24.12.2014

Law of Georgia No 1182 of 30 June 2017 – website, 13.7.2017

Law of Georgia No 2391 of 30 May 2018 – website, 12.6.2018

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 155 – Current taxes

1. An enterprise and an entrepreneur natural person, whose accounting period is a calendar year (with regard to the part of activity for which the object of taxation is defined on the basis of a calendar year), shall make current tax payments to the budget according to the annual tax payment of a previous tax year in the following amount:

a) not later than 15 May – 25%;

b) not later than 15 July – 25%;

c) not later than 15 September – 25%;

d) not later than 15 December – 25%.

2. A taxpayer who did not have any taxable income/profit during the last tax year or a person whose status of a micro business or of a flat tax payer has been revoked in the current year and who had taxable income in the last tax year shall not pay current taxes.

3. If a taxpayer’s anticipated taxable income (profit) for the current tax year, taking into account tax privileges, decreases by at least 50% compared with the last tax year’s income (profit) and the taxpayer notifies a tax authority about this before the due date for the current taxes set by the first paragraph of this article, the taxpayer has the right to reduce or not to pay current taxes.

4. If a taxpayer applies the third paragraph of this article and if the presented actual annual results do not confirm the fact of at least 50% reduction of the anticipated taxable income (profit) and the taxpayer has not fully paid his/her current taxes in the reporting year, he/she shall pay a penalty under this Code within the period from the dates fixed for the payment of current taxes to the date of filing a tax return.

5. If a tax rate changes compared with the previous tax period, a taxpayer may pay current taxes from the amounts of the taxable income (profit) of the previous taxable year recalculated at the rate applicable in the current taxable year.

5¹. (Deleted – 26.12.2013, No 1886).

6. The amounts of current taxes transferred to the budget shall be credited against the taxes assessed to the taxpayer according to a tax year.

7. If current taxes are not paid, the tax enforcement measures under Article 238 of this Code shall apply.

Law of Georgia No 5556 of 20 December 2011 – website, 30.12.2011

Law of Georgia No 6212 of 15 May 2012 – website, 29.5.2012

Law of Georgia No 1886 of 26 December 2013 – website, 30.12.2013

Law of Georgia No 5092 of 13 May 2016 – website, 1.6.2016

Law of Georgia No 97 of 16 December 2016 – website, 23.12.2016

SECTION VI

VALUE-ADDED TAX

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Chapter XXI – General Part

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 156 – General provisions

1. This Section shall define the procedure for calculating and paying the value-added tax (the ‘VAT’).

2. The VAT is a tax set on the consumption of goods/services, which is directly proportional to the price of the goods/services.

3. The obligation to pay the VAT shall arise at all stages of supply of goods/provision of services, including the retail supply.

4. Where so provided for in this Section, the amount of VAT due can be reduced by the amount of VAT directly assigned to the value of various components of charges related to the supply of goods/provision of services.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 157 – Definition of terms

The terms used for the purposes of this Section shall have the following meaning:

a) a person:

a.a) a natural person;

a.b) an enterprise or an organisation under this Code;

a.c) an association of persons which independently participates in legal relations but does not have the status of legal person;

b) the place of establishment of a taxable person – a place from where a taxable person performs its main economic activities, where the management body of the taxable person operates and the main decisions regarding its activities/management are made.

Note: if the criteria provided for in this subparagraph fail to precisely identify the place of establishment of the taxable person, preference shall be given to the place where the main decisions regarding its activities/management are made;

c) the fixed establishment – any place which is not the place of establishment of a taxable person but is characterised by a sufficient degree of consistence, and by a proper structure in terms of human and technical resources, thus allowing it to provide or receive services and use them for its own need;

d) the permanent address – the address of a natural person where he/she has been registered under the procedure established by the legislation, or the address of which a natural person has informed a tax authority, unless there is evidence that this address fails to show the reality;

e) a place of residence – a place which a natural person has chosen as his/her ordinary residence, based on the personal purpose/obligation or that of an economic activity, considering the close/stable connection to this place of residence of his/her;

f) the territory of Georgia – the territory defined by the legislation of Georgia, including the land space, its subsoil and air space above it, internal waters and territorial sea, their bed, subsoil and air space above them, and the area adjacent to its territorial sea, the special economic zone and the continental shelf, in relation to which Georgia can exercise its sovereign rights and/or jurisdiction in accordance with international law;

g) public authorities – bodies that exercise the legislative, executive or judicial power, and the state supervision and control, in accordance with the legislation of Georgia;

h) an immovable thing:

h.a) any place on or below the earth’s surface in relation to which the right of ownership or possession can arise;

h.b) any building/structure located on or below the earth, which is firmly linked to the earth and is not intended for temporary use;

h.c) any thing which is an integral part of a building/structure and without which the building or structure is incomplete, in particular a door, a window, a roof, a staircase, an elevator and other similar things;

h.d) any thing, equipment or machinery, which is permanently installed in a building/structure and which cannot be removed without destroying or remaking it or without changing its intended purpose;

i) a gift of little value – goods or services that are transferred free of charge and the value of which, without VAT, does not exceed GEL 50 during a calendar year, for one natural person. Advertisement and entertainment expenses shall not be considered a gift of little value;

j) a trade agent – a taxable person whose main activity is to resell natural gas or electricity purchased, and whose consumed volume of the aforementioned goods for personal purpose is insignificant;

k) an independently operable subdivision – part of the assets of a taxable person, which constitutes a combination of the functionally interrelated fixed assets and the accompanying communications, and the independent operation of which does not depend on the change of an owner;

l) an ancillary service/goods – a service/goods purchasing of which is not the main purpose of their customers but intend to ensure improvement of the conditions for providing major services/supplying goods to them, and/or better usage;

