During the month of June 2024 Amendments to the tax legislation of Georgia
Kreston Georgia continues to review tax law changes and updates. This time we offer an overview of legislative news introduced in the month of June 2024.
- Amendments to the law of Georgia
1.1 Tax benefits have been defined for the transfer of assets from offshore to Georgia
1.2 Tax debts will be written off for individuals
1.3 The excise duty rate on tobacco products has been reduced
- Changes in the orders of the Minister of Finance of Georgia
2.1 A change in the gaming business
2.2 Tax obligations of a person in the process of dissolution
2.3 New public decision on taxation of barter operation with VAT
2.4 The manner of reporting of the multinational enterprise group was defined
- Changes in the resolutions of the Government of Georgia
3.1 The rule for writing off unpaid fees, fines and surcharges provided for underground fresh water pumping
1. Amendments to the law of Georgia
1.1 In connection with the transfer of assets from offshore to Georgia, tax benefits have been determined
On June 2024, 4, the amendment to the Tax Code of Georgia was published and immediately after its publication, it came into effect. As a result of the change, it will be encouraged Transferring assets from a foreign enterprise registered in a country with preferential taxation to Georgia process by establishing temporary tax benefits for these operations. In particular, a new section 309 was added to Article 146 of the Civil Code, according to which it is determined that when transferring ownership rights to all assets (including shares) of a foreign enterprise registered in a country with preferential taxation to a Georgian enterprise until January 2028, 1 In the framework of the operation, the income received by the foreign enterprise registered in the country with preferential taxation and the partner natural person, which for the purpose of this Code is considered as income received from the source of Georgia, Exempt from profit/income tax. Also, within the scope of the said operation, the asset/goods in Georgia Imports/imports are exempt from import duties. And, the Georgian enterprise regarding the asset received within the scope of this operation Exempt from property tax, until January 2030, 1.
Tax benefits shall apply only to transfers of assets owned by an enterprise registered in a country with preferential taxation as of the date of entry into force of this Article. In order to benefit from the benefits, it is necessary that 100% of the shares/shares in the offshore registered enterprise and the Georgian enterprise are owned by the same individual (group of individuals). However, within this transaction, the value of the asset to the party receiving the asset is the same as its value to the party providing the asset at the time of transfer of the asset.
For detailed information about the change, see the link:
https://matsne.gov.ge/ka/document/view/6158656?publication=0
1.2. Tax debts will be written off for individuals
On June 2024, 4, the amendment to the Tax Code of Georgia was published and immediately after its publication, it came into effect. As a result of the change, the tax was determined Immunity to natural persons. In particular, subsection "d" was added to part 309 of Article 37, according to which Article 252 of the Tax Code (General rule for writing off tax debt) Regardless of the requirements, according to the rules established by the Minister of Finance of Georgia The recognized tax debt of a natural person, arising before January 2021, 1 and existing at the time of writing off, and the accrued interest on it are subject to write-off.
In relation to the mentioned issue, relevant changes were also made in the order N994 of the Minister of Finance "On conducting ongoing control procedures, write-off of goods and material values, repayment of recognized tax debts, implementation of measures to ensure the payment of tax debts, approval of the procedure for conducting proceedings for legal violations" and in the order N13446 of the Revenue Service. On the procedure for the production of personal registration cards of taxpayers" on the approval of the methodical instruction.
according to the changes made, to the payer Tax debt will be written off programmatically, if after January 2021, 1, the transactions performed are not recorded on the personal registration card (including the temporary registration card) until the moment of writing off. Debts existing at the time of write-off are subject to write-off.
And those natural persons who have unpaid tax debts arising before January 2021, 2021, at the time of write-off, and have recorded operations for the period after XNUMX as well, Tax debt may be written off by examining the taxpayer's statement individually On the basis of (see the application form on the attached link) or on the basis of the decision of the body reviewing the dispute.
For detailed information about the change, see the link:
https://matsne.gov.ge/ka/document/view/6158656?publication=0
https://matsne.gov.ge/ka/document/view/6201107?publication=0
https://matsne.gov.ge/ka/document/view/6209236?publication=0
https://eservices.rs.ge/ServiceRequestNew.aspx?p=487
1.3. The excise duty rate on tobacco products has been reduced
On June 2024, 13, an amendment to the Tax Code of Georgia was published and immediately after its publication, it came into force. As a result of the change, the 188rd column of the table of the 1st part of Article 3 of the Civil Code was formed with a new edition, which shows the excise rates established for tobacco and tobacco products.
