Tax
agents who withhold tax at the source of payment are required to:
·
Transfer the tax to the
budget when making payments to physical persons;
·
When paying wages,
issue to the physical person receiving the income (at his or her request) a
statement with the person’s name, amount and type of income paid, and amount of
tax withheld; and
·
Within 30 days of the
end of the tax year, present to the tax agencies and, if requested, to the
person paid, a statement containing the person’s registration number, total
income, and total amount of tax withheld during the year.
Physical
person entrepreneurs and individual enterprises are required to submit income
tax payments in three instalments, based on their income tax liability for the
previous year. Instalments are applied against the taxpayer’s actual liability.
Payments may be reduced if income in the current year is expected to be at
least 30 percent less than income in the previous year. Taxpayers with no
income from the previous year must make payments based on actual income during
the previous quarter.
Tax
payers[3] are required to submit returns
before April 1st of the year following the reporting year. Before the income
tax return due date, taxpayers may apply to the tax authorities for an extension
of time to submit their returns. Taxpayers who cease entrepreneurial activity
must submit a tax return within 30 days of the cessation of activities.
Taxes
Paid by Enterprises.
Profit
Tax. Profit
taxes must be paid by Georgian entities and foreign entities with permanent
establishments in Georgia. Foreign entities that do not have permanent
establishment presence in Georgia are taxed via a withholding tax at the source
of payment, as stated above. Enterprises are defined as:
·
Legal persons
established according to the legislation of Georgia
·
Corporations,
companies, firms, and other entities established pursuant to the legislation of
foreign states
·
Branches and other
separate units that are structural units of the entities indicated in the first
bullet and that have their own balance sheet and a separate settlement or other
account.
Georgian
and foreign enterprises are distinguished by place of activity and management.
A Georgian enterprise has its place of activity or management within the
territory of Georgia, whereas a foreign enterprise has its place of activity or
management outside the territory of Georgia. If there is more than one place of
management or activity, or the place of management and activity do not
coincide, then the predominant location should be used to determine the place
of activity or management.
Individual
enterprises and physical person entrepreneurs are subject to income tax (or
presumptive tax), not profit tax. Branches and other units of an enterprise do
not pay profit tax separately, but aggregate profit with the main enterprise,
which pays the full profit tax.
Georgian
enterprises are taxed on gross income, which includes all income regardless of
its source or place of payment, less allowable deductions. The profit tax is a
flat rate of 20 percent. Foreign enterprises are also subject to profit tax,
the extent to which depends on whether the foreign enterprise is connected to a
permanent establishment.
Foreign
enterprises that conduct economic activity through a permanent establishment
are subject to profit tax on gross income, less deductions, from Georgian
sources connected to the permanent establishment. Foreign enterprises that do
not conduct economic activities through a permanent establishment must pay
profit tax on gross income from Georgian sources (no deductions are allowed),
and the tax is withheld at the source of payment. However, non-resident
taxpayers (including foreign enterprises) who receive certain types of income
(e.g., insurance payments, royalties, management fees, income from works or
services) may file a return and claim deductions as if this income was
connected to a permanent establishment. The withholding rates for certain types
of income are as follows:
·
Dividend and interest
payments—10 percent
·
Insurance proceeds—4
percent
·
Telecommunication and
transportation services, shipments, and oil and gas transactions—4 percent
·
Royalties, management
fees, income from performing work or rendering services (except income earned
as wages), income from leasing movable property, income from management,
financial, and insurance services—10 percent
·
Certain oil and gas
profits—10 percent.
Foreign enterprises
receiving profits from the sale of some stocks, assets, and property not
connected to their permanent establishment must pay profit tax, with allowable
deductions, on the income from these sales. Annex D provides a listing of
profit tax exemptions as well as allowable deductions from gross income.
Table 1.4.1.2 summarizes the
asset categories into which fixed assets subject to depreciation are grouped.
Table 1.4.1.2:
Summary of Asset Categories
Group
Types of Fixed Assets
Percentage Depreciation
1
Passenger automobiles, automobile and tractor
equipment for use on roads, special instruments, miscellaneous accessories,
computers, peripherals and equipment for data processing and storage.
20
2
Automotive transport, trucks, buses, special
automobiles and trailers, machines and equipment for all sectors of industry
and the foundry industry, forging and pressing equipment, electronic
equipment, construction equipment, agricultural machines and equipment,
office furniture.
15
3
Railway, sea, and river transport vehicles; power
machines and equipment; turbine equipment; electric motors and diesel
generators; electricity transmission and communication facilities; pipelines.
8
4
Buildings and structures
7
5
Assets subject to depreciation not included in other
groups.
10
Source: Tax Code.
Buildings and structures are
each depreciated separately, whereas the other asset groups are depreciated
using the balance of the asset group at the end of the tax year. The balance of
the asset group is adjusted for purchases, sales, and repairs. The maximum
deduction for repair expenses is 5 percent of the balance of each asset group.
Any repairs that exceed 5 percent are added to the balance of the asset group
and depreciated as such.
Physical persons who incur a
loss in a tax year (i.e., deductions exceed gross income) and who are not
connected to employment may not deduct such losses from employment income, but
may carry forward and deduct the loss from non-wage income for a period up to 5
years after the tax year in which the net loss occurred. Legal persons who
incur a loss in a tax year may carry forward and deduct losses from profit for
a period of up to 5 years after the tax year in which the net loss occurred.