m) a directly relating service/goods – a service/goods that are supplied to ensure supply of the main service/goods and which are necessary to perform this main operation;

n) a continuous service – a service the result of which can be used by a customer continuously, at any moment of the accounting period;

o) a regular service – a service which is not a continuous service but it may be accepted by a customer at any specific moment of an accounting period, based on a contract/agreement, without additional agreement with a service provider;

p) an electronically provided service – a service which is provided through internet or electronic network, supply of which is essentially automated, requires minimum human interference and it cannot be provided without information  technology; including:

p.a) supply of digital products, including software support and supply of its updated version;

p.b) provision of websites;

p.c) webhosting, remote software and hardware maintenance;

p.d) software and the appropriate update;

p.e) provision of an image, text and information to ensure the accessibility of a database;

p.f) provision of music, films and games (including gambling games);

p.g) proadcasting and provision of political, cultural, arts, sports, scientific and entertainment programmes;

p.h) provision of distance learning;

p.i) other types of services defined by an order of the Minister of Finance of Georgia.

Note: the circumstance alone that the provider and buyer of services exchange information electronically does not in itself mean that the service has been provided electronically.

q) the market price – the price that a customer would have to pay at an appropriate time when buying these goods or services at a market of the same level where, under the conditions of free competition and economic independence of entities, the goods are supplied or services are provided, and where this transaction is subject to VAT tax. If the comparable price of the goods or services cannot be set, the market price, for VAT purpose, shall be:

q.a) for the goods – the price that must not be less than the purchase price for these or similar goods, and, where there is no purchase price, the production cost of these goods at the time of their supply;

q.b) the services – the price that must not be less than the cost of all charges related to the provision of the services;

r) a voucher – an instrument that gives rise to an obligation of a taxable person to accept it as a remuneration or part of a remuneration in return for the supply of goods/services, and the goods/services to be supplied or a potential supplier are identifiable in it or in a related document, and the conditions for using this instrument;

s) a single-use voucher – a voucher upon issuance of which the place of supplying goods/providing services related thereto and the VAT to be assessed in respect to this transaction is identifiable;

t) a multi-use voucher – a voucher that is not a single-use voucher;

u) a second-hand thing – a used movable thing, which is still suitable as is or after repair for usage, except for a piece of art, a collectible item and antique, and for a precious metal or a precious stone, in the meaning defined by the legislation of Georgia;

v) a taxable dealer – any taxable person who, within economic activities, buys for further selling or uses for own economic activities a second-hand thing, a piece of art, a collectible item or antique, or carries out the import of goods, irrespective of whether he/she acts on behalf of himself/herself or another person, on the basis of a contract with him/her, according to which a commission charge is payable when buying or selling goods;

w) NCNFEA – the National Commodity Nomenclature of Foreign Economic Activity;

x) short term leasing of a vehicle – continuous possession or usage of a vehicle (of an air vehicle, ship and any other vehicle provided for in Groups 86, 87, 88 and 89 of the NCNFEA), for not more than 90 days in the case of a ship, and for not more than 30 days in the case of another vehicle;

y) a tour operator – a person creating a tourist product and providing it to a tourist;

z) a tourist – a natural person to whom a tourist product is provided, for travelling in Georgia for at least 24 hours and for not more than one year (including for recreation and/or health improvement purposes);

z1) a tourist product – a combination of at least two components of tourist service types (including transportation, accommodation, food, tour guide service, and ancillary service for tourist services);

z2) repair of a fixed asset (building/structure) – modification (reconstruction) of the elements of a building/structure for the purpose of prolonging their useful service and for ensuring enhancement of their capacity, except for current operating expenses that are paid for the restoration or maintenance of the initial capacity of the fixed asset.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 158 – A VAT taxable person

1. A VAT taxable person (the ‘taxable person’) shall be considered any person who, at any place, independently performs any type of economic activity, irrespective of the purpose and result of the activity.2. For the purposes of this Section, the following shall be considered economic activities:

a) activities provided for by Article 1(2) and (3) of the Law of Georgia on Entrepreneurs;

b) activities of persons performing transactions of supplying goods/providing services, except for a one-off/occasional activities, based on paragraph 3 of this article;

c) use of property for earning regular income.

3. Despite the one-off/occasional nature, in any case, delivery of a non-residential building/structure shall be considered an economic activity.

4. The following shall not be considered economic activities:

a) activities provided for by Article 9(2)(b-f) of this Code;

b) activities of a public authority/municipality body or of a legal person under public law if, when performing activities, it acts as a state body (exercises powers delegated to it by the state), even when a membership fee and other fees, or another payment is established for this activity, except for:

b.a) the telecommunication services;

b.b) the supply of water, gas, electricity or thermal energy;

b.c) the transportation of goods;

b.d) the port or airport services;

b.e) the passenger transportation;

b.f) the supply of goods produced for selling purposes;

b.g) the supply of agricultural products and provision of services through an intermediary agency;

b.h) the organisation of the exhibition and sale;

b.i) the warehousing;

b.j) the advertising activities;

b.k) the activity of a tourist agent;

b.l) the food service;

b.m) the broadcasting and telecasting activities.

5. The Government of Georgia may, for avoiding the restriction of competition, define the types of activities different from paragraph 4 of this article, and if and when they are performed, activities of a public authority/municipality body or of a legal entity under public law shall be considered economic activities.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Chapter XXII – Taxable Transactions

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 159 – VAT taxable transactions

1. The VAT taxable transactions shall be as follows:

a) the supply of goods by a taxable person within economic activity in the territory of Georgia, for consideration;

b) the provision of a service by a taxable person within economic activity in the territory of Georgia, for consideration;

c) the import of goods.

