Курсовая работа: Private sector and human-resource development in Georgia

Operating a Business – Customs. The State Customs Department (SCD) operates an inland clearance system that requires considerable resources and logistical support for effective control of cargo. In practice, the current system is largely ineffective and prone to fraud and corruption.  There is no compendium of the legislation on customs available to the customs service employees or the public. In the absence of common information and an official interpretation of the rules and regulations, the discretionary authority of individual customs officers and offices is strong thereby facilitating corruption.  There is significant leakage of cargo transported for inland clearance. Some sources estimate that as much as 50 percent of fuel and cigarette imports are diverted.

Management of the SCD has suffered as a result of frequent changes in the management. Efforts to reform the SCD have been impeded by the lack of political will, competing political agendas, and the frequent changes in leadership. Under these circumstances, the inputs of external advisers have been marginalized and the reforms implemented by previous chairmen have been reversed in many instances. The detailed action plan prepared under the ITS contract and endorsed by the government has been stalled with only marginal progress. The customs reform committee established by the President to lead the reform effort has met irregularly.

The principal recommendations for strengthening and improving the customs service include:

·     Implementation of the already approved customs reform program. This is a well developed and comprehensive program that can be implemented over time. It encompasses a number of the IMF and FIAS recommendations. One of the immediate tasks would be to assign priorities for implementation.

·     In light of the decision not to renew the ITS contract, it is necessary to immediately develop and implement a framework for carrying out efficient pre-shipment inspection services if it is to be continued after December 30, 2001.  The SCD clearly lacks the capacity or the expertise to carry out this function independently.

·     Review of the existing regulations for the valuation of cargo and implementation of guidelines that are consistent with the provisions of GATT.

·     Revision of the declaration processing procedures to eliminate contact between the import (or broker or freight forwarder) and the customs officer.

·     Expansion of the ASYCUDA system to all major customs clearance offices.

·     Implementation of risk-based criteria for selecting goods and documents to be examined at all locations where imported goods are cleared.

·     Implementation of an information publication and dissemination program.

Operating a Business  - Licensing and Permits. The existing regime for licenses has benefited from extensive efforts to streamline and simplify the legal framework for licenses. As a result, the current licensing procedures do not appear to present significant barriers to investment and business activity in Georgia, particularly compared with other former Soviet Union countries. However, some of the sectoral licensing laws and regulations do not conform to the provisions of the framework Law on Licensing.

The Law on Local Charges and related normative acts (including municipal regulations) are not entirely clear in defining the purpose and scope of permits. The criteria and conditions for authorizing and terminating permits (similar to licensing conditions) are not clearly specified in the laws and regulations. In effect, the enforcement of the permit system is arbitrary and subject to abuse of the compliance provisions and the assessment of violations. While this permit regime does not generally impede business in Georgia, it does create unequal conditions for newcomers and arbitrary enforcement can cause significant problems for individual companies.

The main recommendations for strengthening the framework for the system of licensing and permits and facilitating the streamlining and simplification of the current system in Georgia include:

·     Passage and adoption of a strong and clear framework law and implementing regulations on the licensing and permit regimes.

·     Review and rationalization of the number and level of legally permissible permits to avoid the proliferation of permits for revenue generation.

·     Development of a basic set of guidelines on the procedures for processing and enforcing permits (similar to those in place for licenses).

·     Development of a monitoring mechanism within the Ministry of Justice that will ensure consistent enforcement of provisions for permits.

·     Publication and dissemination of information on the legally sanctioned licenses and permits (e.g., regulations, procedures, documentation requirements, fees and appeals mechanisms).

Operating a Business  - Inspections. The passage of the Law on Supervising Entrepreneurial Activity represented the most recent of a series of attempts to streamline the business inspection process by state and local governments. It is, however, too early to assess the effect of this new law. At the time of the FIAS mission, the implementing regulations had not been completed and the law had not been fully implemented.

