Georgia legal and accounting and tax considerations in 2023
Since 2003, Healy Consultants Group assists our Clients with timely compliance of their annual legal, accounting and tax obligations.
- Georgia is a low-tax eastern European jurisdiction with i) a well-developed double tax treaty network ii) multiple tax benefits and iii) simple tax and accounting reporting procedures. For example, a Georgia-resident company can legally minimise its withholding tax exposure by accessing the 56 double tax treaties the country has signed with countries around the world, including India, Germany, China, United Kingdom, Singapore and Ireland. An increasing number of international companies are relocating some activities and functions to Georgia to take advantage of the country’s attractive tax system.
- Georgian companies pay 15% income tax on worldwide income. Permanent establishments of non-resident companies pay 15% income tax only on profit derived from Georgian sources.
- Georgia-resident companies and permanent establishments of non-resident companies also pay 15% tax on distributed profits (e g shareholder dividends). Profit that is retained or re-invested is legally tax exempt.
- Capital gains realised by a Georgia-resident company or permanent establishment are subject to 15% tax.
- Dividends, royalties or interest paid to Georgia-resident legal entities are exempt from withholding tax. Dividends, royalties, or interest paid to non-resident companies (I e companies not registered in Georgia but sourcing income in the country) are subject to 5% withholding tax.
- EU imports of Georgian i) pharmaceutical products ii) fixed assets and iii) industrial goods are subject to just 5% import tax. EU imports of Georgian i) meat ii) dairy products iii) fruits and vegetables iv) tobacco v) alcohol vi) concrete and wooden material vii) clothes and shoes and viii) petroleum products (other than fuel oil) are subject to 12% import tax.
- Exports and re-exports from Georgia to the EU attract zero customs duties.
- Personal income tax in Georgia is 20%, applied only to Georgia-derived income.
Value added tax (VAT)
- A Georgian company with an annual turnover exceeding GEL100,000 (US$35,000) must register for VAT with the Georgia Revenue Service
- The standard VAT rate of 18% is imposed i) on the supply of goods and services by a taxable person/entity in Georgia and ii) on the import of goods by any person/entity in Georgia.
- Exports and re-exports of goods and financial services provided from Georgia are VAT-exempt. Some goods and services related to i) oil and gas activities and ii) medicine are also VAT-exempt.
- VAT filing and payment must be made to the Georgia Revenue Service by the 15th day of the month following the reporting calendar month. Penalties apply for late payment.
- From January 1, 2019, a compulsory pension tax was introduced for individuals and businesses. A pension contribution of 2% is payable by both employer and an individual. A self-employed individual has the right to refuse to pay the fee.
Filing due dates
Mode of filing Filing deadline
- For taxpayers taxable on distributed profits: 15th day of the month following the reporting calendar month.
- 31 March for all other taxpayers. Deadline extensions up to a maximum of three months can be applied for.
- Annual personal income tax returns must be filed by 31 March
Consequences of late / non-filing of tax returns
- 5% of the tax payable on the basis of the tax return calculation if filing misses the deadline by up to two months. Delays beyond two months of the deadline incur a 10% penalty. In addition, an interest fine of 0.05% of the underlying tax liability is imposed for every day payment remains overdue.
- For under reporting, penalties of between 10 and 50% are imposed on the understated tax amount. Large understated amounts are likely to lead to criminal charges.
- Non-resident entities can carry forward losses for up to five years. This can be extended for a further five years on application to the Georgia Revenue Service. Georgian International Financial Companies, Free Industrial Zone companies and Special Trading Companies are ineligible for such extensions. In addition, Georgia-resident companies and permanent establishments cannot carry losses forward.
- A Georgia international finance company, defined as a licensed financial services provider with Clients outside Georgia, is 100% tax-exempt on all income related to the sales of financial services and securities to non-Georgian customers, provided the company’s foreign-sourced income exceeds 90% of its total income.
- A Georgia Free Industrial Zone (FIZ) Enterprise is 100% exempt from corporate income tax and VAT. Among the additional tax incentives enjoyed by an FIZ Enterprise are i) interest and dividends paid by an FIZ Enterprise are tax-exempt ii) trade conducted between FIZ Enterprises is VAT-exempt iii) goods supplied by an FIZ Enterprise to a Georgia-resident company are taxed at 4% tax of the invoice value iv) an FIZ Enterprise is not liable to assess and pay Reverse Charge VAT and iv) FIZ land and property is exempt from property tax.
- A Special Trading Company is legally exempt from paying tax on trading profit derived from overseas sales. However, the traded products cannot be of Georgian origin, or sold to customers in Georgia. A Special Trading Company is permitted to i) re-export non-Georgian goods from a customs warehouse ii) supply non-Georgian goods in a customs warehouse to both special trading companies and non-special trading companies
- In October 2020, the Georgian government launched new tax incentives for locally-registered and offshore companies in the shipping and IT sectors. Incentives include i) a reduced corporate income tax rate of 5% ii) 5% wage tax (previously 20%) and iii) zero withholding tax on dividend distributions (5% for companies engaged in other activities). Shipping and IT companies can also i) access part-exemptions from property tax and ii) use salary and R&D expenses to reduce their corporate income tax base.
