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Amendments to Georgia’s Tax Code to further Incite Private Sector

Published: May 14, 2012 | 8:21 am
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Parliament of Georgia is holding sessions around the new amendments to the Tax Code. The main goal of the changes, initiated by the Georgian government is to create further simplified environment for businesses. The COMMERCIAL TIMES interviewed Rusudan Kemularia, Deputy Minister of Finance of Georgia, regarding the tax code amendments, expected to be approved in the coming weeks.

- New amendments to the Tax Code were prepared together with the local business sector. Could you please name the initiatives that were suggested by businessmen?

- Almost all the initiatives are aimed at creating further improved conditions for business sector in Georgia. Tax Ombudsman came up with interesting initiatives, one of which refers to own bank account management. According to the proposed amendment, encashment will refer only to the estimated debt volume and a person can manage the rest money of the own account. This type of regulation is far flexible for taxpayers. It is also important that the new regulation will allow making payments even within the account with encashment only if a person has to pay State fees or court dues.

Another initiative, concerning Tax Agent’s freeing from the responsibility to withhold income tax on goods under GEL 1000 given to a person as a free gift, belongs to NGOs. Recipient will declare and pay what is due.

The main goal of the amendments to the Tax Code is to further reduce tax  burden on tax payers, make sanctions more liberal, simplify  tax administration, provide clear explanations of vague norms. Major part of the proposed initiatives has been worked out together with business sector and tax ombudsman.

- How big is the share of reduced fines in the new initiatives?

-One of the initiatives in this regards concerns cash machines.A person will not be fined with GEL 3000 in case of losing acash machine(GPRS / Crypto), if it is just an accident and not a deliberate act to hide something.

Another initiative on reducing fines is that a warning, an alternative sanction, or GEL 1000 fine will be used for moving goods up to the value of GEL 3000 secretly. If we see a repetition of the violation, relative sanction will be directly applied.

Also, In case of declaring property tax on agricultural land by January 1, 2013, physical persons will be freed from the fine for not presenting the declaration.

- What about the regulations on a relatively new system of fixed taxpayers?

- Fixed tax is a new, simpler and more flexible system of taxation. This new regulation requires relative sanctions in case of violations.  Fine for fixed tax payers will be GEL 200 if during the termination period of business activity as of a fixed tax-payer the person continues working withoutany status. Also, this sanction will be activated if another taxable object is added without the notification to the tax body.

Currently beauty salons and bread bakers are eligible to register as fixed taxpayers. Payment per chair at salons for hair services is GEL 50 and for manicure-pedicure GEL 30. Payment for bread bakers is GEL 50 per baking object.

- What concrete privileges do new initiatives offer for landholders in occupied territories of Georgia?

- Landholders of the land located close to Georgia’s occupied territories, thus unusable, are freed from land property tax. The fact must be confirmed by a special document issued by the local municipality.

According to the law on Georgia’s Occupied Territories, tax fines on the land within the territory, including property tax loan, will be cut off.

-What will be the benefits of Georgia moving to the international convention of Harmonized System Nomenclature 2012?

-According to theinternational convention of Harmonized System Nomenclature 2012-harmonized description and coding of goods,a number of goods have been classified with new codeswhich was reflected in the presented project. According to the new editing, no increase of excise rate is expected on no goods.

The only change here is that production supplied to the manufacturer from the manufacturer for manufacturing is exempted from excise.(Alcohol made with grape wine distillation given to the alcohol producer for production).

- Lately, we see one of the widely accepted practices for improving services is launching electronic alternatives. How much attention is drawn to electronic services in the new amendments?

- One of the most important initiatives, as far as electronic services are concerned, is that getting credits based on electronic VAT invoices is no longer limited in terms, which is a rather flexible offer to business sector. It’s important that no administrative risk is raised with this initiative.

- What are the top news about the above mentioned amendments to the Tax Code that might be interested for foreigners?

- Rental incomeof non-residentsin relations to physical persons taxable at source at 20% instead of 10%. This only refers to physical persons.

Second, Yachts, other swimming objects, spade boats and canoes will be freed from VAT. This is an important step made by Georgian government for supporting tourism development in the country.

And last but not least,Import of goods from the territory of Georgia to FIZ and vice versa, import of goods from FIZ to Georgia is taxed at a rate of 4%.


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