The main recommendations to strengthen the implementation of the new regime for inspections include:

·     Articulate and publish the mandate of each inspectorate as well as information on definitions of violations, criteria for selecting businesses for inspection, the penalties that may be assessed under specific conditions, and the rights and responsibilities of inspectors and businesses.

·     Halt extralegal inspectorate activity pending the registration of all sanctioned inspection activities.

·     Establish and enforce procedures for conducting on-site inspections.

·     Regulate the payment of penalties and fines resulting from inspections to a central cashier in order to avoid on-site payments and minimize opportunities for corruption.

·     Coordinate and rationalize the activities of inspection agencies; implement initiatives for joint training and information sharing among inspection agencies; introduce a code of conduct for inspectors; and train inspectors to understand that their primary function is to ensure public health and safety.

Conclusions and Next Steps. There is a general agreement within Georgia that the existing environment for investment needs to improve if the country wishes to attract new FDI flows and secure the expansion of existing investments. This report has focused on the principal administrative barriers that increase the cost and risk of doing business in Georgia.

Pervasive corruption and the apparent lack of political will to implement reforms have emerged as two fundamental issues affecting the business environment in Georgia. While the degree of corruption may not be the worst in the region, it has a negative effect on business activity and increases the risks and costs of doing business in Georgia. The process of streamlining and simplifying administrative procedures must go hand-in-hand with anti-corruption programs. In a similar vein, it should be noted that number of reforms (e.g. Customs reform) have been stalled as a result of resistance to change and the apparent lack of political will effect change.

In addition to making recommendations for solving some of the regulatory, administrative, and institutional issues that need to be addressed in order to improve the business environment in Georgia, the report points out the areas where further review is necessary and where significant technical assistance is already being channeled, albeit with limited impact.

The experience of other countries clearly demonstrates that sustainable change cannot be achieved without government commitment at the highest political levels.  Successful and sustained change requires leadership, strong champions, and shared goals among all stakeholders within the government and the private sector. On the basis of shared goals,  the process of rationalizing, streamlining, and simplifying bureaucratic procedures can develop, gain momentum, and improve the values of government agencies and transform them into service-oriented organizations. A comprehensive approach to change is necessary, and commitment and time are essential ingredients. Procedural and institutional reforms will require the support of public servants at all levels of government, plus their support for changes in the systems of performance monitoring, evaluation, and rewards.

The Presidential Commission on Support of Private Business already exists as a champion of this initiative. However, the framework for the change agenda must include the participation and inputs of stakeholders at all levels. Stakeholders must be drawn from the public and private sectors. In addition, there is a role for the international donor community in this framework since the incorporation of related donor-sponsored initiatives must be integrated into the change agenda. Chapter V of the report proposes a framework for the development and implementation of the change agenda.

The institutional structure to support the change agenda should include:

·     The Presidential Commission. The Commission should serve as the focal point of the change agenda and it should be given the mandate to promote and advocate reforms in collaboration with other parts of the Government.

·     An implementation team. The staff of the commission’s secretariat should constitute the core group of the implementation team. The responsibilities of the team would include the development of the Action Plan, coordination of implementation activities, solicitation of donor funds and resources to support reform, coordination of related initiatives, and regular reporting on progress to the Commission.

·     A consultative committee. The committee should provide a mechanism for regular consultation with a broad group of stakeholders on various reform initiatives.

The above - mentioned Action Plan should be utilized to document the agreed-upon changes, establish priorities and timeline, provide a basis for accountability, and keep an ongoing record of progress. Therefore, it must be emphasized that the Action Plan is not a static document but one that must evolve over time.

Law of Georgia "On Investment Activity Promotion and Guarantees". On 12 November 1996 the Parliament of Georgia adopted the law of Georgia "On Investment Activity Promotion and Guarantees", which replaced the Law of the Republic of Georgia "On Investment Activity" adopted on 10 August 1991 and the Law of the Republic of Georgia "On Foreign Investments" adopted on 30 June 1995.

The Law defines the legal bases for realizing both foreign and local investments and their protection guarantees on the territory of Georgia. The purpose of the Law is to establish the investment-promotional regime in Georgia.

