During the month of December 2023 Amendments to the tax legislation of Georgia

 

Kreston Georgia continues to review tax law changes and updates. This time we offer an overview of the legislative news introduced in the month of December 2023.

Table of Contents

1. Changes in the Tax Code of Georgia

1.1 Amendment regarding taxation of gaming business

1.2 Additional benefits for agritourism and wine tourism activities

1.3 Taxation of benefits received by suspended students

1.4 Writing off unpaid fees

1.5 Terminological changes

1.6 Other important changes to the Code

2. Changes in the orders of the Minister of Finance of Georgia

2.1 Changes in the manner of public distribution of the document

2.2 Declaration of income tax on the supply of property of an individual

2.3 Changes in the procedure for submitting timber balances

3. Changes in the orders of the head of the revenue service

3.1 New Situational Guidelines

3.2 New examples of methodical indication of VAT

 

1. Changes in the Tax Code of Georgia

• Amendment regarding taxation of gaming business

The amendment to the Tax Code of Georgia was published on December 2023, 25 and will enter into force on January 2024, 1. The change refers to the issues of taxation of the persons who arrange the gaming machines salon, the persons who arrange the gambling in system-electronic form, and also the money withdrawn by the player from the gaming account or cash register. In particular, the change affected the following issues:

• The regime of profit and income tax taxation of gaming machine installers (who do not engage in the mentioned activity in a system-electronic form) was defined;
• The rate of taxation of profit and income tax of persons organizing games in system-electronic form has been changed;
• Changed the rate of taxation of withdrawals by players with income tax at the source.

According to the above-mentioned change, the object of taxation has been defined for the persons arranging gaming machines, who do not engage in the mentioned activity in a system-electronic form. In particular, the difference between the bets received from the players and the profit given to the player is the object of taxation with income or profit tax for the mentioned persons. Accordingly, part 80 of article 7 and part 97 of article 9 of the Civil Code were established with the new edition.1 part. As we know, in the articles 80 and 97 formed by the existing edition before the change, until now only the object of taxation of the persons organizing games in system-electronic form with income and profit taxes was defined. As a result of the change, the object of taxation with income tax was determined for the persons arranging the gaming machines, who do not engage in the mentioned activity in a system-electronic form, similarly to the persons performing the games in a system-electronic form. The reporting period of the persons arranging gaming machines is a calendar month, and accordingly, they will apply the tax to the state budget on a monthly basis.დ, like the persons organizing games in system-electronic form.

In addition to the above, the income and profit tax taxation rate of persons arranging gambling in a system-electronic form has been changed, and also, the taxation rates for persons arranging gaming machines have been determined, and this rate for both types of activities, both for individuals and legal entities, is 15%. Accordingly, Article 81, 3 of the Civil Code was amended1 part and the first part of Article 98. We remind you that before the above-mentioned change, the income and profit tax rate of persons arranging gambling in system-electronic form was 10% of the difference between the bets received from players and the profit paid to the player, while neither the object of taxation nor the rate was defined for persons arranging gaming machines. . 

As for the withholding tax of the funds received by the players from the aforementioned games, the mentioned amounts will be subject to a 5% withholding tax instead of 2%, as it was defined in the previous edition. The obligation to tax the funds withdrawn by the players at the source rests with the person organizing the game.

• Additional benefits for agritourism and wine tourism activities

Amendments to the Tax Code of Georgia were published on December 2023, 27, and will come into effect on January 2025, 1. The change refers to additional preferential taxation of natural persons engaged in agrotourism and wine tourism activities.

Based on the amendment, Article 8 was added to Article 37 of the Civil Code1and 372and two new terms were defined, namely:

•  Subject of agro-tourism activity - a person who has been granted the status of an agro-tourism activity subject in accordance with the resolution of the Government of Georgia;
• Subject of wine tourism activity - A person who has been granted the status of a subject of wine tourism activity in accordance with the resolution of the Government of Georgia.

