Physical person entrepreneurs and physical persons who carry out economic activities classified as non-entrepreneurial (under the Law on Entrepreneurs) must remit social taxes along with their income taxes. The social tax return must be submitted along with the income tax return.
Excise Taxes. Excise taxes are levied on specific excisable goods produced in Georgia or imported into Georgia. Unless exempted, all physical and legal persons who produce excisable goods on the territory of Georgia or who import excisable goods must pay excise taxes. Exports of excisable goods are taxed at a zero rate.
Several products are exempt from excise taxes, including:
· Alcoholic beverages produced by a physical person for personal consumption
· The import of 2 litres of alcoholic beverages and 200 cigarettes by a physical person for personal consumption
· The transit and temporary import of excisable goods into the customs territory of Georgia
· The re-export of excisable goods
· The import of automobiles and tires for humanitarian aid during a natural disaster
· Aviation fuel to be supplied on board for international flights
· Import or supply of oil products necessary to carry out oil and gas transactions (specified by the oil and gas law of Georgia).
Excise taxes must be paid up to the 10th of the next month after carrying out the taxable transaction. The taxable transaction for products produced in Georgia is considered to occur at the earlier of 90 days from the delivery (transfer) of goods or the moment of payment. In the case of imports, the taxable transaction is considered to occur at the time the goods are imported, and the excise tax is collected by customs agencies. For excisable products subject to excise stamping, the taxable transaction is considered to occur at the time the goods are delivered, and the total amount of excise must be paid upon purchasing the stamps. Excise stamps are required for most imported and domestically produced alcohol products and tobacco products, except for pipe tobacco.
For goods produced on the territory of Georgia, the amount of the taxable transaction is the payment received or to be received by the taxpayer from the customer, excluding the amount of the excise tax and VAT. This amount cannot be less than the wholesale market price excluding the excise tax and VAT. For goods sold at the retail level, the amount of the taxable transaction is the market price of the goods at the wholesale level not including the amount of the excise tax and VAT. For alcohol products, the amount of the taxable transaction is based on the volume of alcoholic beverages. For imported goods, the amount of the taxable transaction is the customs value of the goods determined in accordance with the customs legislation of Georgia (but not less than the wholesale market price, excluding the excise tax and VAT) plus the amount of duties and taxes payable on the import of the goods (except for the excise tax and VAT).
Property Taxes. Georgian enterprises, branch offices, and other similar subsidiary enterprises that have an independent balance sheet and settlement account, foreign enterprises operating through a permanent establishment, and organizations whose property or part of property is used for economic activity must pay property tax.
Property subject to this tax includes fixed assets, installed equipment, uncompleted capital investment, intangible assets that are listed on the balance sheet of an enterprise, as well as such property listed on the balance sheet of an organization and used for economic activity. For foreign enterprises, only property connected with the permanent establishment of the enterprise is subject to property tax.
The property tax rate is 1 percent of the value of the property. The tax is due in four equal payments, before February 15th, May 15th, August 15th, and November 15th.
Tax on the Use of Land. Physical and legal persons who are owners or users of land plots, including land used for agricultural and non-agricultural purposes, are subject to tax on the use of land.
The base rate of the tax for the use of nonagricultural land is 0.24 GEL per square meter of land. This tax is due in equal parts before August 15th and before November 15th of the reporting year.
The base rates for agricultural land are set on a per hectare basis and vary depending on location and use. This tax is due on or before November 1st of the reporting year.
Tax on Economic Activity. This local tax is paid by all physical and legal persons engaged in any economic activity on the territory of a corresponding city (region).
This tax rate is set by local governments, but cannot exceed 1 percent of income (less material expenditures and VAT). For port services (loading and unloading ships) the maximum rate is 2 percent of income (less VAT).
Tax on the Transfer of Property. This tax is imposed on the transfer of real estate located in Georgia, inheritances and gifts, and the transfer of motor vehicles. The transferee is subject to the tax. Transfers of title, as well as certain leases of real estate are taxable.
The taxable amount is the amount of compensation transferred (but not less than the market price), including assumed indebtedness. In the case of a lease or tenancy, the taxable amount is determined by discounting the amount payable under the lease or tenancy agreement.
The tax rate on the transfer of real estate is 2 percent of the taxable amount. The tax is due prior to the registration of the documents transferring the property. If the property is not registered, the tax is due at the time the property is transferred.
For property received as inheritance, the tax is due no later than 6 months from the receipt of documents transferring title. For property received as gifts, the tax is due within 1 month of the transfer.
Tax on the Use of Natural Resources. Physical and legal persons engaged in any activity that requires a license for the use of natural resources (with the exception of land) owned by the state must pay this tax. The tax is imposed on the volume of natural resources extracted.
The tax rates vary by natural resource. For minerals, the rate is between 1 and 15 percent (of the price of the mineral resources extracted), timber 2–34 percent, water 3–10 percent, animals 2–55 percent.
The tax for the use of natural resources is due before the 15th of the month following the reporting month. However, the tax for timber and flora resources should be paid at the time of their transportation from the forest; the tax for water resources should be paid before December 1st of the relevant year; and the tax on hunting birds in migration should be paid on receipt of the license.
The tax on natural resources must be paid within 3 months after receiving the license for using the natural resources.
Exempt from this tax are the mineral resources gained in the course of underground construction. In addition, the tax rate is reduced by 70 percent for use of natural resources in connection with scientific and cultural activities and for users of natural resources that have carried out restoration or replacement of natural resources from their own funds, within the limits of the volume of restored resources.
Environmental Taxes. This tax must be paid by physical and legal persons engaged in any activity listed in categories 1–4 of the Law of Georgia on Environmental Permits (October 15, 1996), who pollute the environment from fixed sources or who import or produce gasoline, diesel fuel, kerosene, natural gas (except as used as a raw material for production of goods), or liquid gas.
Tax rates are based on the pollutant emitted, whether it is emitted into the atmosphere or water (either directly or through sewers and storm drains), and geographic region. For other items the tax is based on the amount imported or produced. Imported goods that are later exported are exempt from this tax.
Tax rates apply to pollutants emitted within limits set by environmental laws. Pollutants emitted in excess of established limits are subject to a fine equal to five times the tax rate for pollution within the limit (see the section on fines and penalties below).
Taxpayers who pollute the environment from fixed sources must submit a tax return certified by the Ministry of Environment and Natural Resource Protection to the tax agency and pay the tax by the 15th of the month following the reporting quarter. Taxpayers who produce or supply gasoline, diesel, kerosene, natural gas, or liquid gas must submit a tax return by the 15th day of the month following the reporting month.
Taxpayers who import any products subject to the pollution tax must pay the tax before the customs agency clears the products. Customs may clear the products only after the tax agency issues a receipt indicating that the tax has been paid.
1.3.4 Existing Taxation Practices
Background. Georgia was one of the first CIS countries to codify its tax legislation in a comprehensive Code. However, since its adoption in 1997, there have been numerous amendments, which have considerably reduced the consistency of the Code. Some of the mayor changes in recent amendments include: i) changes in the tax rates for tobacco products and the tax rates of the motor vehicles ownership tax; ii) repealing provisions in the Code allowing the tax administration to seize and sell delinquent taxpayers’ property; iii) introduction of exemptions from property taxation for enterprises and physical persons in mountainous regions. The IMF carried out a review of tax policy in 2000 and a number of the recommendations from this review were actually included in a tax reform package prepared by the Ministry of Finance in September 2001. However, this package has not been presented to Parliament so far. Key issues remaining on the tax policy side are:
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