2. Supply of goods/provision of a service that is directly related to the supply of another type of goods/provision of another type of services, or is of ancillary nature for the supply of another type of goods/provision of another type of services shall be considered as part of the provision of this service/supply of these goods.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 160 – Supply of goods

1. Supply of goods shall be the transfer of the right of ownership of disposing of tangible property. The following shall also be considered the supply of goods:

a) the transfer of the right of ownership of property, for consideration, by a decision of a public authority/municipality body, and/or as provided for by the law;

b) the factual transfer of goods under a rental, leasing or similar agreement, with the right of redemption;

c) the transfer of goods on the basis of an agreement according to which a commission fee is paid when buying or selling goods.

2. Electricity, gas, thermal energy, cooling energy and other similar property shall be considered as tangible property. Money (except for a collectible item and/or a coin with numismatic value), and cryptography currencies (crypto assets) shall not be considered as goods.

3. The following shall also be considered supply of goods for consideration:

a) the free supply of goods by a taxable person if its VAT on the goods or on the related charges has been fully or partially deducted. In addition, the transfer/use of the goods as a sample or a gift of little value shall not be considered supply of goods for consideration;

b) the use by a taxable person of a building/structure of own production as a fixed asset if it would not be able to fully receive the VAT deduction in the case of purchasing the building/structure from another person.

Note: for the purpose of this subparagraph, own production shall mean construction of a building/structure on a plot of land owned by/in possession of the taxable person by own efforts and/or by purchasing construction and installation services;

c) the supply of goods by a taxable person for personal use of its employees or the supply/use of goods for the purpose different from the purpose of its own activity if its VAT on the goods or on the related charges has been fully or partially deducted;

d) the leaving of goods by a taxable person or its successor in title in its own possession after terminating economic activities if its VAT on the goods or on the related charges has been fully or partially deducted;

e) the cancellation of the registration of a taxable person as a VAT payer if its VAT on the goods left on the balance sheet at the time of cancellation of its registration as a VAT payer or on the related charges has been fully or partially deducted;

f) the transfer of goods by an enterprise or an association into ownership of a partner or a member of association respectively in return for a share;

g) the expiry or early termination of the validity period of the status of a tourist enterprise;

h) the shortage provided for by this Code.

4. Supply by a co-owner of an immovable thing of his/her share in the co-ownership shall be considered supply of the immovable thing.

5. If the right of ownership of an immovable thing has been registered on its purchaser in a registration authority with regard to a facility under construction, the construction, installation and/or repair services provided by the supplier of the immovable thing with respect to the supply of this thing shall be considered part of the supply of the immovable thing.

6. Joint supply of a land plot and the attached building/structure shall be considered supply of the building/structure.

7. The following shall not be considered supply of goods:

a) the supply by a taxable person of all assets or its part (independently operable subdivision) to another taxable person;

b) the contribution of an asset into the capital of an enterprise or partnership;

c) the transfer of an asset between persons – parties to the reorganisation of an enterprise.

Note: for the purpose of this paragraph, a person who has received the asset shall be considered a successor in title for the supplier of this asset.

8. Conditions and procedure for the application of paragraph 7 of this article, and cases when the provisions under this paragraph do not apply shall be defined by the Minister of Finance of Georgia.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 160¹ – Provision of services

1. Provision of services shall be any activity that is not supply of goods. The following shall also be considered provision of services:

a) the transfer of intangible property;

b) the obligation to abstain from acting or to allow a specific act/situation;

c) the provision of services on the basis of a decision by a public authority/municipality body and/or as provided for by law.

2. The following shall also be considered provision of services for consideration:

a) the free provision of services by a taxable person for personal use of its employee or for the purpose different from the one of its own activity;

b) the repair of own fixed asset (building/structure) carried out by a taxable person for the purpose of its activity if it would not be able to fully receive the VAT deduction in the case of purchasing this service from another person.

Note: for the purpose of this subparagraph, the repair of the fixed asset (building/structure) shall be considered carried out by the taxable person, whether by own efforts and/or through purchasing the repair services/works from a person who is not registered as a VAT payer;

c) the provision of services by an enterprise or an association to a partner or a member of association respectively, in return for a share.

3. A person who, on behalf of himself/herself but by order of another person, participates in the provision of services shall be considered a beneficiary of the services and a provider of services.

4. The following shall not be considered provision of services:

a) the transactions provided for by Article 160(7) of this Code;

b) the transfer of the right of ownership of money, and of cryptography currency (crypto asset).

5. Provisions provided for by Article 160(7) of this Code, in cases defined by the same paragraph, shall also apply to the supply of services.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 160² – Import of goods

The import of goods shall be the placement of goods under the Release for free circulation procedure under the Customs Code of Georgia.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 160³ – Transactions conducted through vouchers

1. The transfer of a single-use voucher to another person by a taxable person acting on its own behalf shall be considered the voucher-related supply of goods or provision of services.

2. Where so provided for by paragraph 1 of this article, a factual supply of goods/services, in return for a single-use voucher, shall not be considered an independent taxable transaction.

3. The transfer of a single-use voucher by a taxable person acting on behalf of another taxable person shall be considered the voucher-related supply of goods/provision of services carried out by the taxable person on behalf of whom this person acts.

4. If a taxable person, who carries out supply of goods/provision of services, is not a taxable person that has issued a single-use voucher and who acts on its own behalf, it shall be considered that he/she has supplied the voucher-related goods/services to the taxable person that has issued the voucher.

5. A factual supply of goods/services by a supplier in return for a multi-use voucher shall be considered a VAT taxable transaction. In addition, all previous transfers of the multi-use voucher shall not be considered a VAT taxable transaction.