The main essence of the change lies in the fact that the income limits established for individuals engaged in agrotourism and wine tourism, for the use of small business status, have been increased and the upper limit has been determined in a calendar year. 700 GEL in the amount, while the upper limit of other activities within the small business status remained unchanged - in the amount of 500 GEL. In addition to the above, for persons engaged in agrotourism and wine tourism, the basis for termination of the small business status will be exceeding the limit of 000 GEL in two tax years, instead of 700 GEL. The incomes of the mentioned persons will be taxed by 000% instead of 500% from the month of exceeding the limit of 000 GEL to the end of the year, instead of the month of exceeding the limit of 1 GEL. Otherwise, the income is subject to taxation at the standard rate of 3%.

• Taxation of benefits received by suspended students

Amendments to the Tax Code of Georgia were published on December 2023, 25 and entered into force on January 2024, 1. In particular, 309 was added to Article 87 of the Civil Code1Part-e and benefits received by a suspended student with financial debt in a higher educational institution in Georgia, which are received from:

• by writing off tuition fees payable by the higher educational institution as of August 2023, 1;
• As of August 2023, 1, with the amount paid by the Ministry of Education, Science and Youth of Georgia for the purpose of redemption of tuition fees.

 

• Writing off unpaid fees

An amendment to the Tax Code of Georgia was published on December 2022, 27, and immediately after its publication, it came into force. As a result of the change, new parts 309 and 144 were added to Article 145 of the Civil Code and the procedure for writing off unpaid fees, related fines and fines for the use of underground fresh water for the purpose of bottling was determined.

In particular, according to the amendment, the tax authority has the right to write off the fee imposed for the use of natural resources, related fines and surcharges payable by the person who has not used the appropriate license (with or without a properly approved exploitation plan) until December 2023, 1, in particular, fresh underground water will pour In order to use the said benefit, one of the following conditions must be met:

a) As of December 2023, 1, the relevant person no longer holds the license issued for tapping underground fresh water; 

b) Before April 2024, 1, the relevant person shall apply to the authority issuing the license for underground fresh water pumping to cancel this license, and from December 2023, 1 to April 2024, 1, he shall not use the said license, in particular, he shall not pump underground fresh water.

• Terminological changes

In the month of December 2023, three new amendments to the Tax Code of Georgia were published, which will come into effect on January 2024, 1. The amendments clarify terminology in the Code and bring it into line with other Codes, namely:

• Amendments have been made to subsection "L" of the first part of Article 170 and subsection "H" of the first part of Article 206 of the Civil Code, and as a result, the names of the Ministry of Education and Science of Georgia and the Ministry of Culture, Sports and Youth of Georgia will be replaced by the Ministry of Education, Science of Georgia at the level of terminology. and in the names of the Minister of Youth and the Ministry of Culture and Sports of Georgia. The change is caused by the amendments implemented in the Law of Georgia "On the Structure, Powers and Procedures of the Government of Georgia".

The change will come into effect on January 2024, 1.

• The amendment was introduced in the 39nd part of Article 2 of the Civil Code, where the circle of agencies that have access to information containing tax secrets is given - among them is the National Competition Agency of Georgia. In particular, in subsection "P" of the same part, the name of the agency is changed and instead of the National Competition Agency of Georgia, it is indicated - the Agency of Competition and Consumer Protection of Georgia. As a result, the compatibility of the provisions of the Law of Georgia "On Competition" and the Tax Code of Georgia will be ensured.

The change will come into effect on January 2024, 1.