- To qualify for the above tax incentives, shipping and IT companies must have i) at least two years’ operating experience in the sector and ii) have an office, staff and generate expenses in Georgia.
- Companies with Virtual Zone status offering IT services to non-resident Clients are also exempt from corporate income tax and VAT for services delivered outside Georgia, and pay no corporate income tax on distributed profits.
Tax reporting, accounting and auditing considerations
- Georgia’s tax and accounting system and reporting regime is straight forward, and Georgian tax laws are relatively simple. Tax returns can be submitted electronically. However, the Georgia Revenue Service’s e-filing system is in the Georgian language only. Therefore, it is advisable to engage a local accountant to fulfil this task.
- The World Bank ranks the country very highly for the ease with which taxes can be paid. For example, it notes that i) paying taxes in Georgia takes, on average, 216 hours and ii) only five payments are required annually. This compares favourably to neighbouring countries in the Caucasus region, as well as countries such as The Netherlands and Germany, and Australia. As a result, meeting statutory obligations in Georgia is largely stress-free, quick and inexpensive.
- All Georgian entities must register for tax at the Georgia Revenue Service.
- All private and public Georgian companies and permanent establishments of foreign companies, (FIZ) Enterprise must prepare and file an annual financial statement to Georgia Revenue Service according to international accounting standards. Group companies must each file returns and make tax payments. It is not possible to file consolidated returns.
- An audit is not mandatory. However, some Georgian entities are subject to a desk audit, where a tax officer will review a company’s financial statements, tax returns and other information to confirm it is complying with the tax code without visiting the company’s office.
- Should the desk audit uncover errors, a field audit at the taxpayer’s office will be ordered. The Georgia Revenue Service will notify the taxpayer 10 days before the field audit begins.
Healy Consultants Group fees for accounting & tax support
For an active trading company, Healy Consultants Group will efficiently and effectively discharge your annual company accounting and tax obligations. Following receipt of a set of draft accounting numbers from your company, Healy Consultants Group will more accurately advise accounting and tax fees.
Georgia accounting & tax task € Tax and VAT registration 750 Annual tax and accounting fees (active trading company) 2,300 Annual tax and accounting fees (dormant company) 950
Monthly book keeping service
Healy Consultants Group will be happy to provide a monthly book-keeping service for your Georgian company. Typically, our Accounting & Tax Department (ATD) team will receive a Dropbox of data from our Client and will immediately thereafter timely supply our Client with i) a general ledger ii) trial balance iii) monthly and quarterly management accounts and iv) monthly and quarterly government reporting, including sales tax and payroll.
For further details of our book keeping service and our fees, visit this page.
Clients should be aware of their personal and corporate tax obligations in their country of residence and domicile. They must fulfill these obligations annually. Let us know if you need Healy Consultants Group’s help to clarify your annual reporting obligations.
Legal and compliance
- Foreign nationals are eligible to register companies in Georgia;
- A company must have a registered office in Georgia;
- Clients and suppliers from foreign countries can verify the legal standing of a Georgian company by visiting the National Agency of Public Registry and submitting the request. Publicly available information includes i) business name, registered address and legal status; ii) names and details of the company officers and iii) latest filed annual returns;
- Limited liability companies and joint-stock companies do not require minimum issued share capital before business registration;
- Annual financial statements for both private and public companies must be filed in accordance with the IFRS.
- The Georgian Labor law is flexible and allows the employer to customize the employment policy with the company’s requirements;
- Additionally, the Labor law gives the employer and the employee the freedom to set out and agree on the terms and conditions of the labor contract;
- In Georgia, the probation period may not exceed 6 months. During the probation period, the employer can conclude a labor contract with the applicant or terminate the labor contract concluded for a probation period;
- Georgia does not have minimum wage regulations, and compensation for labour depends on the written agreement with the employer;
- There are no social security/social insurance taxes in Georgia;
- The maximum duration of working should not exceed 40 hours or 48 hours for specific sectors. However, the employer must take into consideration that the duration of the rest time between working days may not be less than 12 hours;
- All employees working in Georgia are entitled to:
- At least 24 days of paid holidays per annum;
- 15 days of national holidays (Religious, National celebrations and the New Year days);
- Additionally, an employee has the right for unpaid leave for at least 15 calendar days per annum;
- Maternity leave for the reason of pregnancy, childbirth, and childcare in the range of 477 calendar days and 126 calendar days are payable from the leave taken for the reason of pregnancy, childbirth and childcare, in case of complicated childbirth or delivery of twins – 140 calendar days;
- According to the Labour Code, if the employer terminates the contract, the company must send written notice to employee at least 1 month prior to the termination and pay at least 1 month salary. Additionally, employer is entitled to give a 3-day prior written notice to the employee, but in this given, situation employer must pay at least two months’ salary/compensation within 30 calendar days of the contract termination.
Other business regulations
- Since 1991, Georgia is a member of the World Intellectual Property Organization, which allow foreign businesses to apply for a patent or a trademark and give them the same intellectual property protection conferred to Georgia nationals.