• BDO Tax & Legal Newsletter / June 2018 No.7
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BDO Tax & Legal Newsletter / June 2018 No.7

05 June 2018

Amendments to the Orders and Laws

Taxation of advance payment by VAT

By the Order #190 (16.05.2018) of the Minister of Finance of Georgia amendment was made to the Order #996 (31.12.2010) of the Minister of Finance of Georgia - 'Administration of Taxes'. By the amendment new illustrative example #27 was added to the article 481, which defines VAT taxation of advance payments.
The example determines the rule of  taxation of advance payments by VAT for the cases when before supply of goods in full the receiving entity is re-organized. According to the example since the liabilities are to be split between the entities produced as a result of re-organization, VAT liability on advance payment should also be split between the entities. Such a liability shall be subject of split according to the period when the re-organization takes place.

Amendment came into force on18 May 2018.

Determining the value of the taxable Property

The different provisions of determining the market value of taxable Property had been adopted from May 2018. The new section - 41 was added to the article 202 of GTC. It defines that tax authority may during tax audit determine the value of the taxable Property of a taxpayer at its market price in cases approved by the Minister of Finance of Georgia.

According to the above amendment made to the Georgian Tax Code, the corresponding amendment was made to the order #996 of the Minister of Finance of Georgia. Articles 921 and 922 were added to the order by the amendment which define the regulation scope of the amendment. In particular, they define the cases when tax authority is entitled to determine the value of taxable property at the market price. The market price is not used if the market price of a taxable property exceeds the carrying value by no more than 10%. By the article 922 defined are also the cases when the value of taxable property is not determined at the market price. These cases are the following:

  • Unfinished construction
  • Property towards which the taxpayer uses property tax relief
  • Property which is reevaluated periodically at least within 3-year period and the revaluation fully covers the inspected periods
  • Taxable property which is purchased by the taxpayer in the inspected period
  • Property contributed into the capital that was reevaluated by the owner and the years passed from such revaluation is no more than 3 in total

Mentioned provisions are applicable for all those tax inspections which did not result in a decision of charging penalties/sanctions by tax authorities.

The above provisions on the use of market price by the tax authorities are applicable only for the immovable property.

The amendment came into force on 18 May 2018.