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Income Tax

Who is an income tax payer?

Resident natural person and non-resident natural person, who receive income from the source in Georgia, pay income tax.
 

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What is the percentage rate of income tax?

According to tax period, starting from 1st January, 2011 till 1st January, 2013 income tax rate is 20 percent.
 

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What is the rate of income tax charged for income received by a non-resident from a source in Georgia?

Income received by a non-resident from a source in Georgia, that does not belong to the non-resident’s permanent establishment registered in the tax registry of Georgia is charged in Georgia:
• dividends – 5 percent;
• interests – 5 percent;
• amounts paid by an enterprise, organization and/or an entrepreneur natural person for international telecommunication services and for the international shipment transportation services –10 percent;
• income received by non-resident subcontractors in case of implementation of the oil and gas transactions determined under the Law of Georgia on “Oil and Gas” –4 percent;
• other payments deemed as income gained from a source in Georgia in compliance with Tax Code - 15 percent;
• income received as salary - 20 percent. (Article 134 of the Tax Code)
 

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Which tax authority shall Georgian citizens employed by international organizations in Georgia and having diplomatic status apply for tax registration purposes?

Georgian citizens employed by international organizations in Georgia and having diplomatic status are obliged to get tax registration according to their place of residence/working place.

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Within which period is natural person obliged to pay income tax on income received from realization of tangible assets, inherited property or grant?

 

The following persons pay income tax before 1st April of the year following the reporting year:
• Natural person, from the surplus received by realization of tangible assets owned for a period less than 2 years.
• Natural person from the value of the property received by first and second lines of succession as a grant or as inheritance during the tax year from third of forth lines of succession is subject to payment during 2 calendar years (article 153-7 of Tax Code)

 

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What is the percentage rate the dividend is taxable with?

Dividends paid by resident enterprise to natural person or to non-resident enterprise, are charged with 5 percent income tax rate at the source of payment from 1st January, 2011 till 1st January 2013. 


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How should entrepreneur natural persons conduct when taxable income decreases in comparison with previous year?

If a taxpayer’s estimated taxable income (profit) for a current tax years including tax benefits, is reduced by at least 50 percent compared to the taxable income (profit) of the previous tax year and it notifies a relevant tax authority about the above mentioned prior to the date current tax payment is due, a taxpayer is entitled to reduce or not to pay current tax payments. Furthermore, if according to the presented actual annual results the reduction of expected taxable income (profit) with at least 50 percent is not confirmed and the taxpayer has not paid current tax payments in full amount during a reporting year, the taxpayer shall pay penalty in accordance with Tax Code, within a period from the deadlines for the payment of current tax payments to the deadline for filing of a tax return (Article 155, Tax Code)
 

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What is the deadline for paying tax for the salary received by a person employed by an international organization in Georgia with diplomatic status?

Salary received by natural person as a result of employment in the organization shall be charged with income tax and is subject to monthly payments not later than the 15th day of the month following the reporting month. (Order 996 – Article 34)

 

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What percentage rate an interest is charged with?

Interest paid by a non-resident permanent establishment or a resident or on their behalf shall be charged at the source of payment at the rate of 5 percent from 1st January, 2011 till 1st January 2013 (Article 131, Tax Code).

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What is the way and rate for the entrepreneur natural persons who carry out economic activities to make current tax payments of income tax?

Entrepreneur natural persons who carry out economic activities shall be bound to make current payments to the budget according to the annual tax of the previous tax year in the following amounts: a) not later May 15 - 25% b) not later July 15 - 25% c) not later September 15 - 25% d) not later December 15 - 25%. Provided a tax rate is changed compared to the previous tax period the taxpayer is entitled to make the current payments from the re-calculated amounts of the taxable income of the previous tax year according to the current rate of the current tax year. (Article 155, Tax Code).

 

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When is not paid current tax payment?

Taxpayer who did not have taxable income (profit) during the previous tax year, also person whose status of micro business or fixed taxpayer is abolished and did not have taxable income for previous tax year, does not pay current tax payments.

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Which tax benefits do war veteran natural persons enjoy?

Taxable income up to 3 000 GEL received during a calendar year of the citizens of Georgia who participated in World War II and in the battles for territorial integrity of Georgia is not charged with income tax.