6. If transfer of a multi-use voucher is carried out by a taxable person who is not a person to carry out a taxable transaction provided for by paragraph 5 of this article, provision of any service that can be defined as a service promoting the distribution/sales of goods or a similar service shall be considered a VAT taxable transaction.

7. When goods/services are supplied continuously or regularly, in return for a voucher, VAT taxation shall be carried out for taxation of the respective continuous/regular supply, at the moment defined under Article 163 of this Code.

8. The Minister of Finance of Georgia may define the procedure for taxing individual taxable transactions carried out through a single-use voucher, which is different from the one in paragraphs 1-3 of this article.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 161 – Reverse charge

1. The following shall be subject to VAT reverse charge:

a) provision of a service to a tax agent in the territory of Georgia by a taxable person who is not established or does not normally live in Georgia, or who has no fixed establishment in Georgia which participates in providing this service;

b) transfer of a collateral (goods) to the possession of a creditor under a contractual obligation performance security measure;

c) foreign goods purchased from a person in the customs warehouse in the case provided for by Article 164¹(4) of this Code, which are placed under the Release for customs free circulation procedure;

d) in the case provided for by Article 164¹(5) of this Code, foreign goods purchased from a FIZ enterprise, which are placed under the Release for customs free circulation procedure.

2. For the purpose of this article, the following persons shall be considered tax agents:

a) for the purpose of paragraph (1)(a) of this article, any person established in Georgia  (except for a non-entrepreneur natural person and a FIZ enterprise), or which has a fixed establishment in Georgia through which the service was purchased;

b) for the purpose of paragraph (1)(b) of this article, a person (creditor) who takes possession of a collateral (goods) under a contractual obligation performance security measure;

c) for the purpose of paragraph (1)(c) and (d) of this article, a person placing goods under the Release for customs free circulation procedure.

3. Where so provided for by paragraph 1 of this article, a tax agent shall assess VAT:

a) where so provided for by paragraph (1)(a) of this article, on the sum to be paid for a service;

b) where so provided for by paragraph (1)(b) of this article, on the market price of a collateral (goods) taken into possession, excluding VAT;

c) where so provided for by paragraph (1)(c) of this article:

c.a) if the import and supply of goods are not VAT exempt, on the amount of a positive difference between the purchase value of foreign goods in a customs warehouse and the amount of import of goods;

c.b) if the import of goods is VAT exempt and the supply of goods is VAT taxable, on the purchase value of foreign goods in a customs warehouse;

d) where so provided for by paragraph (1)(d) of this article:

d.a) if the import and supply of goods are not VAT exempt, on the amount of a positive difference between the purchase value of foreign goods from a FIZ enterprise and the amount of import of goods;

d.b) if the import of goods is VAT exempt and the supply of goods is VAT taxable, on the purchase value of foreign goods from a FIZ enterprise.

4. Where so provided for by 1 paragraph of this article, the procedure for submitting a report by a tax agent to a tax authority and paying the assessed tax to the budget shall be defined by the Minister of Finance of Georgia.

5. Where so provided for by paragraph (3)(b) of this article, the obligation of VAT assessment shall not be imposed on a person registered as a VAT taxpayer. In addition, it shall be considered that he/she has received a VAT deduction of the appropriate amount on the goods.

6. The following shall not be subject to VAT reverse charge:

a) the supply of goods or provision of services that are VAT exempt under this Code;

b) where so provided for by paragraph (1)(b) of this article, the transfer of a plot of land owned by a natural person and of a flat/dwelling house attached to it.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 161¹ – VAT taxation in individual cases

1. Sale (supply) of goods by auction, direct sale or in another way, as part of a tax liability collection security measure or for any other pecuniary liability (except for sanctions imposed under criminal and administrative procedures) shall be VAT taxable under this article, and payment of the VAT assessed on this transaction on behalf of a person (the owner of goods) to the budget shall be ensured by an authorised person carrying out sale of goods. In addition, in such a case, VAT shall not be charged on:

a) the supply of a flat/dwelling house;

b) the supply of a plot of land;

c) the supply of a car specified under the NCNFEA Code 8703 and/or a motorcycle (including a moped) specified under the NCNFEA Code 8711;

d) the supply of property owned by a natural person (except for an individual entrepreneur).

2. Sale of custodial property by auction, direct sale or in another way under the procedure defined by the Law of Georgia on Insolvency Proceedings shall be VAT taxable under this article, and payment of the amount of VAT assessed on this transaction on behalf of a person (the owner of custodial property) to the budget shall be ensured by an authorised person carrying out sale of goods. In addition, except where custodial property is sold (supplied) as an integrated complex, VAT shall not be charged on:

a) the supply of a flat/dwelling house owned by an individual entrepreneur;

b) the supply of a plot of land;

c) the supply of a motor vehicle;

d) the supply of agricultural machinery.

[2. Sale of insolvency mass by auction, direct sale or in another way under the procedure established by the Law of Georgia on Rehabilitation and Collective Satisfaction of Creditors shall be VAT taxable under this article, and payment of the amount of VAT assessed on this transaction on behalf of a person (the owner of insolvency mass) to the budget shall be ensured by an authorised person selling the goods. In addition, except where insolvency mass is sold (supplied) as an integrated complex, VAT shall not be charged on:

a) the supply of a flat/dwelling house owned by an individual entrepreneur;

b) the supply of a plot of land;

c) the supply of a motor vehicle;

d) the supply of agricultural machinery. (Shall become effective from 1 April 2021)]

3. Where so provided for by paragraphs 1 and 2 of this article:

a) the selling price of goods (the compensation paid/to be paid by the buyer) shall include the amount of VAT;

b) when VAT is charged on the supply of goods, Articles 170-172 of this Code, and other statutory provisions under this Code that provide for the VAT exemption of the supply of goods, shall not apply.