• The amendment was made in the 238th part of Article 12 of the Civil Code, which more clearly defines the list of persons against whom, when applying the measures to ensure the payment of tax debts provided for in the same article, it is not allowed to apply the said measures to the assets of the clients defined in the same article. The said change is mainly caused by the terminological changes/clarifications implemented in the Law "On Securities Ownership" and the Law "On the Securities Market" of Georgia (including the clarification of the definition of certain concepts). 241 was added to Article 10 of the Civil Code as well2, which will provide for the authority of the liquidator or special administrator in certain cases to transfer the seized securities accounts to another account holder without change. With the changes made, the Tax Code of Georgia will be in compliance with the Law of Georgia "On Possession of Dematerialized Securities". The change will take effect from March 2024, 1.

In addition, Article 238 was added to the mentioned Article 125-128 parts. The changes are based on the smooth and unhindered implementation of the regulatory framework of the special purpose unit of securitization provided by the draft law of Georgia "On Securitization". In particular, the funds of the persons defined by the first paragraph of Article 10 of the Law of Georgia "On Securitization", which represent the funds belonging to the special purpose unit of securitization, will be fully protected from the measures to be implemented to ensure the payment of tax debts. These measures are – tax lien/mortgage; making payments to a third party; confiscation of property; Realization of confiscated property; Submitting a collection order on the bank account; Withdrawal of cash from taxpayer's coffers. If, prior to the registration of a tax lien/mortgage on a person's property, a commercial bank, a microfinance organization, an insurance organization, or a financial institution of developed countries defined in accordance with Article 2024, subsection "E" of the Law of Georgia "On the Activities of Commercial Banks" submits a request secured by a mortgage/mortgage to the "On Securitization" of Georgia. to the special purpose entity of securitization established in accordance with the law, and this property is sold, the withdrawn amount will first satisfy the requirements of the special purpose entity of securitization. This will have an impact in favor of the persons who represent the owners of the securities issued by the special purpose entity, since the requests of the said persons will be satisfied in the first place. The change will take effect from April 1, XNUMX.

• Other important changes to the Code

On December 2022, 28, an amendment to the Tax Code of Georgia was published. The change was made in order to solve a separate problem in the issues of tax administration, to bring the commodity codes and commodity names provided by the SSC into compliance with the national commodity nomenclature of foreign economic activities prepared on the basis of the 2022 edition of the nomenclature of the International Convention on the Harmonized System of Description and Coding of Goods, as well as editorial and technical Based on the expediency of eliminating character flaws and bringing separate provisions "on rehabilitation and collective satisfaction of creditors" into compliance with the law of Georgia. Let's review the important change notes:

• According to the amendment, editorial changes are made in Subsection "a" of Section 4 of Article 10 of the Civil Code, Subsection "C" of Section 8 of Article 29, Subsection "H" of Section 82 of Article 99, Section 153 In subsection "f" of the first part of the article, in subsection 5, part 1, in subsection "d" of part 1651 of article 3, in part 168 of article 5 and in part 205 of article 101 "Rehabilitation and collective satisfaction of creditors" About" in order to bring it into compliance with the provisions of the law of Georgia. Among them, a clarifying change is made in part 272 of Article 3 of the Civil Code, according to which, in case of approval of the rehabilitation plan, the tax will be charged only in relation to the overdue tax amounts provided for in the rehabilitation plan.
• Article 154, Part 1, sub-point d of the Civil Code states that the amount of compensation for services paid to a small entrepreneur will not be subject to withholding of income tax at the source of payment in any case.
• According to the amendment, subsection "b" of part 82 of Article 2 of the Civil Code was formed with a new edition. The mentioned change is editorial in nature. In particular, it was clearly written that the taxable income of up to 6000 GEL received by a person with severe or significant disabilities during a calendar year is not subject to income tax.
• According to the amendment, an editorial correction was made in the 141th part of Article 5 of the Civil Code and it is in line with the terminology provided by the International Financial Reporting Standards (IFRS). In addition, a note has been added after Section 5, which clarifies the definition of loan for the purpose of the said norm. In particular, for the purposes of this section, credit (loan), overdraft, letter of credit, credit line, guarantee and/or debt securities, factoring, as well as received/received from these instruments (including received/received as discount, commission and/or interest) are considered loans. acceptable) any kind of pre-announced (established) income.
• 172, 173, 182, 184, 188, 192, 194, 197 and 199 of the CSC, "Harmonized of Commodity Description and Coding" In order to bring the nomenclature of the 2022 edition of the International Convention on the System into compliance, technical changes were made in the mentioned articles. At the same time, an editorial amendment was made in subsection "sh" of Article 173, and the term "import tax" was replaced by the term "customs obligation", thus bringing the mentioned norm into compliance with the terminology provided by the Customs Code of Georgia.
• According to Articles 280 and 282 of the Civil Code, issuing a false or fictitious/non-goods transaction invoice, as well as calculating VAT with such a document, is subject to sanctions in the amount of 200 percent of the corresponding amount of VAT. At the same time, subsection "e" of Article 178 of the Civil Code, which provides for cancellation of VAT deduction in case of fictitious/non-goods operation, does not regulate the case of cancellation of the VAT amount calculated with a false document. According to the amendment, the aforementioned legislative error was corrected and a corresponding change was made in subsection "e" of Article 178 of the Civil Code, and it was written that the calculation of VAT is limited both to the invoice showing a fictitious transaction or a non-goods operation, as well as to a false document.
• In accordance with the legislation in force in the period from June 1997, 13 to January 2000, 1 and from November 2001, 1 to October 2005, 1, the obligation of the electricity distribution company to pay VAT arose only in case of compensation for the value of the supplied goods. According to Article 309, Section 86 of the Civil Code and Section 87, Sub-Clause "a" of the same Article, for the debtor of the electricity distribution company and the person whose debt was forgiven for the debt arising from the supply of electricity in the period from November 2001, 1 to October 2005, 1 In case of forgiveness, additional tax liabilities in VAT and income tax will not arise. In addition, the said provision does not envisage a similar approach for the period from June 1997, 13 to January 2000, 1. According to the amendment, the tax benefits provided for the relevant persons according to Article 309, Section 86 and Section 87 of the same Article, subsection "a", will also apply to the period from June 1997, 13 to January 2000, 1.ე
• According to the amendment, Articles 309 and 142 were added to Article 143 of the Civil Code, which stipulates that if an insurance organization distributes dividends from the net profit received in accounting periods from January 2015, 1 to January 2024, 1, it has the right to be considered according to these periods. The amount of accrued and paid profit tax, but not more than 98 of the Tax Code1 of the amount to be paid according to the object of taxation with the profit tax provided for in the first part of the article. 

The said imputed amount is calculated by the formula - A×B/(C-D), where: A is the amount of the amount to be distributed as a dividend, B is the amount of profit tax accrued and paid according to the reporting periods from January 2015, 1 to January 2024, 1, C is from January 2015, 1 The amount of net profit received in the accounting periods up to January 2024, 1, D is the value of the shares of this insurance organization transferred by the insurance organization to the partner in exchange for dividends at the expense of the net profit received in the accounting periods from January 2015, 1 to January 2024, 1. 

The preparation of the change is caused by the fact that Article 309, 94 of the Civil Code1 According to the section, the insurance organization is taxed with profit tax according to the object of taxation provided for in the first part of Article 97 of the Tax Code from January 2024, 1. Accordingly, from January 2024, 1, the insurance organization will have to tax the said dividend distribution with profit tax, which, in relation to the net profit received in the reporting periods before January 2024, 1, will result in double taxation of the same income. The proposed amendment will prevent insurance companies from being taxed twice on the same income. For the mentioned purpose, a technical change is also included in the 309nd part of Article 92 of the Civil Code.

Among the mentioned changes, the change implemented in Article 2024 of the Civil Code regarding the distribution of dividends by insurance organizations will come into effect on January 1, 309. The main part of the changes made in relation to the commodity codes will come into force on the 30th day after publication, i.e. from January 2024, 27. The rest of the changes will take effect immediately after publication.

