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Georgian Gov’t Amends Tax Code

Georgia’s Minister of Finance pledges that meaningless concessions will be withdrawn from the country’s  “Tax Code”. However, the Minister did not specify what he meant senseless exemptions.

The Minister made the statement at a meeting with business representatives and briefed them  on the changes planned to the  “Tax Code”.

According to the amendments to the Code, unpaid taxes will be written off if theyrelated to recognized tax liabilities that arose prior to January 1, 2009 and accrued fines and penalties prior to January 1, 2009 in case the taxpayer did not have any activities during the following period.

In this article, the amendments don’t envisage a cancellation of the main arrears.

Along with that, tax liabilities that do not exceed 5,000 GEL may be deferred without any additional collateral, according to a decision by the Revenue Service of Georgia.

Proposed changes also consider cancelation of  several types of unpaid taxes, including unpaid tax debts that originated before January 1, 2005 in case the taxpayer did not have any activities within the following period.  Changes also related to accrued and unpaid fines imposed on an individual for violating cash register rules prior to January 1, 2013.

The  amendments to the Tax Code  envisage simplification  of the mechanisms for tourism enterprises to meet their tax obligations.

The Ministry of Finance explains that a person who receives income from tourism enterprise should be taxed at 20%, however, according to the amendments, a tax will amount to  5%.
Thin capitalization occurs when the “debt to equity” ratio exceeds a set level. In case of thin capitalization, a company is not allowed to deduct paid and/or payable interest expenses from its total annual income. At the same time, thin capitalization rules do not restrict deduction of interest expenses on debt below the established ratio.

This norm will be first implemented this year.

Thin capitalization rules are not clearly defined, does not allow for a consistent interpretation, which may interfere with a process of  business lending.
Therefore, the code was amended to provide for the postponement of the entry into force of this norm  until 2016.

Ministry of Finance explains that  the reason for the postponement was that there were problems in a process of business  lending. It was the banks and business associations’ recommendation that   was considered  by  the Ministry.


The government of Georgia expects that the amendments to the “Tax Code” willfacilitate the development of local enterprises that provide services to foreign companies as well as will create   a competitive environment for local businesses. Ministry of Finance believes that owners of such enterprises will still be able to invest the savings in the development of businesses and create new jobs.