Investments. Investments shall be deemed to be all types of property and intellectual valuables or rights invested and applied for gaining possible profit in the investment activity carried out in the territory of Georgia, such as:

a)    Monetary assets, a share, stocks and other securities;

b)    Movable and immovable property (real estate) - land, buildings, structures, equipment and other material valuables;

c)    Lease rights to land and the use of natural resources (including concession), patents, licenses, know-how, experience and other intellectual valuables;

d)   Other property or intellectual valuables or rights provided for by the law.

Investor. An investor shall be deemed to be a physical (individual) or legal person, as well as an international organization investing in Georgia. A foreign investor shall be deemed to be:

a)    A foreign citizen;

b)    A stateless person temporarily residing on the territory of Georgia;

c)    A Georgian citizen permanently residing abroad;

d)   A legal person registered beyond Georgia.

An enterprise with a foreign investment of not less than 25% shall enjoy the same rights as the foreign investor.

1.3.2     Foreign Investment Advisory Council (FIAC)

In order to assist foreign investment inflow into Georgia, improve investment climate in the country and support private sector development, it became necessary to create a special government agency, which would serve the above-mentioned goals. Therefore, on March 30, 1997, according to the presidential decree N87, Foreign Investment Advisory Council (FIAC) was created under the supervision of the President of Georgia, intended to assist the development of the private sector and improve the investment environment in the country, to coordinate donors and donor financed projects, to monitor these projects and to ensure a transparency and accounting of foreign aid inflow into Georgia.

The Investment Council operates through its secretariat, which is responsible for the fulfilment of the responsibilities assigned to the Foreign Investment Advisory Council. The Secretariat of the Investment Council works in three directions:

Prepares the Council's meetings;

Cooperates with the donors and coordinates the donor financed projects;

Assists the private sector.

Preparation of the council's meetings. The secretariat of the council plans, prepares meeting and monitors their procession. The meetings are preceded by a preparatory phase, during which the Secretariat identifies priority issues, gathers relevant information, processes, analysis it and identifies a range of possible conclusions. One of the responsibilities of the Secretariat is to control the fulfilment of assigned works and appraise their compliance and produce relevant recommendations.

Cooperation with the donors and coordination of the donor financed projects. Activities related to the cooperation with donors and coordination of the donor-financed projects are a part of the Secretariat's daily job. The Secretariat of FIAC conducts permanent monitoring and control of the projects. Among the donor related activities, a notable obligation of the FIAC Secretariat is to identify the strategy of cooperation with the donors and direct flow of further assistance to relevant channels and to target further projects. Daily work of the FIAC Secretariat includes collection of information on problems related with investment projects and identification of ways of their solution. The council cooperates with short term missions of donors, organizes meetings, drafts agendas and prepares background information for topics of discussion for the Government members as well as for the President of Georgia. The FIAC Secretariat actively works on elaboration of financial-economic, and particularly international relations related legislation of Georgia.

Private sector related activities. To fulfil this obligation the council works in few directions. According to the presidential decree N1324, a Presidential Commission on Support of the Private Businesses in Georgia was formed in the year 2000. By means of close cooperation of the Commission and FIAS, it became possible to study all administrative barriers to investment (see above). As a result, the problems impeding the development of business in Georgia were identified. On the basis of the results of this study, the recommendations were drafted and action plan was compiled, which was approved by the president of Georgia. The commission of cooperation with investors conducts permanent monitoring of fulfilment of the action plan, appraises its fulfilment and prepares relevant recommendations. The Secretariat of Foreign Investment Advisory Council actively cooperates with other donor organizations in terms of the private sector development projects.

1.5  Tax Regime

1.3.3     Taxation System and Tax Rates in Georgia

Legal Framework. The Tax Code of Georgia, adopted on June 13, 1997,[2] is the principal law on taxation policy and administration. Other legislation that regulate taxation include the Administrative Offences Code, the Criminal Code, bankruptcy legislation, customs legislation, the Law on the Road Fund of Georgia, and the Law on the Medical Insurance Fund of Georgia.