 

1. Changes in the orders of the Minister of Finance of Georgia

• Changes in the manner of public distribution of the document

On December 2023, 6, an amendment to the "Tax Administration" instruction approved by Order No. 996 of the Minister of Finance was published and entered into force immediately after publication. In particular, Article 14 of the aforementioned order was established with a new edition, which regulates the manner of public distribution of the document.

We remind you that according to Article 44, Part 10 of the Civil Code, the tax/dispute review body or the National Enforcement Bureau has the right to publicly distribute the document, if the taxpayer (except for an individual) sends the document sent by the tax authority in electronic form with the authorization of the taxpayer. It has not been recognized within 30 days of posting on the user's page. And if the taxpayer is a natural person, the document can be publicly distributed if the following conditions are met:

a) the person sent/submitted the document in written form at least twice and it was not possible to deliver it to the addressee;

b) The person is not an authorized user of the official website of the Revenue Service, or the addressee has not read the document within 30 days after its placement on the website of the authorized user.

Based on the above-mentioned change, Article 14 formed by the updated version of the instruction is partially formed from Article 44 of the mentioned CSC. However, with the implemented change, the details of the issue of public dissemination of the document, which were not so clearly defined by the above-mentioned Article 44 of the Civil Code, were significantly clarified.

In particular, if the location of the individual is unknown and it is not possible to send/submit the document to him, the relevant authorities are authorized to directly distribute the document to be submitted to him in a public way, if the relevant document is submitted on the authorized website of the Revenue Service (RS.GE) and the addressee has not been identified within 30 days. him.

In addition, the case when a person is not registered on the official website of the Revenue Service (www.rs.ge) authorized user. In this case, the tax/customs authority has the right to publicly distribute the document if:

a) the person is a natural person (including a non-resident natural person) and his whereabouts are unknown or he does not have an address in Georgia;

b) The person is a legal entity (including a non-resident legal entity) and does not have a legal address in Georgia.

• Declaration of income tax on the supply of property of an individual 

The amendment to the "Tax Administration" instruction, approved by Order No. 2022 of the Minister of Finance, was published on December 28, 2024 and will enter into force on January 1, 996. Determining the form of declaration of income tax on the supply of property/asset by a natural person and the manner of filling it.

The said change was expected and its basis is the already well-known amendment to Article 2023 of the Tax Code of Georgia published on April 18, 153, according to which, in case of receiving excess income by providing property/asset within the scope of non-entrepreneurial activity, a natural person is obliged no later than the 15th of the month following the reporting month To submit a monthly declaration of income tax to the number tax authority. We remind you that before the above-mentioned change in the CSC, a person was obliged to submit a declaration and pay tax by April 1 of the year following the year of delivery of the asset.

As for the changes included directly in the order of the Minister of Finance No. 996, a new 33 was made3Article and Appendix NII-042- addition, which provides for the income tax declaration form, the deadline for its submission and the manner of filling in case of receiving additional income by providing property/asset within the scope of non-entrepreneurial activity.

In addition to the above, based on the change, two examples were added to the instruction, according to which, in March, a natural person sells a residential apartment owned for less than 2 years and a commercial space used in economic activity, less than 2 years have passed since the moment of last use in economic activity. According to the example, the person is obliged to submit the income tax declaration and pay the tax amount by the 15th of the following month of the reporting month, i.e. by the 15th of April. A person will be taxed by 5% in the case of residential property and 20% in the case of commercial property.

• Changes in the procedure for submitting timber balances

On December 2023, 26, an amendment to the "Tax Administration" instruction approved by Order No. 996 of the Minister of Finance was published and entered into force immediately after publication. In particular, 112 was added to Article 64, Clause 64 of the mentioned order1and 642Paragraphs and exceptional cases of submitting information on the balance of timber products were defined.