4. The procedure for VAT taxation of the transactions under this article and payment of the VAT amount to the budget shall be defined by an order of the Minister of Finance of Georgia.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Law of Georgia No 7169 of 18 September 2020 – website, 25.9.2020

Article 161² – Special taxation scheme for supply of certain goods

1. Supply of a second-hand thing, a piece of art, a collectible item or antique may be subject to VAT taxation according to the special taxation scheme (‘the special scheme).

2. The profit margin of a taxable dealer shall be the difference between the supply price of goods and its purchase price.

3. The purchase price of goods imported by a taxable dealer, which must be taken into account when calculating the profit margin, shall be the sum of the VAT taxable amount when importing the goods and the respective amount of VAT.

4. The VAT taxable amount following the supply of goods shall be obtained as a result of division of the amount of the profit margin received by a taxable dealer by 1.18.

5. A taxable dealer shall not be entitled to have VAT deducted on the goods supply of which is subject to taxation under the special scheme.

6. A taxable person shall be entitled to have VAT deducted with regard to the goods supplied or to be supplied to it by a taxable dealer if the supply of the goods is subject to taxation under the special scheme.

7. A taxable dealer shall inform a tax authority about application of the special scheme provided for by this article, where a period of application of the scheme shall be indicated, which may not be less than 24 months. The aforementioned period shall be calculated from the beginning of a month the information under this paragraph was filed with the tax authority.

8. The procedure for applying the special scheme under this article and informing a tax authority about the application of the scheme, and the types of pieces of art, collectible items and antiques supply of which may be subject to taxation according to the special scheme shall be defined by the Minister of Finance of Georgia.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Chapter XXIII – Place of Conducting Taxable Transactions

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 162 – Place of supply of goods

1. A place where the goods are located at the moment of their supply shall be considered the place of supply of goods, unless the goods are dispatched or transported.

2. If goods are dispatched or transported, a place where the goods are located at the moment of starting to dispatch or transport them to the purchaser shall be considered the place of supply of goods.

3. If natural gas or electricity is supplied to a trade agent through the distribution network, a place where the trade agent has established its activity, or where it has a fixed establishment for which the goods are supplied shall be considered the place of supply of goods; and if there is no place of establishment of activity or fixed establishment, a place where the trade agent has permanent address, or where it normally lives shall be considered the place of supply of goods.

4. When natural gas or electricity is supplied through the distribution network, unless it is provided for by paragraph 3 of this article, a place of factual use and consumption of the goods by the consumer shall be considered the place of supply of goods.

5. If a consumer does not factually consume natural gas or electricity fully or partially, the goods that were not consumed shall be deemed used and consumed at the place where the consumer conducts its activities or has a fixed establishment for which the goods are supplied. If there is no place of activity or fixed establishment, it shall be deemed that the goods have been used and consumed by the consumer at the place where he/she has permanent address, or where he/she normally lives.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 162¹ – Place of provision of services

1. If, under this article, services are provided within the territory of Georgia, it shall be deemed that they have not been provided within the territory of another country, and if services are not provided within the territory of Georgia, they shall be considered as having been provided within the territory of another country.

2. For the purpose of defining the place of provision of services, a person (except for a non-entrepreneur natural person) shall be considered a taxable person in relation to any service provided to him/her/it.

3. Unless otherwise determined by this article:

a) the location where a service recipient is established shall be considered the place of provision of services, if the service recipient is a taxable person. In addition, if services are provided for a fixed establishment of a service recipient, which is not located in the place where the service recipient is established, the location of the fixed establishment shall be considered the place of provision of services. If there is no place of establishment or fixed establishment, the location where the service recipient has permanent address or where he/she/it normally lives shall be considered the place of provision of services;

b) the location where a service provider (taxable person) is established shall be considered the place of provision of services, if the service recipient is not a taxable person. In addition, if services are provided by a fixed establishment of a service provider, which is not located in the place where the service provider is established, the location of the fixed establishment shall be considered the place of provision of services. If there is no place of establishment or fixed establishment, the location where the service provider has permanent address or where he/she/it normally lives shall be considered the place of provision of services.

4. The place of provision of services related to an immovable thing shall be considered the place where the immovable thing is located, including:

a) the services of an expert and an agent of immovable thing;

b) the services for the preparation and coordination of construction works (exercise of control and supervision on the construction site).

5. The place of provision of a service provided to a non-taxable person by an intermediary acting on behalf and by order of another person shall be considered the place of conducting a transaction for which the intermediary service has been provided.

6. For a non-taxable person, the place of cultural, art, scientific, education, entertainment, physical culture and sports or similar events such as a performance, a presentation or an exhibition, and the place of provision of services for organising the above events (including ancillary services) shall be considered the place where the events are actually carried out.

7. For a taxable person, the place of exercising the right of entry/access to cultural, art, scientific, education, entertainment, physical culture and sports or similar events such as a performance, a presentation or an exhibition, and/or the place of provision of ancillary services related to the above right of entry/access shall be considered the place where the events are actually carried out.

8. The place of provision of services shall be considered the location of its actual performance if any of the following services has been provided to a non-taxable person:

a) the transportation-related services, which include loading, unloading, repacking, warehousing, and storage of goods during carriage, packing of goods for transportation, preparation of documents before completion of custom clearance formalities, inspection, check-up-related services and other similar services;

b) the assessment of a movable thing or the work/service related to such property.

9. The place of provision of transportation services to a passenger shall be considered the place where the transportation is carried out, in proportion to the distance driven.

10. The place of provision of services of transportation of goods to a non-taxable person shall be considered the place where the transportation is carried out, in proportion to the distance driven.

11. The place of provision of restaurant and/or food services shall be considered the place where the above services are actually performed.

