BDO Tax & Legal Newsletter / AUGUST 2021 No.5
Mariam Khuskivadze / Manager, TAX
Amendment to the law
Property tax exemption
According to the law №809-Vრს-Xმპ of Parliament of Georgia (22.07.2021) amendments have been made to the Tax Code of Georgia (hereinafter “GTC”), namely the subparagraph “gg5”, part 1, article 206 which stipulated exemption from property tax on real estate, which was gratuitously transferred by the state body and/or local self-government authority and owned by any state-founded higher education institution and used for educational activity. According to the amendment it was defined, that the real estate will also be exempt from property tax, which will be transferred by the state body to the state-founded higher education institution not only in ownership, but also in usage. However, the exemption applies not only to such real estate used for educational services, but also for those services which are related to educational services.
The amendment also affected to the part 2 of the above article. The edition before the amendment stipulated that the above exemption would not apply to immovable property that was transferred under lease, usufruct, rent or similar agreement to another person. The amendment defined that the exemption will also be applicable on the real estate transferred under lease, usufruct, rent or similar agreement, if this real estate is transferred by a state-founded higher education institution and the transferred real estate is used for higher education and/or those services which are related to the higher education services.
The amendment came into force from July 27, 2021 and applies to legal relationships arising from January 1, 2020.
Amendment to the Order
Value added tax
By the order №170 (16.07.2021) of the Minister of Finance of Georgia, the amendment has been made into the Order №996 of December 31, 2010 of the Minister of Finance of Georgia on Tax Administration. According to the amendment the article 665 was added to the order, which defines certain cases when the place of rendered service is determined in a different way from the Part 3 and Parts 12-14 of the Article 1621 of GTC. According to this entry, the service related to tourism product is considered provided outside the territory of Georgia, if according to the Tax Code of Georgia, the mentioned service is considered as rendered on the territory of Georgia, but this service is actually used outside the territory of Georgia. This amendment is valid for legal relations arising from January 1, 2021.
The amendment also affected to the part 49 of the article 112. The previous version stipulated that in case of import of goods, the costs for transport of goods and related services, incurred to the customs border of Georgia and included in the customs value of goods, were subject to exemption from VAT with the right of deduction. The amendment defined that this relief applies also to those costs of transport and related expenses incurred after customs clearance and included in the customs value.
This entry is valid for legal relations arising from January 1, 2021.
The amendment came into force from July 20, 2021.
Personal tax advisor
By the order №178 (21.07.2021) of the Minister of Finance of Georgia, the amendment has been made to the Order №996 of December 31, 2010 of the Minister of Finance of Georgia on Tax Administration. According to the amendment, Chapter 5 was deleted from the order, which defined the provisions on a personal tax advisor (employee of a tax authority).
It was further clarified that the rules that existed prior to the entry into force of this Order remain in force in relation to the agreements for the provision of personal tax consultant services in force at the time this Order enters into force during the term of these agreements.
The amendment came into force from July 23, 2021.
Foreign taxable person
By the order №184 (27.07.2021) of the Minister of Finance of Georgia, an amendment has been made to the Order №996 of December 31, 2010 of the Minister of Finance of Georgia on Tax Administration. The amendment referred to the Article 471. The article stipulates the special rules of calculating, payment of VAT and informing about it for Foreign Taxable Person without registration as a VAT payer.
According to the amendment, definition of VAT portal has also been added to the definitions of the terms of this article. It is an electronic platform hosted on the website of the Revenue Service through which a Foreign Taxable Person fulfills tax obligations in relation to digital services provided in Georgia.
According to the amendment, the reporting period was defined as a quarter instead of a calendar month:
- From January 1 to March 31 (Q I)
- From April 1 to June 30 (Q II)
- From July 1 to September 30 (Q III)
- From October 1 to December 31 (Q IV)
Due to the change in the reporting period, the deadline for submitting a tax return and payment of tax by a Foreign Taxable Person has been changed. According to the change, a person is obliged to submit a declaration no later than the 20th day of the month following the reporting period (quarter) and pay the tax - no later than the last day of the same month, instead of the 15th day of the month following each reporting month. In addition, it was additionally clarified that the date of fulfillment of the tax obligation is the date when paid amount is reflected on the corresponding account of the Treasury Service.
Also, the opportunity was given to the Foreign Taxable Person to use one of the given currencies, such as - USD, EUR or GEL in connection with the fulfillment of the tax liability arising before the budget of Georgia.
Also, Foreign Taxable Person was given the opportunity to use one of the indicated currencies, for example, the US dollar, Euro or Gel, in connection with the fulfillment of the tax obligation arising before the budget of Georgia.
According to the amendment, Foreign Taxable Person is obliged to record the digital services rendered by her/him on the territory of Georgia and, in order to determine the correctness of the tax liability, to keep the accounting documents for 3 years from the end of the year in which the services were provided.
Under the amendment, the Article 471 is suspended until October 1, 2021.
The amendment came into force from July 29, 2021.
Amendment to the Decree of the Government
By the decree №366 (21.07.2021) of the Government of Georgia an amendment has been made to the decree №619 (08.10.2020) of the Government of Georgia about definition of the Status of International Company, the types of Permitted Activities and the list of certain expenses. According to the amendments, the status of International Company may be granted to a Virtual Zone Person defined by the Tax Code of Georgia, however, in such a case, the status of a Virtual Zone Person shall be revoked in accordance with the rules established by law.
It was further clarified that if the status of a Virtual Zone Person is granted to a person with the status of International Company, the status of an International Company will be revoked from the moment of granting the status of a Virtual Zone Person.
The amendment came into force from July 23, 2021.