The taxation system in Georgia includes both national and local taxes; the latter are set by local authorities following guidelines and limits set forth in the Tax Code. Every taxpayer must register with their regional tax inspectorate and is given a tax identification number, which must be indicated on all tax documents.

Taxes Paid by Individuals, Individual Enterprises.

Income Tax. Income tax must be paid on wages and income earned from economic activity, including income received in non-monetary form. Physical persons, both resident and non-resident, individual enterprises, and entrepreneurs are subject to this tax. Under Georgian law, residents are physical persons in the territory of Georgia for more than 182 days during any 12-month period ending in a given tax year.

An individual enterprise is defined as an entity owned and managed by a single person, an enterprise run solely by family members, or a farm solely owned by an individual or members of that individual’s family. Physical person entrepreneurs are individuals who engage in entrepreneurial activity without first establishing themselves as legal persons (and in accordance with the entrepreneurs law). Physical person entrepreneurs and individual enterprises with annual gross income equal to or less than 24,000 GEL are subject to a presumptive tax in lieu of an income tax. The presumptive tax is described in the next section.

Georgian residents must pay income tax on gross income from all sources (Georgian and non-Georgian) received during the tax year, regardless of where the income was earned or paid, less allowable deductions.

Non-residents must pay income tax, but only on income received from Georgian sources. Non-residents who engage in economic activities through a permanent establishment are subject to profit tax on gross income received during the tax year from Georgian sources connected with the permanent establishment, less allowable deductions.

Taxable income is composed of the following:

·     Salaries and wages

·     Dividend, interest, and royalty payments

·     Income from the lease or rental of property

·     Income from the write-off of debts

·     Income received from the supply of goods or performance of services

·     Gains from the sale of assets

·     Income received as a result of the restriction or closing of an entrepreneurial activity

·     Income from the sale of shares in an enterprise

·     Income in the form of insurance payments paid under agreements for the insurance or reinsurance risk in Georgia.

In addition to monetary wages, benefits are considered wage income and are taxable as part of gross income. Generally, benefits are included in income at the market price at the moment of receipt, reduced by any portion of the benefit paid by the employee. These include: use of an automobile for private service; gifts of goods or gratuitous performance of services; educational assistance to the employee or dependents; and employee expenses reimbursed by the employer.

Table 1.4.1.1 shows income tax rates.  Income tax on dividends, interest payments, and payments to non-residents are withheld at the source of payment and are subject to different rates. Dividends and interest payments are taxed at the rate of 10 percent. Dividends and interest payments received by physical persons, taxed at the source of payment, are not subject to additional taxation. Further, taxes paid on the first 3,000 GEL of combined interest and dividends may be applied to reduce the taxpayer’s tax liability, assuming adequate documentation of the tax payment is provided.

Table 1.4.1.1:  Income Tax Rates

Source:  Tax Code.

Tax agents who withhold tax at the source of payment are required to:

·     Transfer the tax to the budget when making payments to physical persons;

·     When paying wages, issue to the physical person receiving the income (at his or her request) a statement with the person’s name, amount and type of income paid, and amount of tax withheld; and

·     Within 30 days of the end of the tax year, present to the tax agencies and, if requested, to the person paid, a statement containing the person’s registration number, total income, and total amount of tax withheld during the year.

Physical person entrepreneurs and individual enterprises are required to submit income tax payments in three instalments, based on their income tax liability for the previous year. Instalments are applied against the taxpayer’s actual liability. Payments may be reduced if income in the current year is expected to be at least 30 percent less than income in the previous year. Taxpayers with no income from the previous year must make payments based on actual income during the previous quarter.

Tax payers[3] are required to submit returns before April 1st of the year following the reporting year. Before the income tax return due date, taxpayers may apply to the tax authorities for an extension of time to submit their returns. Taxpayers who cease entrepreneurial activity must submit a tax return within 30 days of the cessation of activities.

Taxes Paid by Enterprises.