 

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Which tax benefits do natural persons engaged in agricultural (farming) industry enjoy?

Income received from initial delivery of agricultural products cultivated in Georgia by a natural person engaged in agricultural industry before January 1, 2014 will be exempted from income tax unless the gross income received from the above supply by the natural person exceeds GEL 200 000 within a calendar year. At the same time, salary paid to an employee engaged in the below stated activities unless gross income gained by an individual engaged in agricultural industry from the initial delivery of the agricultural products cultivated by him/her in Georgia before 1st January, 2014 prior to industrial processing (before commodity is changed) exceeds GEL 200 000 is exempted from income tax (Article 82, Tax Code)

 

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Will the liability to pay income tax be imposed to a natural person in case he/she has inherited or been granted property?

If a natural person has inherited or been granted property he/she will be bound to: - pay income tax from the market value of inherited or granted property. Note: the following are exempt from the above tax within a tax year: a) cost of property granted or inherited by heirs of the 1st and 2nd lines of succession b) cost of property granted or inherited by heirs of the 3rd and 4th lines of succession not to exceed GEL 150 000 c) cost of property granted by one individual to another that does not exceed GEL 1000 (except for the cost of property granted by an employer to an employee) (Article 82, Tax Code)
 

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Who is considered as I, II, III and IV line of succession during granting or inheritance?

Following persons are considered as I, II, III and IV line of succession during granting of inheritance:
I line of succession – spouse, child (son/daughter), adopted, grandchild, great grandchild and his/her child, parents and adoptive;
II line of succession – sister, brother, niece and nephew and their children;
III line of succession – grandmother and grandfather, parents of grandmother and parents of grandfather, from both sides of mother and father;
IV line of succession – uncle (both mother’s and father’s brother), aunt (both mother’s and father’s sister)
 

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What represents the income taxable with income tax for a non-resident natural person?

Income received by a non-resident natural person carrying out activities through a permanent establishment located in Georgia represents an object of taxation that is defined as difference between gross income received within a calendar year from a source in Georgia and related to a permanent establishment and between deductibles prescribed by Tax Code for this period.
• Gross income of a non-resident natural person that is not related to the non-resident’s permanent establishment is charged at the source of payment without deduction in compliance with Article 134 of Tax Code.
• Non-resident natural person who received income by property realization represents an income tax payer from gross income obtained from a source in Georgia within a calendar year that will be reduced by deductibles associated with receiving such type of income over this period. (Article 80-3,4, Tax Code)

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What kind of income is not attributed to income received as salary?

Income received as salary does not include: a) travel expenses paid to an employee within the framework of a standard defined by the Ministry of Finance of Georgia b) reimbursement of representation expenses (Article 101-3, Tax Code)

 

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Will the cost of an apartment and/or land granted free of charge to a natural person injured as a result of military operations be exempted from income tax?

Following are exempted from income tax: Compensations received by person with the status of refugee of humanitarian instead of temporary resident place, also by IDP within the frames of privatization project; Also, Value of property transmitted to by State to IDPs, refugees and the income received by initial sale of this property (Article 82-1, Tax Code)


 

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In what case and in what period will a liability of income tax return submission and payment be imposed on a natural person when he/she sells the tangible assets that were not used by him/her in his/her economic activities?

If natural person sells tangible assets owned for less than 2 years period or a vehicle owned for less than 6 months period he shall be bound to submit an income tax return before April 1 of the year following the tax year and to pay 20% of price surplus within the same period.

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What represents the income charged with income tax for a resident natural person?

Taxable income is an object of income taxation for a resident natural person that is defined as difference between gross income received within a calendar year and deductibles prescribed by Tax Code for this period. (Article 80-1, Tax Code)

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Will the cost of pecuniary aid provided by a taxpayer to an employee for educational purposes be taxed with income tax?

The cost of pecuniary aid provided by an employer to an employee with educational purposes in the course of assistance rendered by an employer to an employee or his/her dependents with educational purposes (except for an educational program directly associated with employee’s fulfillment of liabilities) represents income received as salary and is subject to income tax. (Article 101-2, Tax Code)

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Which tax benefits do disabled people enjoy?

