Digest REVERA Georgia

The legislative changes listed in this digest were put into effect in Georgia between July 1, 2024 to September 30, 2024. The paper addresses a number of topics, such as administrative law, taxation, data protection, intellectual property, and notarization.

Taxes

The Georgia Finance Minister's Order No. 423 of December 18, 2013, which approved the guidance for evaluating overseas controlled activities, was amended.

"On Approving the Instruction on the Evaluation of International Controlled Operations" (Order No. 423 of the Georgian Finance Minister dated December 18, 2013) added Article 141 to the instruction on the eligibility for loan capital contributions. By considering which controlled operation will be totally or partially qualified as a contribution to the operation's capital that is regarded as a loan by the parties' signed agreement and/or by the actual circumstances, the aforementioned regulation established the criterion. However, the amendment states that if the justification for the modification is based on at least three (3) of the aforementioned criteria, it is permissible to alter the operation's or its portion's qualification. 

Along with the aforementioned, the first article of the instruction was modified in paragraphs two and three. Specifically, the Organization for Economic Cooperation and Development's 2017 transfer pricing guidelines were substituted with the most recent version of the guidelines that were available at the time of the tax audit, without mentioning a particular year.

It should be mentioned that loans made prior to January 1, 2025, exchange rate differences that happened prior to that date, and interest earned prior to that date that was paid in the same or later periods will not be affected by the change.

With the exception of Article 141, which will take effect on January 1, 2025, the order went into effect right away after it was published.

See the full change at the link.

Changes have also been made regarding the trading of electricity by wholesale electricity market entities on the electricity exchange.

Chapter VII6 "Taxation and tax reporting of electricity trade and related activities on day-ahead and daily electricity markets (exchange)" was added to the instruction "On Administration of Taxes" approved by the order No. 996 of the Minister of Finance of Georgia dated December 31, 2010. 

The change are taken due to the implementation of the appropriate norms of the "day-ahead and daily electricity market rules" approved by the Resolution N46 of the National Energy and Water Supply Regulatory Commission of Georgia on August 11, 2020 (effective date July 1, 2024).

Chapter VII6 determines the procedural provisions of the fulfillment of tax obligations, production of accounting documentation/primary tax documents and proper reporting by the entities of the wholesale electricity market within the framework of electricity trading on the electricity exchange.

With the implemented change, it was determined that the operator of the exchange is considered a party to the economic operation of electricity supply, and accordingly, when selling electricity by another entity of the wholesale electricity market, he represents the taxable person (receiver) who buys electricity, and when buying electricity on the electricity exchange - the taxable person (supplier) who sells electricity.

With the change, it was also determined that when the wholesale electricity market entity supplies electricity to the exchange operator, the exchange operator does not represent the final consumer, nor does it purchase electricity for its own consumption. Accordingly, based on subsection "Z" of Article 172, Part 4 of the Tax Code of Georgia, this operation is exempted from VAT with the right of deduction.

The amendment establishes the rules for VAT taxation of the supply of electricity by the operator of the exchange to the wholesale electricity market subject when buying electricity on the electricity exchange by the subject of the wholesale electricity market.

In addition, the services provided by the exchange operator, for which the service fee is set by the National Energy and Water Supply Regulatory Commission of Georgia, are considered services provided to the end user and are taxed in accordance with the tax legislation of Georgia.

The effect of the above-mentioned change applies to legal relationships arising from July 1, 2024.

See the full change at the link.

An amendment was made to the "Code of Product Safety and Free Circulation"

From January 1, 2025, an amendment to the „Code of Product Safety and Free Circulation“ will come into force, based on which a number of issues related to the implementation of market supervision have been newly regulated. In particular, according to the legislative amendment, the existing amount of fines for non-compliance with the resolution of the head of the market supervision agency on the suspension of sale, removal from the market, withdrawal from the market and/or destruction of non-compliant and/or dangerous products has been increased. Also, administrative responsibility was established for placing on the market a product that does not comply with the requirements of the Georgian legislation and/or contains a risk, and for the repeated commission of each offense, a stricter responsibility was determined.

The mentioned changes are aimed at strengthening the market supervision system for consumer, construction and industrial products, in order to make it possible to carry out measures proportionate to the dangers arising from the product.

For detailed information, see on the link.

Change in the procedure for using the benefit provided for citizens of Georgia who have entered country after staying abroad for more than 6 months

From August 26, 2024, the amendment entered into the Order No. 257 of August 29, 2019 of the Minister of Finance of Georgia "On approving instructions on the movement and clearance of goods in the customs territory of Georgia", which determined that the provisions of Article 199, subparagraph "DD" of the Tax Code of Georgia In order to receive the benefit, an individual person (Georgian citizen) entering Georgia after staying abroad for more than 6 months must declare information about the goods he/she is importing (which will not move with him) in the "customs declaration of an individual" filled in at the customs checkpoint.

It should be noted here that the mentioned goods must be brought into the customs territory of Georgia within 90 calendar days from the person's entry, and the customs declaration must be submitted within the time limits for determining the customs procedure.

You can see the change made in order #257 at the link

Data Protection

New personal data protection Law

The former Law on Personal Data Protection was superseded by the Law of Georgia on Personal Data Protection (henceforth the "Law"), which was adopted by the Georgia Parliament on June 14, 2023.

The law was adopted to establish best practices in the area of protecting personal data, to integrate current laws with European standards, and to fulfill the requirements outlined in the EU-Georgia Association Agreement.

Among other things, the Law aims to strengthen data subjects' rights and put in place strong safeguards to give them the best possible protection. The law clearly defines the duties of the data processor, making it easier for everyone involved in data processing to understand and fulfill their responsibilities.

In accordance with the law, processing data includes any actions such as gathering, recording, organizing, storing, sharing, disclosing, and deleting personal information. Any company handling personal data must make sure it complies with the new law's standards.

The following are the Law's primary new requirements:

  • Appointment and registration of a Special Representative: Before processing personal data, the data processor must designate and register a Special Representative if the person in charge of processing the data or the person authorized to process the data is registered outside of Georgia but the data processing is done using Georgia-available technical means.
  • The Personal Data Protection Officer is appointed by public institutions, insurance companies, commercial banks, microfinance companies, credit bureaus, electronic communication companies, airlines, airports, medical facilities, and those in charge of processing or large-scale processing, as well as those in charge of systematic and extensive control of the behavior of data subjects.
  • Personal data breaches must be reported within 72 hours. If an event does occur, the company must document the incident, its outcomes, and the actions taken. It must notify the impacted data subject and the Personal Data Protection Service within 72 hours.
  • Video and audio monitoring: The person who conducts video or audio monitoring must decide in writing beforehand the extent and goal of the monitoring, the terms and duration of access to the recording, its storage and destruction, and the procedures for safeguarding the data subject's rights.
  • Data protection impact assessment: If there is a high likelihood that processing data will jeopardize fundamental human rights and freedoms, the organization must perform a data protection impact assessment beforehand (taking into account new technologies, data category, volume, purposes, and means of data processing).

It should be mentioned that the law raises the punishments, distinguishes liable parties, and creates new categories of infractions. In certain instances, the fine amount has quadrupled for a legal entity with an annual revenue surpassing GEL 500,000 and doubled for a natural person.

On March 1, 2024, the majority of the Law's provisions went into effect. However, as of June 1, 2024, it becomes required to hire a Personal Data Protection Officer and carry out a data protection impact assessment.

You can see the new Law on Personal Data Protection at the link

Author: Iashagyan Oksana 


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