Georgia Tax & Business Guide - Deloitte

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Basic facts
Population 4.5m Inflation 8.2% (2005)*
Main languages Georgian, English, Russian GDP per head US$1,416 (2005)
Currency Georgian Lari (GEL) GDP growth 9.3% (2005)*
Economic communities Commonwealth of Independent States
GDP sources 18.2% agriculture, 26.7% industry, 55.1% services
* Economist Intelligence Unit
Political environment

The president of Georgia, currently Mikheil Saakashvili, is the head of state and is elected for a five-year term. The prime minister, currently Zurab Nogaideli, is nominated by the president and appointed by the parliament by a majority of votes. A presidential election is scheduled for October 2009.

The Georgian government consists of a legislative, executive and judicial branch. The legislative branch consists of the parliament, the parliaments of the autonomous republics of Adjara and Abkhazia, and councils (on the level of local authority). Parliament and council members are elected for a four-year term on the basis of a proportional and majority system.

The executive branch comprises the president, the prime minister, state ministers, ministries, state chancellery, state departments, city governments and regional governments. There are several ministries in the autonomous republics of Adjara and Abkhazia.
Foreign trade and investment
Exports US$1.5m (2005)* Imports US$2.7m (2005)*
*Economist Intelligence Unit.

Leading export markets: Russia, Turkey, the UK, Azerbaijan and Germany. Exports are expanding to the EU and the US.

Major exports: Ferro alloys and gold, ferrous waste and scrap, food and agricultural products.

GeorgiaÌs legislation provides protection for investors in the country. Most sectors of the economy are open to foreign investment, although exceptions exist for some infrastructure projects and agricultural land.
Business and financing
Business forms Limited liability company, joint stock company, individual enterprise, limited partnership, joint liability company, co-operative, branch, representative office

Foreign investors may operate in Georgia through a participation in a foreign-owned local corporate entity or open a branch or representative office in Georgia.

Georgia is the most improved business environment in the world in 2006, according to the World Bank.
Labour environment
Unemployment rate 13.8% (2005)* Minimum wage GEL 115 (monthly)
*Official rate.

The national minimum wage for public employees is GEL 115 a month. Private enterprise pays an average monthly wage of GEL 147, state enterprises an average of GEL 149. A Labour Code became effective on July 1st 2006.
Taxation
Corporate tax
Tax on enterprises 20%

Taxation is imposed at the national level. Residents are taxed on their worldwide income with a credit for foreign tax. For Georgian enterprises, gross income includes all income, regardless of its source or place of payment, except for income specifically exempt under the Tax Code. Most Georgian-source income of non-residents is taxed. A 10% withholding tax applies to repatriated profits of foreign companies.
Individual tax
12%

Resident individuals pay tax on worldwide income; non-residents pay tax only on Georgian-source income. An individual is resident if physically present in the territory of Georgia for more than 183 days in any continuous 12-month period ending in the tax (calendar) year. Tax at a fixed rate of 12% applies to employment income.
Capital gains
Taxed as income

Capital gains are generally taxed as income.
Indirect tax
Standard rate 18%

Value-added tax (VAT) is charged on the value of supplies of taxable goods and services made in Georgia, including imports of goods. VAT applies to most transactions at a rate of 18%. Certain supplies are zero-rated, including the export of goods, international transportation services, etc. Under the Host Government Agreement, the supply of goods, works and services to and by contractors in connection with the Baku-Tbilisi-Ceyhan pipeline project are taxable at 0% VAT. The Tax Code provides for a number of exempt transactions, namely financial and insurance services, import of machinery, means of transport, spare parts and materials needed for the oil and gas industry.
Tax administration and compliance
Tax year Calendar year

Enterprises must make four equal advance payments of corporate income tax during the calendar year. All enterprises must submit their annual corporate income tax returns to the tax authorities before March 31st of the year following the relevant tax year. For individuals, personal income tax is withheld at source by the employer. The tax return must be submitted to the tax authorities on a monthly basis before the 15th day of the following reporting month.

Employers are liable for a social tax of 20% of the gross income paid to employees. Personal income and social taxes are payable to the state budget at the time the salary or other taxable compensation is paid. Employers must submit to the tax authorities within 30 days after the end of the tax year a personal income tax statement reporting personal details of each individual whose income was subject to taxation, the total amount of income and the tax withheld during the accounting year.
Additional tax information
Withholding taxes Dividends 10%, Interest 10%, Royalties 10%.
Tax treaties Georgia has concluded more than 22 tax treaties.
Dividends Dividends are taxed by withholding at 10%.
Revenue protection There is no transfer-pricing or anti-haven (CFC) legislation.
Groups There is no provision for group taxation.
Incentives Taxation under the Host Government Agreement regime in the oil and gas sector.
Other taxes Property taxes (including land tax), Excise taxes, Customs duties, Duty on usage of natural resources.