Profit Tax. Profit taxes must be paid by Georgian entities and foreign entities with permanent establishments in Georgia. Foreign entities that do not have permanent establishment presence in Georgia are taxed via a withholding tax at the source of payment, as stated above. Enterprises are defined as:

·     Legal persons established according to the legislation of Georgia

·     Corporations, companies, firms, and other entities established pursuant to the legislation of foreign states

·     Branches and other separate units that are structural units of the entities indicated in the first bullet and that have their own balance sheet and a separate settlement or other account.

Georgian and foreign enterprises are distinguished by place of activity and management. A Georgian enterprise has its place of activity or management within the territory of Georgia, whereas a foreign enterprise has its place of activity or management outside the territory of Georgia. If there is more than one place of management or activity, or the place of management and activity do not coincide, then the predominant location should be used to determine the place of activity or management.

Individual enterprises and physical person entrepreneurs are subject to income tax (or presumptive tax), not profit tax. Branches and other units of an enterprise do not pay profit tax separately, but aggregate profit with the main enterprise, which pays the full profit tax.

Georgian enterprises are taxed on gross income, which includes all income regardless of its source or place of payment, less allowable deductions. The profit tax is a flat rate of 20 percent. Foreign enterprises are also subject to profit tax, the extent to which depends on whether the foreign enterprise is connected to a permanent establishment.

Foreign enterprises that conduct economic activity through a permanent establishment are subject to profit tax on gross income, less deductions, from Georgian sources connected to the permanent establishment. Foreign enterprises that do not conduct economic activities through a permanent establishment must pay profit tax on gross income from Georgian sources (no deductions are allowed), and the tax is withheld at the source of payment. However, non-resident taxpayers (including foreign enterprises) who receive certain types of income (e.g., insurance payments, royalties, management fees, income from works or services) may file a return and claim deductions as if this income was connected to a permanent establishment. The withholding rates for certain types of income are as follows:

·     Dividend and interest payments—10 percent

·     Insurance proceeds—4 percent

·     Telecommunication and transportation services, shipments, and oil and gas transactions—4 percent

·     Royalties, management fees, income from performing work or rendering services (except income earned as wages), income from leasing movable property, income from management, financial, and insurance services—10 percent

·     Certain oil and gas profits—10 percent.

Foreign enterprises receiving profits from the sale of some stocks, assets, and property not connected to their permanent establishment must pay profit tax, with allowable deductions, on the income from these sales. Annex D provides a listing of profit tax exemptions as well as allowable deductions from gross income.

Table 1.4.1.2 summarizes the asset categories into which fixed assets subject to depreciation are grouped.

Table 1.4.1.2:  Summary of Asset Categories

Source: Tax Code.

Buildings and structures are each depreciated separately, whereas the other asset groups are depreciated using the balance of the asset group at the end of the tax year. The balance of the asset group is adjusted for purchases, sales, and repairs. The maximum deduction for repair expenses is 5 percent of the balance of each asset group. Any repairs that exceed 5 percent are added to the balance of the asset group and depreciated as such.

Physical persons who incur a loss in a tax year (i.e., deductions exceed gross income) and who are not connected to employment may not deduct such losses from employment income, but may carry forward and deduct the loss from non-wage income for a period up to 5 years after the tax year in which the net loss occurred. Legal persons who incur a loss in a tax year may carry forward and deduct losses from profit for a period of up to 5 years after the tax year in which the net loss occurred.

Tax credits are subtracted directly from the tax liability. There is a tax credit against Georgian taxes for income and profit taxes paid outside of Georgia, as long as the credit does not exceed the amount of tax charged in Georgia.

A taxpayer may record income and expenses under either the cash basis method or accrual basis method of accounting, but must use the same method for both accounting and tax purposes, and must use the same method throughout the tax year. A physical person must keep records using the accrual basis method for income from entrepreneurial activity.

Profit taxes must be paid in three installments based on the profit tax liability of the previous year. These are:

·     Before May 15th: 30 percent of the previous year’s tax liability

·     Before August 15th: 30 percent of the previous year’s tax liability

·     Before November 15th: 40 percent of the previous year’s tax liability.