As you know, the taxpayer was obliged to submit to the tax authority no later than August 2023, 16, information on the balance of timber products as of June 2023, 15.

As a result of the change, the established deadline has been changed for the taxpayer who, as of August 2023, 16, due to ongoing proceedings in the tax/other authorized body/court, does not have the right to dispose of the timber commodity values ​​as of June 2023, 15, and received the said right:

a) in the period from August 2023, 17 to December 2023, 31. In this case, the person is obliged to submit information about the balance of these commodity values ​​to the tax authority no later than January 2024, 31, in the form and manner established by the individual administrative-legal act of the head of the revenue service;

b) After December 2023, 31.  In this case, he is obliged to submit the information about the balance of these commodity values ​​to the tax authority no later than 10 working days after receiving this right, in the form and manner established by the individual administrative-legal act of the head of the revenue service.

Also, on the basis of the change, as of June 2023, 15, the National Forestry Agency of the Ministry of Environment and Agriculture of Georgia was instructed to submit the balances, no later than January 2024, 31.

 

1. Changes in the orders of the head of the revenue service

• New Situational Guidelines

On December 2023, 19, two new situational guides were published:

• N1432 Situation Guide explaining how to calculate spousal income in the first year of marriage;
• N1433 Situational guidance explaining that land and buildings attached to it must be taxed separately. 

Below is a detailed discussion of each of them.

N1432 Situation manual

According to the example of the situation manual, individuals Ketevan and Kote got married on October 2020, 20. The income received by Ketevan from the beginning of the calendar year until marriage was 000 GEL, and the income received by Kote was 20 GEL. From October 000, 2020 (marriage) to the end of the calendar year, Ketevani received 5 GEL, Kote received 000 GEL, therefore the income of the spouses (income received by the family) amounted to 10 GEL.

In this case, the annual income of Ketevani and Kote is 35 GEL (000 + 20), which does not exceed the limit of 000 GEL established by subsection "a" of the first part of Article 15 of the Civil Code, and therefore, they do not qualify as a natural person. Obligation to submit and pay annual property tax declaration.

Therefore, for the purposes of the property tax of an individual, the income in the year of marriage should be calculated by the total amount of the income received by the person (individually) from the beginning of the calendar year to the date of marriage and the income of the spouses (family) until the end of the calendar year after the marriage.

N1432 Situation manual

On December 2023, 19, another new situational guidance N1433 was published, which clarifies that land and buildings attached to it must be taxed separately.

According to the example of the situation guide, the real estate of the enterprise - the plot of land and the building-structure located on it, as independent assets, is recorded in a separate group, the land - for 200 GEL (000 m500) and the building-structure for 2 GEL. The enterprise carried out the assessment of the said property. According to expert assessment, the market value of the property was determined at 700 GEL, including the land value at 000 GEL. Accordingly, the assets were recorded on the balance sheet at a revalued value.

In this case, the enterprise must tax the building with the balance value of 1 GEL (200 - 000) with property tax, and the land - according to the area.

• New examples of methodical indication of VAT

On the basis of the order N2023 of the head of the revenue service of December 19, 31922, two new examples were added to the methodical reference of the value added tax. In particular, a new example N8 has been added to Appendix 2, which discusses the issue of withholding tax on the sale of shares for the purpose of paying tax debts. And, a new example N9 was added to Appendix 2, which discusses the issue of tax liabilities arising from the VAT section during the resale of residential property under construction. Below is a detailed discussion of each example.

Taxation of resale of residential property under construction with VAT

According to the example, "A" LLC buys the construction site from the construction company for 118 GEL (including VAT). The registration of the right of ownership and the payment of part of the amount in the amount of 000 GEL (including VAT) are carried out in the same month, and the remaining amount, 70 GEL, will be paid after the space is put into operation. 

