IFC Cooperates With Georgia On Tax Reform

by Tatiana Smolenskaya, Tax-news.com, Moscow

31 August 2010

Through its Advisory Services, the International Finance Corporation (IFC), a member of the World Bank Group, is working towards reform of Georgia’s tax system to benefit small businesses while helping companies improve corporate governance practices, said Lars Thunell, Executive Vice President, after a meeting in Tbilisi with Prime Minister Nika Gilauri.

The IFC is the largest global development institution focused on the private sector in developing countries. Thunnell said that the IFC is committed to sustainable private sector development in Georgia and increasing the private sector’s role in Georgia’s rapidly developing roads system had also been discussed.

Thunell, who is meeting with clients and other finance institutions during his visit, said the IFC will continue to seek opportunities to invest in Georgia, particularly in sectors such as agribusiness, renewable energy, and transportation and energy infrastructure. Following his two-day trip to Tbilisi, Thunell will continue on to Armenia.

IFC’s cumulative investments in Georgia since 1995 total nearly USD500m in 35 projects across a variety of sectors. Georgia has been a member of the IFC since 1995.

Georgia's redrafted Tax Code is expected to become effective from 2011.

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

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