12. The place of provision of short-term vehicle lease services shall be considered the place where the vehicle is actually placed in customer’s service.

13. The place of renting/leasing of a vehicle, except for short-term leasing, to a non-taxable person shall be the place where the customer is established, has permanent address or normally lives. In addition, the place of rental of a leisure boat (except for short-term leasing) to a non-taxable person shall be the place where the leisure boat is actually placed in customer’s service.

14. The place of provision of services to a non-taxable person shall be considered the place where he/she/it is established, has permanent address or normally lives if any of the following services have been provided to him/her/it:

a) telecommunication services;

b) radio and TV broadcasting services;

c) electronically provided services;

d) the transfer or cession of a copyright, a patent, a licence, a trademark or other similar rights;

e) advertisement services;

f) consultancy, engineering, legal, accounting and other similar services, and data processing and information delivery service;

g) the obligation to abstain from full or partial performance or exercise of an economic activity or a right provided for by this paragraph;

h) banking, financial and insurance transactions, including reinsurance, except for safe rental service;

i) personnel provision services;

j) leasing out of a movable thing, except for leasing of any type of vehicle.

15. The Minister of Finance of Georgia may define the cases when a certain service under paragraphs 3 and 12-14 of this article is considered:

a) provided in another country if it is performed within the territory of Georgia, but the service is actually employed and/or used outside the territory of Georgia;

b) provided in Georgia if it is performed outside the territory of Georgia, but the service is actually employed and/or used in Georgia.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Chapter XXIII¹ – Time of Taxation

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 163 – Time of taxation when supplying goods/providing services

1. VAT taxation of supply of goods/provision of services shall be carried out at the moment of supplying goods/providing services, unless otherwise provided for by this article.

2. If the sum is fully or partially paid before goods are supplied/ services are provided, payment of the respective VAT of the sum paid shall be effected according to the accounting period for payment of the sum, except as provided for by paragraphs 5 and 9 of this article.

3. a) a transaction provided for by Article 160(3)(b) of this Code shall be subject to VAT taxation at the moment when a taxable person starts using its produced building/structure (fixed asset) in economic activities;

b) transactions provided for by Article 160(3)(d) and (e) of this Code shall be subject to VAT taxation at the moment when an appropriate person terminates economic activities/cancels VAT registration;

c) transactions provided for by Article 160(3)(g) of this Code shall be subject to VAT taxation at the moment when the status of a tourist enterprise is cancelled;

d) where so provided for by Article 160(3)(h) of this Code, VAT taxation shall be carried out at the moment when the shortage under this Code is identified.

4. VAT taxation of a transaction provided for by Article 160¹(2)(b) of this Code shall be carried out at the moment when repair of the building/structure (fixed asset) is finished (the moment when provision of repair services/works would be VAT taxable if performed by a person registered as a VAT taxpayer).

5. VAT taxation shall be carried out not later than the last day of each accounting period if telecommunication/communication services are provided or goods (guaranteed capacity, electricity, gas, water, thermal energy, cooling energy or other similar goods) are supplied regularly or continuously.

6. Unless the condition under paragraph 2 of this article is present, VAT taxation shall be carried out:

a) not later than the last day of each accounting period if services are provided regularly or continuously, considering paragraph 5 of this article;

b) except as provided for in Article 160(5) of this Code, when an immovable thing is supplied, at the moment of preparation of a document confirming the right of ownership to be filed with a registration authority for the registration of the right of ownership, and if the registration (transfer) of the right of ownership depends on the fulfilment of a certain obligation by a party (parties) to this document and/or on the presence of the condition, then at the moment when such obligation is fulfilled/condition is present;

c) where so provided for by Article 160(1)(b) of this Code, at the moment when goods are actually transferred;

d) where so provided for by Article 160(5) of this Code, at the moment when an immovable thing is accepted into service.

7. Where so provided for by Article 161(1)(c) and (d) of this Code, VAT taxation of a respective transaction shall be carried out at the moment when charging VAT on the import of goods.

8. Where so provided for in paragraph 5 of this article, if a taxable person keeps record of the supply of goods/services on different days of an accounting period according to the amount of goods/services supplied during not a calendar month but during a certain period (cycle) which may include the accounting period as well as a period preceding the accounting period, the amount of goods/services recorded according to the different days of the accounting period (recorded according to the amount of goods/services supplied during the certain period (cycle)) shall be considered supplied within the accounting period, irrespective of the amount actually supplied within the accounting period.

9. The Minister of Finance of Georgia may define cases of certain taxable transactions when paragraph 2 of this article does not apply.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 163¹ – Time of taxation at import

VAT taxation of the import of goods shall be carried out in accordance with the customs legislation of Georgia at the moment when customs obligations arise, and if the goods are not subject to import tax or are exempt from import tax, then at the moment when the goods would be assessed unless they were exempt from this tax.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Chapter XXIII² – Taxable Amount

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 164 – Taxable amount when supplying goods/providing services

1. Unless otherwise provided for by this article, a VAT taxable amount shall be the compensation received/to be received in return for the supply of goods/provision of services, without VAT, including the subsidy directly related to the price of the goods/services. The aforementioned provision shall also apply to the case of goods/services exchange transaction (barter transaction).

2. In cases provided for by:

a) Article 160(3)(a-e) of this Code, a VAT taxable amount shall be the purchase price of goods for the current or similar goods, or if it does not exist, then their production price which, in appropriate cases, is set at the moment when goods are used, alienated, converted (kept in possession) or when the registration as a VAT taxpayer is cancelled;

b) Article 160(3)(f) and (h) of this Code, a VAT taxable amount shall be the market price of goods, without VAT;

c) Article 160(3)(g) of this Code, a VAT taxable amount shall be the difference between the sum obtained as a result of division of the turnover exempt from VAT under Article 172(4)(v) of this Code with the right of deduction by 1.18 and the declared sum of the VAT taxable transactions (except for the VAT exempt transactions) as a result of functioning of the hotel (facility/its part) by a person/persons invited for functioning/operation of a tourist enterprise and/or a hotel (including the sum additionally assessed by a tax authority according to the aforementioned facility).

