Georgia To Debate Tax Code Redraft

by Tatiana Smolenskaya, Tax-News.com, Moscow

29 June 2010

A redrafted Tax Code has been sent to the Georgian parliament for approval with a view to becoming effective from 2011.

The government originally planned to cut personal income tax from 20% to 15% by 2013, but in the new draft, income tax will remain at 20% until 2013, after which it may be reduced to 18%.

Small businesses with annual turnover of less than GEL200,000 (USD107,000) will be taxed on gross income at either 3% or 5%, depending on whether the business can verify with approved documentation that at least 60% of its turnover is balanced by expenses (excluding wages), when the lower rate will apply. The lower 3% rate will also apply to those small businesses which operate in “special trade zones,” for example in outdoor markets.

The draft also includes a “micro business” category, applying to sole traders with no employees and an annual turnover not exceeding GEL30,000, such people being fully exempt from income tax.

The scope of value-added tax will be broadened to include among other things, supplies to higher educational institutions. The government also intends to increase excise taxes on alcohol. Duties will be doubled on ethyl spirit (to GEL2.6 or USD1.28 per litre), vodka (to GEL3 per litre), whisky (to GEL5 per litre) and beer (to GEL0.4 per litre).

Ferrous and non-ferrous metal export duties will rise from the current the GEL80 per tonne to GEL120. Telephone communication services will be subjected to a turnover tax of not more than 10%.

The position of tax ombudsman will be introduced to resolve tax disputes over ambiguities in the Code.

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