The following significant changes were made to Georgian legislation in October, November, and December 2024

I. Amendment to the Order No. 423 of the Minister of Finance of Georgia of December 18, 2013 “On Approval of the Instructions on the Evaluation of International Controlled Transactions”

Article 141 was added to the Instruction “On Approval of the Instruction on the Evaluation of International Controlled Transactions”, which determined the criteria for fully or partially qualifying an operation considered as a loan by the parties to the controlled transaction under the agreement concluded by them and/or under the actual circumstances as a capital contribution. According to the amendments, the qualification of an operation or its part may be changed if the grounds for changing the qualification are identified according to at least 3 (three) of these criteria.

The above-mentioned article will enter into force on January 1, 2025.

See the full change at the link.

II. Amendment regarding the cancellation of electronic tax invoices and special invoices for petroleum products

As a result of the amendments to the instruction approved by Order No. 996, the seller (supplier) may programmatically submit to the buyer (recipient) a request for cancellation of the tax invoice and special invoice for petroleum products issued in electronic form, which has not been submitted by either party with the relevant annex to the VAT tax declaration, and if it has been submitted by either party with the relevant annex to the VAT tax declaration, the request for cancellation shall be submitted to the buyer (recipient) if the relevant person, upon application to the tax authority, has removed the tax invoice and special invoice for petroleum products from the relevant annexes to the tax declaration.

According to the same amendment, the seller (supplier) is obliged to issue a replacement NSAF and/or register an application for the cancellation of a special tax invoice immediately upon the need to cancel a special invoice for petroleum products and submit this information to the buyer (recipient) along with the cancellation request. An application for the cancellation of a special tax invoice is registered in the event that special invoices for petroleum products cannot be issued in accordance with the instruction approved by the Order of the Minister of Finance of Georgia of December 31, 2010 No. 996 “On Tax Administration”.

A tax invoice and a special invoice for petroleum products are considered canceled after the buyer (recipient) confirms the cancellation request.

See the full change at the link.

III.  Amendment to the Instruction "On Tax Administration" approved by Order No. 996 of the Minister of Finance of Georgia dated December 31, 2010

Article 461 was added to the instruction approved by Order No. 996 “On Tax Administration” - “Consideration of Several Entities Based on the Territory of Georgia as a Single Entity Subject to VAT”.

Based on the above changes, the tax authority is authorized, for the purpose of preventing VAT evasion, to consider any several persons established in the territory of Georgia (hereinafter referred to as a group of persons) as a single taxable person, regardless of their formal/legal independence, if all of the following conditions are met:

  • The same person makes key decisions related to their activities/management;
  • Their place of activity is identical;
  • The nature and content of their activities are identical;
  • None of the group members is registered for VAT.

The implemented changes defined the cases and rules according to which several persons, regardless of their formal/legal independence, may be considered a single taxable person, and also defined the cases in which the type and content of the activity are considered identical.

According to this amendment, each member of a group of persons is considered a VAT payer from the moment of carrying out a taxable transaction (including this transaction), according to which the total (aggregate) amount of taxable transactions of the persons included in the group exceeds 100,000 GEL.

See the full change at the link.

IV. Amendment to the Instruction "On Tax Administration" approved by Order No. 996 of the Minister of Finance of Georgia dated December 31, 2010

Amendments were also made to Instruction No. 996 based on amendments to Instruction No. 4364-XIVMS-XMP dated 27.06.2024. According to the aforementioned amendments:

  • Profits received by foreign citizens as a result of participation in gambling games organized in a systematic-electronic form and/or in totalizator games organized in a systematic-electronic form and amounts withdrawn from a systematic-electronic gambling account were exempted from income tax;
     
  • For a person who receives income/profit from the organization of systematic-electronic totalizator games organized by foreign citizens as a result of their participation in them, the difference between the bets received from players with foreign citizenship and the winnings paid to these players was determined as the object of taxation under the income/profit tax in this part of the activity;
     
  • For a person who receives income/profit from the organization of gambling and/or totalizator games organized in a systematic-electronic form by foreign citizens as a result of their participation in systematic-electronic form of gambling and/or totalizator games organized in a systematic-electronic form, the income/profit tax rate has been determined to be 5%.
     

Based on the above changes:

  • Lines 4 and 5 have been added to Part 3 of the monthly income tax declaration of a person who organizes a slot machine parlor, organizes gambling games in a systematic-electronic form and/or organizes totalizator games in a systematic-electronic form (Appendix No. II-04).
     

Line 4 - The amount of the difference between the bets received by the organizer of the systematic-electronic gambling games during the reporting month and the winnings paid to these players as a result of the participation of foreign citizens in systematic-electronic gambling games.
 

