Accounting Outsourcing and
Tax compliance in Georgia
Georgia – Accounting Outsourcing and Tax Compliance
Global Expansion Plus provides accounting outsourcing and tax compliance in Georgia. We provide services with support of our local accountants and tax specialists. We will perform bookkeeping, accounting and filling tax return on your behalf bearing all associated compliance risks.
The state of Georgia incorporates a simple, spread out tax system that encompasses its legal entities and citizens, in the form of tax rates. Different rates apply for different incomes. Georgian tax system is interesting as it simple and offers equity among its citizens and legal entities.
Georgia in facts
- Location: Caucasian State
- Territory: 69,700 square kilometers
- Capital: Tbilisi
- Official language: Georgian
- Currency: Georgian lari (GEL)
- Population: 3,72 million
Corporate income tax (CIT)
Georgia adopts two types of tax systems, the old and the new CIT. Although the former is set to expire in January 2023, some sectors have moved on to the new CIT system. The rate for the old CIT system is 15%, where the taxable income is computed as the net of the gross income verses the allowable expenses.
The financial sectors, credit unions and commercial banks, are still operating on the old CIT system until its expiration in January 2023.
With the new CIT system, Georgia has taken the Estonian way in terms of taxation. Instead of imposing CIT on the retained profits, the chose to effect it on the distributed earnings. The switch took place in January 2017, which means that tax payers do not have to compute taxable income from the allowable expenses. As long as the profits are distributable, then a rate of 15% on the distributable amount will qualify as CIT.
Some of the transactions subject to the Georgia new CIT system of 15% include:
- Expenses that are not relatable to the revenue generation;
- Income distributions with zero costs;
- Corporate profits distributed to shareholders in the form of dividends;
- Expenses that go over and above the limit set;
Value-added Tax (VAT)
For goods and services to qualify as vatable in Georgia, the supplies have to be within the country and also be of economic value. VAT is normally set at 18% for any value addition on a product or service. Any service or good that originates in Georgia is termed as having being supplied in Georgia. For that, it qualifies for VAT imposition.
There are requirements for a business or an individual to qualify as a VAT agent or payer. A person must have an annual income of not less GEL 100,000. Legal entities importing or manufacturing excisable products also meet the threshold to register for VAT. VAT registration does not only check on the annual revenue. Persons or businesses looking to undertake a transaction, taxable, of amounts exceeding GEL 100,000 will have to register for the same, even if it is a one-off activity.
Personal Income tax (PIT)
Incomes generated from outside Georgia by resident persons is except from PIT. However, anything sourced locally is subject to a 20% flat rate in PIT.
Nonetheless, there are special tax regimes that seek to tax cushion low income earners. Georgian nationals with annual revenues lower than GEL 30,000 will benefit from tax exemptions. Also, businesses registered as micro businesses will experience the same treatment.
Sole traders, registered as such, with an annual income lower than GEL 500,000 will be subject to a 1% PIT and 3% for revenues above that.
Withholding Tax (WHT) Accounting
Incomes subject to WHT are those deducted as source. The rates will vary depending on the source of income and the residency of the recipient. The payer of the incomes is the one liable to adhere and be conversant with the different rates, as they apply.
For non-resident individuals earning their incomes in Georgia, the following rates apply:
- Re-insurance and insurance premiums – 0%;
- Royalties, interest incomes and dividends – 5%;
- Incomes due to subcontracting in gas and oil industries – 4%;
- Others incomes sourced in Georgia – 10%;
Payroll-Related Taxation
All employees on a payroll or earning salaries on a monthly basis are subject to PIT. The employer has the obligation to deduct an amount at the rate of 20% of the gross salary payable to their employees. It is a form of WHT since it is deducted by the payer.
Unlike most states, Georgia does not offer social tax contributions to employers, which makes it simple when it comes to accounting for the same.
Import/ Export related taxation
Custom duty
When goods are crossing the Georgian borders, they are subject to charges that constitute the custom duties. Nevertheless, the rates will defer depending on the type of products that are coming into the country. The rates range from 0% to 12%. For cars imported, the rate is GEL 0.05 per the volume of the car engine and an additional 5% for every year an individual owns the vehicle.