In the month of September, LLC "A" sells the said premises (under construction condition) to the enterprise "B" for 147 GEL (including VAT). At the same time, the payment of the existing obligation of "A" enterprise with the construction company (500 GEL) was assigned to "B" enterprise. Accordingly, LLC "A" receives from the buyer 47 (200 - 100) GEL including VAT. 

In December 2023, the apartment was put into operation, and "B" enterprise covers the liability of "A" enterprise in the amount of 47 GEL.

The methodical reference discusses the issue of VAT taxation of the above transactions as follows: 

• The time and amount of VAT taxation for a construction company is, on the one hand, the moment of receiving the advance payment (month of February) and the amount of the advance payment is 60 GEL (000 /70), and on the other hand, the moment of putting the residential apartment into operation (month of December) and "B" The amount paid by the company to cover the liability of "A" company, 800 GEL (1.18/40). 
• The reporting period and the amount of VAT taxation of the operation of the supply of residential space under construction for the "A" enterprise is the month of September and 125 GEL (000 / 147). Therefore, the methodical reference considers as the amount taxable for the enterprise "A" not only the amount received by the enterprise, but also the amount to be paid by the enterprise "B" in the future to cover its obligation. Based on the above, the methodical guideline considers the mentioned amount (500 GEL without VAT) to be paid in favor of the "A" enterprise at the time (September) when the "B" enterprise takes the repayment of the said obligation, since, as we know, the existing VAT from January 1.18, 47 According to the new version of the door, at the time of delivery of the space under construction (if an advance payment is not received before delivery), the moment of commissioning of the space arises when it is taxable with VAT.
• As for the calculation of VAT, according to the methodological instructions, "A" enterprise can calculate VAT in the amount of 10 (800/70*800) GEL from the advance payment received by the construction company in the month of February, and also consider the advance payment received by the construction company in the month of December. VAT of the difference between the delivery and advance payments in the amount of 1.18 GEL (0.18 /7*200). On the other hand, "B" enterprise has the right to consider VAT of 47 GEL (200/1.18*0.18) in the month of September.

Sale of a financial asset (share) by auction for the purpose of paying tax debt

According to the example, Ind. In order to ensure the payment of the financial obligations of an individual with the status of an entrepreneur, the sale of his 30% share in the "A" enterprise is carried out.

As we know, 161 of the Civil Code1According to the article: within the framework of a measure to ensure payment of tax debts or for the purpose of payment of other monetary obligations (except criminal and administrative sanctions) goods Sale (delivery) by auction, direct sale or in another manner is taxed with VAT in accordance with this article, and the payment of the amount of VAT charged on this operation to the budget on behalf of the person (the owner of the goods) is ensured by the authorized person carrying out the sale of the goods. Also, as we know, in the above-mentioned article, the list of goods, the supply of which will not be taxed by VAT, is defined strictly (except for the case of the sale of property of a non-entrepreneurial individual). In particular, only the supply of residential flat/house, land plot, car/motorcycle and property of a non-entrepreneurial individual is not taxed by the withholding tax rule. Therefore, any goods (other than the above-mentioned goods) sold to meet the financial obligations of an entrepreneur will be subject to withholding tax, regardless of whether the supply of said goods is exempt from VAT or not. In addition, 160 of the Civil Code1According to the article, provision of services is any activity that is not the delivery of goods. The transfer of intangible property is also considered for the provision of services.

The methodical reference considers the issue of VAT refund of the above operation (supply of shares) as follows: since a share is a financial instrument that gives rise to the right to receive dividends in an entrepreneurial society, it is an intangible asset and its supply is considered as rendering of services. Accordingly, the said operation is not subject to withholding tax, since it does not represent a supply of goods operation. On the other hand, the sale of shares, as a service provision, according to Article 15 of the Civil Code, is considered as a financial operation and according to Article 171, Part 1 of the Civil Code, it is exempted from VAT without the right of deduction.

 

 

Creston Georgia Ltd

managing partner                                                             Davit Papiashvili

Head of Tax Audit Department                     Chabukiani from Rusu