As a result of the change, The excise duty rate was reduced by 30 lari on such tobacco products, such as raw tobacco, tobacco waste, hookah tobacco, "homogenized" or "reconstituted" tobacco, chewing or snuff tobacco. See the attached table for detailed information.
The purpose of the change is to protect local production, reduce the import of illegal cigarettes, increase competitiveness in the sector and stimulate the development of the local processing industry.
| N | Code according to Ses ESN | Item Title | Units of measurement | Excise duty rate (GEL) | ||
| Column 3 | Tobacco, tobacco products | old | New | difference | ||
| 2401 | Tobacco raw materials, tobacco waste | 1 kg | 60.00 | 30.00 | (30.00) | |
| 2402 10 000 01 | – – Cigars, cigars with cut ends, containing tobacco | 1 strand | 1.90 | 1.90 | - | |
| 2402 10 000 02 | – – Cigars (fine cigars), containing tobacco | 20 strand | 2.20 | 2.20 | - | |
| 2402 20 | - Cigarettes with tobacco content | 20 strand | 1.70 | 1.70 | - | |
| 2403 11 000 00 | − − Hookah tobacco, according to note 1 to subheading to this chapter | 1 kg | 60.00 | 30.00 | (30.00) | |
| 2403 19 | - - The rest | 1 kg | 60.00 | 30.00 | (30.00) | |
| 2403 91 000 00 | − − Homogenized or reconstituted tobacco | 1 kg | 60.00 | 30.00 | (30.00) | |
| 2403 99 100 00 | - - - Chewing or snuff (burnout) tobacco | 1 kg | 60.00 | 30.00 | (30.00) | |
| 2404 11 000 00 | – – Containing tobacco or reconstituted tobacco | 20 pieces/stem | 1.70 | 1.70 | - | |
| 2404 12 000 00 | – – the rest, with nicotine content | 1 ml | 1.00 | 1.00 | - | |
| 2404 19 900 00 | - - - the rest of | 1 ml | 1.00 | 1.00 | - | |
For detailed information about the change, see the link:
https://matsne.gov.ge/ka/document/view/6177582?publication=0
2. Changes in the orders of the Minister of Finance of Georgia
2.1. A change in the gaming business
On June 2024, 11, the amendment to the "Tax Administration" instruction, approved by Order No. 996 of the Minister of Finance, was published and immediately after its publication, it came into force. In particular, the change was made in Chapter XXV, which regulates the administration of gambling business fees.
The change is due to the amendments made to the Law of Georgia "On Licenses and Permits" on February 2023, 9, which came into force on June 2024, 1, and which defined new types of permits, namely:
- in system-electronic form Samorin games permission to organize;
- in system-electronic form Games of slot machines permission to organize;
- in system-electronic form Totalizer games Permission to organize.
It is in relation to the types of new permits, based on the changes made in the above-mentioned chapter of the order of the Minister of Finance, the procedures for issuing permits and gaming business fee payment tokens, the forms of the permit certificate, and also the issues related to the transfer of the permit during the reorganization of the permit holder were determined.
For detailed information about the change, see the link:
https://matsne.gov.ge/ka/document/view/6191141?publication=0
2.2. Tax obligations of a person in the process of dissolution
On June 2024, 27, the amendment to the "Tax Administration" instruction, approved by order No. 996 of the Minister of Finance, was published and immediately after its publication, it came into force. As a result of the change, a new 7 was added to the instruction2 Article by which in addition The tax obligations of the person in the process of dissolution were determined.
In particular, in accordance with the Law of Georgia "On Entrepreneurs", a person in the process of dissolution (dissolved company) is obliged to carry out:
a) submission of tax declaration/calculation to the tax authority;
b) deregistration of cash register(s);
c) payment of the document(s) equal to the check;
d) closing the last bank/payment account in the financial institution(s);
e) Issuance of a tax invoice (including a special tax invoice) in material form;
f) delivery/disposal of immovable and movable property in his ownership/possession, including goods and material values;
g) other obligations determined by the order of the head of the revenue service.