Taxable income not to exceed GEL 3000 gained by a disabled person from childhood and full-blown and considerably disabled person as well within a calendar year will not be charged with income tax (Paragraph 82-2)

 

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Are any benefits related to income tax assumed by Tax Code for the income received by sale of shares owned by a natural person in authorized capital stock of a legal person?

The surplus received by a natural person as a result of sale of shares will become income tax exempt in case by way of enterprise dissolution or reduction of capital, property is transferred to the possession of the enterprise partner natural person instead of the shares and more than 2 years have passed since the origin of the natural person’s proprietary right to the share in enterprise.

 

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What benefits are in place in case of sale of accommodation by natural person?

Surplus received from the sale of an accommodation (house) with attached land under ownership for more than two years of natural person is exempted from income tax.
In this case the two-year period of the ownership of the assets shall be calculated:
a.a) according to the date of the developing a document certifying the title with the purpose of the registration of title at the registering authority;
a.b) from the instance of the initial point of the property right – in case the property right is not registered at a registration authority;
b) the “surplus received from the realization” of the asset shall be calculated as follows:
b.a) the difference between the delivery price of the assets and purchase price thereof at the time of the initial point of the ownership title;
b.b) the difference between the delivery price and its market price as of the instance of receiving gratuitously thereof, provided the ownership title over the asset was obtained gratuitously.

 

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How does a person having diplomatic status and employed by an international organization in Georgia get tax registration?

In order to get tax registered an employee will submit the original of an official document issued on the company’s letterhead to a tax authority. The document will contain the appropriate designation with a reference to the person as “employee”. The document will also contain a signature of an authorized representative of the organization, organization stamp (in case of availability), the employee’s first name, surname and personal number as per the ID. (Order 996 – Article 34)

 


 

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Can an international organization act as a tax agent, i.e. charge an employee at the source of payment?

With the objective of centralized fulfillment of tax liabilities an international organization can voluntarily act as a tax agent stipulated by Tax Code of which it gives notice to the Revenue Service - Legal Entity of Public Law of the Ministry of Finance of Georgia (hereinafter referred to as Revenue Service). Besides, if organization conducts functions of tax agent voluntary, tax authorities will not use responsibility measures defined under chapter XIII of Tax Code, including tax penalties. In this case the taxpayers in whose place the fiscal agent has fulfilled the functions of income tax deduction and payment will be deemed as parties to tax responsibility.

 

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What is the percentage rate of income tax for incomes received as salary?

Payments issued as salary within a tax period from January 1, 2011 through January 1, 2013 will be charged with 20% rate. (Article 309-1, Tax Code)

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What is the percentage rate of income tax the natural persons employed in an organization receiving grant are charged with?

Natural persons, employed in an organization receiving grant are charged with 20 percent rate of taxable income if the latter pays salary from the financial means received as grant. (Article 309-1, Tax Code)

 

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What kind of income is deemed as salary income?

Any gratuities or profits received by a natural person as a result of an employment will be attributed to income received as salary, including income received as pension from the previous place of employment and other incomes or income from future place of employment (Article 101-1, Tax Code)

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Does tax agent have an obligation to withhold tax at the source of payment at the time of reimbursing leasing amount?

Enterprise/organization or entrepreneur natural person who reimburses cost of provided services to natural person who does not have taxpayer ID, has obligation to withhold tax at the source of payment (Article 154 – d, Tax Code)
Natural person with taxpayer ID does have an obligation of tax payment and submission of return on received lease amount.

 

 

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What is the income tax rate for charging income of a natural person who rents property?

Income received from lease by natural person having taxpayer’s ID is charged with 20 percent income tax.

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Is interest received by a natural person from financial licensed institutions subject to taxation at the source of payment?

Interest received from licensed financial institutions is not taxable at the source of payment and will not be included in gross income of natural person receiving interest unless the interest recipient is also a licensed financial institution. (Paragraph 131-5)

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Shall a taxpayer submit a tax return to a tax authority upon termination of economic activities and within which period?

Upon termination of economic activities in Georgia a entrepreneur natural person shall submit a tax return on gross income and deductions to a tax authority within 30 working days. (Article 153-2, Tax Code)

 

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Will a grant received by a natural person charged with income tax?

A grant received by a natural person is exempted from income tax. (Article 82-1.b, Tax Code)

 

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