Line 5 - The amount of the difference between the bets received by the organizer of the system-electronic totalizer games during the reporting month and the winnings awarded to these players as a result of the participation of foreign citizens in the system-electronic totalizer games organized in a systematic-electronic form.

Lines 4 and 5 have been added to Part 4 of the Monthly Profit Tax Declaration (Annex No. II-08).
 

Line 4 - The amount of the difference between the bets received by the organizer of the systematic-electronic gambling games during the reporting month and the winnings paid to these players as a result of the participation of foreign citizens in systematic-electronic gambling games.

Line 5 - The amount of the difference between the bets received by the organizer of the system-electronic totalizator games during the reporting month and the winnings awarded to these players as a result of the participation of foreign citizens in the system-electronic totalizator games.

The change will come into effect on December 1, 2024 and will apply to returns submitted for reporting periods beginning in December 2024 and thereafter.

See the full change at links 1 and 2.

V. Change in the monthly declaration of tax withheld at the source of payment

Instruction No. 996 also introduced a change in the procedure for filling out the tax withheld at source declaration (Appendix No. II-06), according to which, in Appendix “A” (information on payments made and tax withheld during the reporting month), pension contributions made in accordance with the Law of Georgia “On Accumulated Pension” were separated from other benefits provided for by the tax legislation of Georgia. Meanwhile, the boxes related to social tax were removed from Part III of the declaration, and the column reflecting social tax amounts was also abolished in Appendix “A” of the declaration.

This change will come into effect on the 30th day after publication and will apply to December and subsequent reporting periods.

See the full change at the link.

VI. Changes to the procedure for completing the monthly income tax return of a person with small business status

Changes were made in the Order of the Minister of Finance of Georgia No. 999 of December 31, 2010 “On the Application of Special Taxation Regimes” and in the Instruction “On the Procedure for Filling Out and Submitting the Monthly Income Tax Declaration of an Individual with Small Business Status” (Appendix No. 5), according to which new lines were added to the monthly income tax declaration of an individual with small business status, some lines were reworded, and lines were also separated according to the forms of income receipt. Namely: the following data is reflected in the lines of Part III of the declaration:

  • Line 15 - total income received by a person with small business status within the scope of small business activities (including income exempt from income tax) in the aggregate from the beginning of the calendar year, including the reporting month. This line does not include income received under general taxation rules, such as: dividends, interest, income received from the sale of real estate, motor vehicles, income received from the lease of property/renting of real estate, etc.;
     
  • Line 17 - taxable income subject to taxation under the special small business regime, which must correspond to the sum of the amounts reflected in lines 18-21, and if a person with small business status records income and expenses using the accrual method, the sum of the amounts reflected in lines 18-22 minus the sum of the amounts reflected in lines 23-24,
     
  • Line 18 – income received through cash payments (cash register turnover);
     
  • Line 19 - income received through POS terminal;
     
  • Line 20 - income received through non-cash payments (except income received through POS terminals);
     
  • Line 21 - income received in other forms (including the cost of services rendered that is not taxed at the source of payment) that is not reflected in lines 18-20 (income received from barter transactions, income received from foreign exchange transactions, etc.);
     
  • Lines 22-24 - are filled in if the person records income and expenses using the accrual method;
     
  • Line 25 - the part of taxable income exempt from income tax in accordance with Article 82 of the Tax Code of Georgia, to which no allowance has been applied;
     

The above change applies to declarations submitted for reporting periods beginning in December 2024 and thereafter.

See the full change at the link.

VII. Change regarding income received by a person with small business status from construction services

As a result of the amendment to the Resolution No. 415 of December 29, 2010, the Resolution No. 415 of the Government of Georgia of December 29, 2010 “On Special Taxation Regimes” (Government of Georgia, No. 172, 31/12/2010) was amended and paragraph 12 was added to Appendix No. 5 (“Types of income that are not taxed under the special taxation regime and are not considered in the combined income received within the framework of small business activities”) approved by the resolution, according to which the following services provided under the special taxation regime for small businesses (1% and 3%) shall not be taxed under the special taxation regime for small businesses: residential and non-residential building construction services provided under group 41.2 of the Georgian National Classifier SEC 006-2016, civil construction services provided under section 42 and/or 43 Income received from the provision of specialized construction services provided for in the section, if the recipient of the said service is an enterprise, organization or entrepreneur natural person provided for in the Tax Code of Georgia. Accordingly, the income received from the said activity(ies) by a person with the status of a small business will be taxed according to the general rule (20%).

This change will come into effect on February 1, 2025.

See the full change at the link.

Author: Iashagyan Oksana

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