We remind you that the definition of a person in the process of dissolution (dissolved society) and related obligations were defined in the Tax Code of Georgia on the basis of the Law of Georgia "On Amendments to the Tax Code of Georgia" published on April 2023, 18.
For detailed information about the change, see the link:
https://matsne.gov.ge/ka/document/view/6204709?publication=0
2.3. New public decision on taxation of barter operation with VAT
On June 2024, 10, a new public decision of the Minister of Finance was published and immediately after its publication it came into effect _ "Regarding VAT taxation of an exchange (barter) operation, when delivering an immovable object within the scope of this operation", which clarifies the issue of VAT taxation of the exchange (barter) operation, when the immovable object is delivered within the scope of this transaction.
as you know:
- According to Article 159 of the Civil Code, the supply of goods/services for compensation by a taxable person within the framework of economic activity on the territory of Georgia belongs to the operation subject to VAT.
- In accordance with the first part of Article 164 of the Civil Code, unless otherwise provided by this article, the amount subject to VAT is the compensation received/received for the supply of goods/services without VAT, including the subsidy directly related to the price of the goods/services. The mentioned provision is also used in case of goods/services exchange operation (barter operation).
- In accordance with Section 73 of Article 8 of the Civil Code, the tax authority is authorized to determine the amount of the taxable amount based on the market price in the case of the exchange of goods/services (barter) operation. The conditions and rules for the use of this part, as well as the cases when this part is not used, are determined by the Minister of Finance of Georgia. In particular, 996 of the instruction "On tax administration" approved by the order N48 of the Minister of Finance of Georgia.3 In accordance with the article, if an immovable item is delivered within the framework of an exchange (barter) operation, the amount taxable with VAT for each party to the operation is determined by the market price of acceptable goods/services, excluding VAT.
- 996 of the instruction "On Tax Administration" approved by Order N48 of the Minister of Finance of Georgia1 In accordance with clauses 6 and 2024 of the article, if the compensation is fully or partially paid before the delivery of goods/services, the payment of VAT corresponding to the received compensation is made according to the reporting period of the compensation payment. The mentioned rule (for transactions concluded from January 1, 2024) applies to exchange (barter) operations both in cash and in the form of goods/services in the part of compensation payment. Here we remind you that for transactions concluded before January 1, XNUMX, the mentioned rule (advance taxation) applies/applied to exchange (barter) operations only in case of payment in cash.
According to the above-mentioned articles and the published public decision, if, according to the contract, a natural person transfers a plot of land to the ownership of the enterprise, and in exchange, receives from the enterprise a part of the building-structure built on the same plot of land, The VAT taxable amount of the said operation by the enterprise shall be determined by the market price of the plot of land (at the time of delivery of the plot of land), excluding VAT. In addition, if a natural person transfers a plot of land to the ownership of the enterprise, for which the compensation is carried out partly by the delivery of buildings and structures built on the same plot of land, and partly - in cash, for the said operation by the enterprise The amount subject to VAT is determined by the market price of the land received by the enterprise, without VAT, minus the amount paid in cash.
In addition, if the above-mentioned operation is carried out according to the transaction concluded after January 2024, 1, the corresponding compensation received by the enterprise in the form of goods (land) and/or in cash VAT is paid in the reporting period of the delivery of the land plot and/or receipt of money. And, if the operation is carried out according to the transaction concluded before January 2024, 1, by the enterprise, the said operation Taxation with VAT is carried out during the reporting period of the supply of buildings and structures to the individual and not the so-called At the time of receiving the advance.
Therefore, according to the decision:
a) a transaction, during which compensation for goods/services is partially non-monetary (goods/services) and/or partially monetary, is a barter operation;
b) for the purpose of VAT, the value of the subject of barter (goods/services) is determined by the parties in monetary form;
c) In the case of delivery of immovable property as part of an exchange (barter) operation, the amount taxable by VAT for each party of the operation is determined by the market price of acceptable goods/services, without VAT;
d) the person participating in the barter operation calculates VAT on the basis of the tax invoice, taking into account the limitations stipulated by the tax legislation of Georgia;
e) for barter transactions concluded after January 2024, 1, if compensation (in monetary or non-monetary form) is received in full or in part before the delivery of goods/services, the obligation to pay the amount of VAT corresponding to the compensation (both monetary and non-monetary) arises in the accounting period of compensation;
f) For barter transactions concluded before January 2024, 1, VAT taxation of the relevant operation is carried out at the moment of delivery of goods/services. In addition, in the case of only partial reimbursement of the amount before the delivery of goods/services within the framework of barter operation, the obligation to pay VAT corresponding to the reimbursed amount arises in the reporting period of reimbursement.