Taxpayers who have no taxable income in the previous year make payments according to the actual income of the previous quarter.

Installment payments may be reduced if current year income is expected to be at least 30 percent less than income of the previous year. Permission of the head of the tax agency, requested 1 month before the date of payment is required to do so. Resident legal persons and nonresident legal persons who have income from a Georgian source that is not taxed at the source of payment must submit a tax return before April 1st of the year following the year of the reporting year to the tax agency at the place of registration. Before the due date of a profit tax return, the taxpayer may apply to a tax body for an extension of time to submit the return.

Profit taxpayers who cease their entrepreneurial activity in Georgia must submit an income tax return to the tax agency within 30 days of ceasing activities. Legal persons who decide to liquidate must immediately notify the tax service in writing of their plans to liquidate and must file a profit tax return within 15 days of the decision to liquidate.

Value Added Tax. Value added tax (VAT) is collected at every stage of production and distribution. Persons or enterprises with annual taxable turnover less than 24,000 GEL per year are not required to register with the tax authority and pay VAT, although they may.

An enterprise charges VAT on its sales and pays VAT to the suppliers of materials and providers of services it receives. The enterprise then accounts to the tax department for the difference between the tax that it charged on its sales and the tax that it paid on the goods and services supplied to it. This difference usually results in a net payment to the budget, but in some circumstances it can result in a credit to the enterprise.

An enterprise registered for VAT that carries out a taxable transaction is required to prepare and issue a tax invoice to the person who receives goods or services. VAT invoices are purchased from respective regional tax offices at a cost of 0.18 GEL per invoice. The purchaser is given two copies of the invoice and both the seller and the purchaser must submit one copy to their local tax agencies for control purposes. Buyers and sellers are required to submit VAT declarations every month, no later than the 15th of the month following the reporting period. The total VAT an enterprise pays to the budget each month is the total VAT charged on its outputs (sales) less the total (allowable) VAT paid on its inputs (purchases) during that month. VAT paid on inputs can be credited against VAT paid on outputs if inputs are used for economic activities (offset for charities, entertainment, representative expenses are not allowed) and the enterprise has an invoice of paid VAT. VAT paid on exempt goods or on automobiles cannot be offset. If the input tax exceeds the output tax, the enterprise receives a credit for the excess. VAT on taxable imports is levied and collected by customs agencies.

The VAT rate in Georgia is 20 percent. A zero percent rate applies to exports and the categories of goods and services identified below. Annex D provides a list of VAT exemptions.

Exemption means that producers or suppliers of exempt goods and services do not charge VAT on their output, but cannot claim a credit on the VAT paid on inputs used to produce the exempt output.

Social Taxes. Social taxes include both social and employment taxes and are imposed on monetary and non-monetary wages and other forms of compensation paid to employees, as well as on income earned by physical person entrepreneurs from their economic activities. The social tax rates are summarized in Table 1.4.1.3.

Table 1.4.1.3:  Social Tax Rates

Source: Tax Code.

Social taxes must be paid by:

·     Physical person entrepreneurs and legal persons who make wage payments to employees working in Georgia or who make payments to physical person who render services in Georgia

·     Physical persons receiving remuneration from employment or the performance of services

·     Physical person entrepreneurs who conduct entrepreneurial activity in Georgia

·     Physical persons who perform non-entrepreneurial activity in Georgia, including lawyers, doctors, notaries, and other professions.

For public organizations of disabled persons as well as enterprises that have a workforce of 70 percent or more disabled persons and pensioners, the 27 percent tax rate is reduced to 10 percent.

Employers who pay wages to employees or to individuals performing services must remit social taxes to the tax administration at the time that wages are paid. Employees’ social taxes are withheld and remitted along with the employer’s social tax payment. Employers are required to submit their social tax returns before the 15th day following the reporting month.

Physical person entrepreneurs and physical persons who carry out economic activities classified as non-entrepreneurial (under the Law on Entrepreneurs) must remit social taxes along with their income taxes. The social tax return must be submitted along with the income tax return.