3. In cases provided for by:

a) Article 160¹(2)(a) and (b) of this Code, a VAT taxable amount shall be the value of all expenses related to the provision of a service;

b) Article 160¹(2)(c) of this Code, a VAT taxable amount shall be the market price of a service.

4. A VAT taxable amount must include:

a) taxes, fees and dues, except for VAT;

b) related expenses, such as commission fees, or packing, transportation, and insurance costs charged by a supplier to a purchaser.

5. The following shall not be included in a VAT taxable amount:

a) the discount for an advance payment;

b) the discount awarded to a purchaser of goods/services and obtained by him/her at the moment of supply, or another concession;

c) the amount received by a taxable person from a purchaser of goods/services as a compensation for the expenses borne on behalf and by order of the purchaser. In addition, the taxable person shall have the obligation to prove the actual amount of expenses specified in this subparagraph and he/she/it shall have no right to deduct the VAT paid in relation to the aforementioned;

d) the benefit under a leasing agreement – when goods are supplied under lease in the case provided for by Article 160(1)(b) of this Code;

e) the sum of a penalty received/to be received with regard to the violation of a contractual obligation, or another kind of financial compensation.

6. When goods/services under a multi-use voucher are supplied/provided, a VAT taxable amount shall be the compensation paid for this voucher, without VAT. And if there is no information on the compensation, the VAT taxable amount shall be obtained as a result of dividing the value specified in the multi-use voucher or the related documentation by 1.18.

7. When a taxable transaction is carried out between interdependent persons, a VAT taxable amount shall be the market price of goods/services without VAT if:

a) the compensation amount of the taxable transaction is lower than its market price and the purchaser of the goods/services, under this Code, has no right to fully deduct the VAT on this transaction;

b) the compensation amount of the taxable transaction is lower than its market price and the supplier of the goods/services, under this Code, has no right to fully deduct the VAT and the supply is VAT exempt without the right of deduction;

c) the compensation amount of the taxable transaction is higher than its market price and the supplier of the goods/services has no right to fully deduct the VAT.

8. Costs of multi-use (returnable) goods/tare shall not be included in a VAT taxable amount. In addition, if the aforementioned goods were not returned, the VAT taxable amount shall be adjusted. The procedure for applying this paragraph shall be defined by an order of the Minister of Finance of Georgia.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 164¹ – Taxable amount during customs procedures

1. A taxable amount when importing goods shall be the value of goods for customs purposes.

2. Unless a taxable amount contains the below components, the following shall be included in it:

a) taxes, fees or other dues, except for VAT, due in a foreign country and/or in Georgia, based on the import of goods;

b) related expenses, such as commission fees, or packing, transportation and insurance costs that are paid for transporting goods to the first place of destination, and costs paid in the territory of Georgia for transporting goods to another place of destination if this another place is known at the moment when the tax obligation arises.

Note: for the purpose of subparagraph b) of this paragraph, the first place of destination shall be the place indicated in the document by which the goods are imported. In addition, if this place is not indicated in the appropriate document, the place of the first transportation/transfer of goods in the territory of Georgia shall be considered the first place of destination.

3. The following shall not be included in a taxable amount:

a) the discount for an advance payment;

b) the discount awarded to a purchaser and obtained by him/her at the moment of import, or another concession.

4. When importing goods supplied to the customs warehouse, if:

a) the import and supply of goods are not VAT exempt, the amount of VAT due at import shall be paid based on the amount of import, and the amount of a positive difference between the value of purchasing foreign goods at the customs warehouse by the importer and the amount of import of goods shall be subject to VAT reverse charge;

b) the import of goods is VAT exempt and the supply of goods is VAT taxable, the value of purchasing foreign goods at the customs warehouse by the importer shall be subject to VAT reverse charge;

c) the import of goods is VAT taxable and the supply of goods is VAT exempt, the importer shall pay the amount of VAT due at import based on the amount of import.

5. When a person imports goods purchased from a FIZ enterprise, if:

a) the import and supply of goods are not VAT exempt, the amount of VAT due at import shall be paid based on the amount of import, and the amount of a positive difference between the value of purchasing foreign goods from a FIZ enterprise by the importer and the amount of import of goods shall be subject to VAT reverse charge;

b) the import of goods is VAT exempt and the supply of goods is VAT taxable, the value of purchasing foreign goods from a FIZ enterprise by the importer shall be subject to VAT reverse charge;

c) the import of goods is VAT taxable, and if the supply of goods is VAT exempt, the importer shall pay the amount of VAT due at import based on the amount of import.

Note: where so provided for by this paragraph, obligations of the FIZ enterprise under this Code in a part of VAT, with regard to the transaction of supplying goods to the importer shall be considered fulfilled.

6. Where so provided for by Article 54(2), (3) or (4) of the Customs Code of Georgia, the amount of import shall be defined in accordance with the procedure established by the same paragraph for calculating the amount of import tax.

7. The export/re-export of goods shall be considered carried out if the goods are declared in the export procedure or when they are re-exported, during which the export/re-export amount is the customs value of goods.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Chapter XXIV – Registration of Taxable Persons

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 165 – Registration as a VAT taxpayer

1. A taxable person shall, unless otherwise provided for by this Code, from the day when he/she exceeds the total amount of GEL 100 000 for VAT taxable transactions of supplying goods/providing services carried out during any 12 consecutive calendar months, within not later than 2 business days, apply to a tax authority for registration as a VAT taxpayer.