For detailed information about the change, see the link:
https://infohub.rs.ge/ka/workspace/document/d8f07cfc-ec99-4aa8-8063-2ab5aeba90dd
2.4. The manner of reporting of the multinational enterprise group was defined
On June 2024, 6, the Order N188 of the Minister of Finance of Georgia was published, regarding the approval of the "Reporting Rules of Multinational Enterprises Group". said order Enters into force on January 2025, 1.
The order established the conditions related to the obligation to declare the account of the multinational enterprise group to the tax authority, as well The procedure for preparing the report of the multinational enterprise group was defined, Terms of notification obligation, time of declaration, as well as scope of use and confidentiality of such account by tax authorities of Georgia.
We remind you that 70 of the Civil Code1According to Article The ultimate parent enterprise of a multinational enterprise group, which is a resident of Georgia, is obliged to submit a country-by-country report to the tax authority by December 31 of the following reporting year. A multinational enterprise group is any group that contains two or more enterprises that are tax residents of different countries/jurisdictions or contains an enterprise that is resident for tax purposes in one country and is subject to taxation in another country/jurisdiction in respect of economic activities carried on through its permanent establishment , and is not an exceptional multinational enterprise group. For detailed explanations on this issue, see Article 70 of the Civil Code1in the article and in the order of the Minister of Finance N188.
For detailed information about the change, see the link:
https://matsne.gov.ge/ka/document/view/6187508?publication=0
3. Changes in the resolutions of the Government of Georgia
3.1. The rule for writing off unpaid fees, fines and surcharges provided for underground fresh water pumping
On June 2024, 17, the resolution of the Government of Georgia No. 194 was published, which approved the procedure for writing off unpaid fees, fines and surcharges provided for underground fresh water pumping.
We remind you that on December 2023, 27, the Tax Code was amended and according to Article 309, Section 144, The person will be charged the unpaid amount of the fee provided for the use of underground fresh water for the purpose of bottling and the related unpaid fine and surcharge, If the person has not used the relevant license before December 2023, 1, in particular, he does not pour underground fresh water, and one of the following conditions is met:
- The person, as of December 2023, 1, no longer holds a license issued for the extraction of fresh underground water;
- Before April 2024, 1, the person applied 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 did not use the said license, in particular, he did not pump underground fresh water.
In order to determine the manner of using the said benefit, on the basis of Section 309 of Article 145 of the Civil Code, a resolution of the Government of Georgia was issued, according to which a person shall submit an application to the tax authority, in which the following data should be reflected:
- the person's name, identification number or name, surname and personal number, as well as legal/actual address and telephone number;
- Number and date of issuance of the license issued for bottling fresh water (on the basis of which the fee and related fines and surcharges arise);
- The amount of unpaid fees, fines and surcharges as of the date of submission of the application to the tax authority by the person, which arose on the basis of the license that the payer did not use, fresh water bottling was not carried out;
- In the case of the first condition, the application must be accompanied by the decision of the authorized body on the cancellation of the license/a document confirming the transfer of the license or another document that proves that the person, as of December 2023, 1, no longer holds a license issued for bottling underground fresh water;
- In the case of the second condition, the application must be accompanied by a corresponding application submitted to the licensing authority.
Within 10 working days after the receipt of the application, the tax authority verifies the compliance of the application with the requirements established by this rule. If the statement does not comply with the requirements set forth in this article, the tax authority will determine the deficiency and the deadline for its elimination not more than 10 days. Failure to correct the defect within the specified period is the basis for rejecting the application. In addition, the tax authority is authorized to require the person to submit additional documentation. The person is obliged to submit the relevant documentation within the period determined by the tax authority.
For detailed information about the change, see the link:
https://matsne.gov.ge/ka/document/view/6196956?publication=0
Creston Georgia Ltd
managing partner Davit Papiashvili
Head of Tax Audit Department Chabukiani from Rusu