Excise Taxes. Excise taxes are levied on specific excisable goods produced in Georgia or imported into Georgia. Unless exempted, all physical and legal persons who produce excisable goods on the territory of Georgia or who import excisable goods must pay excise taxes. Exports of excisable goods are taxed at a zero rate.

Several products are exempt from excise taxes, including:

·     Alcoholic beverages produced by a physical person for personal consumption

·     The import of 2 litres of alcoholic beverages and 200 cigarettes by a physical person for personal consumption

·     The transit and temporary import of excisable goods into the customs territory of Georgia

·     The re-export of excisable goods

·     The import of automobiles and tires for humanitarian aid during a natural disaster

·     Aviation fuel to be supplied on board for international flights

·     Import or supply of oil products necessary to carry out oil and gas transactions (specified by the oil and gas law of Georgia).

Excise taxes must be paid up to the 10th of the next month after carrying out the taxable transaction. The taxable transaction for products produced in Georgia is considered to occur at the earlier of 90 days from the delivery (transfer) of goods or the moment of payment. In the case of imports, the taxable transaction is considered to occur at the time the goods are imported, and the excise tax is collected by customs agencies. For excisable products subject to excise stamping, the taxable transaction is considered to occur at the time the goods are delivered, and the total amount of excise must be paid upon purchasing the stamps. Excise stamps are required for most imported and domestically produced alcohol products and tobacco products, except for pipe tobacco.

For goods produced on the territory of Georgia, the amount of the taxable transaction is the payment received or to be received by the taxpayer from the customer, excluding the amount of the excise tax and VAT. This amount cannot be less than the wholesale market price excluding the excise tax and VAT. For goods sold at the retail level, the amount of the taxable transaction is the market price of the goods at the wholesale level not including the amount of the excise tax and VAT. For alcohol products, the amount of the taxable transaction is based on the volume of alcoholic beverages. For imported goods, the amount of the taxable transaction is the customs value of the goods determined in accordance with the customs legislation of Georgia (but not less than the wholesale market price, excluding the excise tax and VAT) plus the amount of duties and taxes payable on the import of the goods (except for the excise tax and VAT).

Property Taxes. Georgian enterprises, branch offices, and other similar subsidiary enterprises that have an independent balance sheet and settlement account, foreign enterprises operating through a permanent establishment, and organizations whose property or part of property is used for economic activity must pay property tax.

Property subject to this tax includes fixed assets, installed equipment, uncompleted capital investment, intangible assets that are listed on the balance sheet of an enterprise, as well as such property listed on the balance sheet of an organization and used for economic activity. For foreign enterprises, only property connected with the permanent establishment of the enterprise is subject to property tax.

The property tax rate is 1 percent of the value of the property. The tax is due in four equal payments, before February 15th, May 15th, August 15th, and November 15th.

Tax on the Use of Land. Physical and legal persons who are owners or users of land plots, including land used for agricultural and non-agricultural purposes, are subject to tax on the use of land.

The base rate of the tax for the use of nonagricultural land is 0.24 GEL per square meter of land. This tax is due in equal parts before August 15th and before November 15th of the reporting year.

The base rates for agricultural land are set on a per hectare basis and vary depending on location and use. This tax is due on or before November 1st of the reporting year.

Tax on Economic Activity. This local tax is paid by all physical and legal persons engaged in any economic activity on the territory of a corresponding city (region).

This tax rate is set by local governments, but cannot exceed 1 percent of income (less material expenditures and VAT). For port services (loading and unloading ships) the maximum rate is 2 percent of income (less VAT).

Other Taxes.

Tax on the Transfer of Property. This tax is imposed on the transfer of real estate located in Georgia, inheritances and gifts, and the transfer of motor vehicles. The transferee is subject to the tax. Transfers of title, as well as certain leases of real estate are taxable.

The taxable amount is the amount of compensation transferred (but not less than the market price), including assumed indebtedness. In the case of a lease or tenancy, the taxable amount is determined by discounting the amount payable under the lease or tenancy agreement.

Страницы: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12