2. The obligation of a taxable person to calculate and pay the VAT shall arise from the moment of carrying out a taxable transaction under paragraph 1 of this article (including this transaction), according to which the total amount of taxable transactions has exceeded GEL 100 000.

3. A taxable person, who produces excisable goods in Georgia, shall apply to a tax authority for registration as a VAT taxpayer before supplying the excisable goods.

4. A person set up as a result of reorganisation, if any party to the reorganisation is registered as a VAT taxpayer, shall apply to a tax authority for registration as a VAT taxpayer before carrying out a VAT taxable transaction provided for by paragraph 1 of this article, but not later than 10 days after completion of the reorganisation.

5. If an enterprise/partnership accepts goods/services as a contribution from a partner/member registered as a VAT taxpayer, the enterprise/partnership shall apply to a tax authority for registration as a VAT taxpayer before carrying out a VAT taxable transaction provided for by paragraph 1 of this article, but not later than 10 days after making the contribution.

6. A person may voluntarily get registered as a VAT taxpayer. In such a case, he/she shall be considered a VAT taxpayer from the day of applying to the tax authority, but not later than the period allowed for compulsory registration.

7. When defining the total amount of VAT taxable transactions provided for by paragraph 1 of this article, the taxable transactions exempt from VAT under this Code shall not be taken into account, except for:

a) the transactions exempt from VAT under this Code that are related to a financial or immovable thing if carrying them out is the main activity of the taxable person;

b) the export transactions of goods;

c) the transactions exempt from VAT under Article 172(1) and (2) of this Code.

8. When defining the total amount of VAT taxable transactions provided for by paragraph 1 of this article, for a person set up as a result of reorganisation, the VAT taxable transactions of the parties to reorganisation shall be taken into account, under the procedure established by this article.

9. Irrespective of the requirements of paragraphs 1 and 2 of this article, the obligation of a taxable person, who has a fixed establishment in Georgia, to calculate and pay the VAT shall arise from the moment of providing services/supplying goods (including this transaction), and he/she shall apply to a tax authority for registration as a VAT taxpayer not later than the last day of the accounting period for carrying out this transaction.

10. The procedure for registering VAT taxpayers shall be defined by the Minister of Finance of Georgia.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 165¹ – Cancellation of registration as a VAT taxpayer

1. If the total amount, without VAT, of taxable transactions (except for the transactions that are VAT exempt under this Code, based on Article 165(7) of this Code) provided for by Article 165(1) of this Code carried out by a person during the last 12 calendar months does not exceed GEL 100 000 and one year has passed from the date when he/she was last registered as a VAT taxpayer, he/she can apply to a tax authority for the cancellation of his/her registration as a VAT taxpayer.

2. With the consent of a person, a tax authority may, irrespective of the requirements of paragraph 1 of this article, at its own discretion, cancel the registration of this person as a VAT taxpayer. The procedure for applying this paragraph shall be defined by an order of the Minister of Finance of Georgia.

3. The registration as a VAT tax payer shall be cancelled:

a) upon liquidation of an enterprise/organisation – from the date when the registration was cancelled in the state/entrepreneurial register;
b) when a person dies – from the date of his/her death;

c) when a person makes an application for or consents to a cancellation of VAT registration from the first day of the month following the written application/consent of the person;

d) upon initiation of bankruptcy proceedings under the procedure defined by the Law of Georgia on Insolvency Proceedings – from publication of the court ruling on bankruptcy.

[d) upon commencement of the bankruptcy regime under the procedure established by the Law of Georgia on Rehabilitation and Collective Satisfaction of Creditors – from the publication of the court ruling on commencing the bankruptcy regime. (Shall become effective from 1 April 2021)]

4. The procedure for cancelling registration as a VAT taxpayer shall be defined by an order of the Minister of Finance of Georgia.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Law of Georgia No 7169 of 18 September 2020 – website, 25.9.2020

Article 165² – Persons liable for VAT payment

1. The obligation to calculate and pay VAT shall arise for a person registered or liable for registration as a VAT taxpayer, except as provided for by paragraph 2 of this article.

2. Without liability for registration as a VAT taxpayer, the obligation to calculate and pay VAT shall arise for:

a) a person importing goods;

b) a tax agent, for a transaction subject to reverse charge under this Code;

c) a person authorised to sell goods, when selling the goods, within a measure for insuring payment of a tax liability or for the purpose of enforcing payment of another pecuniary liability (except for a sanction imposed under criminal and administrative procedure), by auction, direct sales or another way;

d) a person authorised to sell goods, when selling custodial property, under the procedure defined by the Law of Georgia on Insolvency Proceedings;

[d) a person selling the goods, when selling insolvency mass under the procedure established by the Law of Georgia on Rehabilitation and Collective Satisfaction of Creditors; (Shall become effective from 1 April 2021)]

e) a taxable person who is not established or does not normally live in Georgia, or who has no fixed establishment which participates in the provision of services, if the place of provision of services by him/her/it is Georgia under this Code and this transaction is not subject to reverse charge. The procedures for fulfilling the obligation defined by this subparagraph and for informing the taxable person shall be defined by an order of the Minister of Finance of Georgia.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Law of Georgia No 7169 of 18 September 2020 – website, 25.9.2020

Chapter XXIV¹ – VAT Rate, Tax Period and Reporting

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 166 – VAT rate

The VAT rate shall be 18%.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 167 – Tax period

The VAT accounting period shall be a calendar month.

Law of Georgia No 6817 of 14 July 2020 – website, 22.7.2020

Article 168 – Declaration procedure